<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 12, 1997
-------------------------------
BTG, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 000-25094 54-1194161
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
3877 Fairfax Ridge Road, Fairfax, Virginia 22030
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(703) 383-8000
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Exhibit Index on Page:
---
Total Number of Pages:
---
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) The audited financial statements of Nations, Inc. ("Nations"),
including independent auditors' report thereon, as of December 31, 1996 and for
the year then ended, and the unaudited financial statements of Nations
three-month periods ended March 31, 1997 and 1996, are included at Exhibit
99(a) and incorporated herein by reference.
(b) Pro Forma unaudited financial information for BTG giving effect to
the Acquisition as of and for the year ended March 31, 1997, is included at
Exhibit 99(b) and incorporated herein by reference.
(c) Exhibits.
99(a) Audited financial statement of Nations, including independent
auditors' report thereon, as of December 31, 1996 and for the
year then ended, and unaudited financial statements of Nations
for the three-month periods ended March 31, 1997 and 1996.
99(b) Pro forma unaudited financial information for BTG giving
effect to the Acquisition as of, and for the year ended
March 31, 1997.
<PAGE> 3
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.
BTG, INC.
Date: August 14, 1997 By:/s/ John M. Hughes
------------------------------------
John M. Hughes, Senior Vice President &
Chief Financial Officer
<PAGE> 1
EXHIBIT 99(a)
<PAGE> 2
NATIONS, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
<PAGE> 3
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Nations, Inc.:
We have audited the accompanying balance sheet of Nations, Inc. as of December
31, 1996 and the related statements of earnings, changes in stockholder's
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nations, Inc. as of December
31, 1996 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
April 10, 1997
-1-
<PAGE> 4
NATIONS, INC.
Balance Sheet
as of December 31, 1996
<TABLE>
<CAPTION>
ASSETS 1996
-------------
<S> <C>
Current assets:
Cash $ 67,586
Accounts receivable, net of allowances of $895,300 11,706,871
Notes receivable 93,950
Prepaid Expenses 135,000
Deferred taxes 561,275
-------------
Total current assets 12,564,682
-------------
Property and equipment:
Leasehold improvements 604,078
Equipment, furniture, and fixtures 1,164,547
Less: Accumulated depreciation (1,195,156)
-------------
573,469
-------------
Notes Receivable 174,175
Other Noncurrent Assets 225,959
Deferred Taxes 88,297
-------------
488,431
-------------
Total assets $ 13,626,582
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank revolving credit note $ 3,783,024
Current maturities of long-term loans 334,000
Book overdraft 284,188
Accounts payable, trade 3,924,093
Accrued expenses, including payroll 2,073,355
Income taxes payable 1,005,597
-------------
Total current liabilities 11,404,257
Long-term loans, less current maturities 350,000
Deferred taxes 159,270
-------------
Total liabilities 11,913,527
-------------
Commitments and Contingencies (Note 8)
Stockholder's equity:
Common stock - no par value: 2,500 shares authorized,
1,276 shares issued and outstanding 1,000
Retained earnings 3,587,055
Less cost of treasury stock - 1,224 shares 1,875,000
-------------
Total stockholder's equity 1,713,055
-------------
Total liabilities and stockholder's equity $ 13,626,582
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -2-
<PAGE> 5
NATIONS, INC.
Statement of Earnings
for the year ended December 31, 1996
<TABLE>
<CAPTION>
1996
-------------
<S> <C>
Contract Revenues $ 45,292,379
Direct Costs:
Direct labor 10,695,542
Direct travel 5,669,084
Subcontracts 9,097,550
Direct material 60,914
Other direct costs 8,539,383
-------------
34,062,473
-------------
Gross profit from operations 11,229,906
-------------
Operating expenses 8,519,488
-------------
Other (income) expenses:
Other income (14,656)
Interest expense 311,350
-------------
296,694
-------------
Net income before taxes 2,413,724
-------------
Provision for income taxes 981,777
-------------
Net income $ 1,431,947
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -3-
<PAGE> 6
NATIONS, INC.
Statement of Changes in Stockholder's Equity
for the year ended December 31, 1996
<TABLE>
<CAPTION>
1996
-------------
<S> <C>
Common stock:
Balance at beginning of year $ 1,000
-------------
Balance at end of year 1,000
-------------
Retained earnings:
Balance at beginning of year 2,155,108
Net income 1,431,947
-------------
Balance at end of year 3,587,055
-------------
Treasury stock:
Balance at beginning of year 1,256,000
Treasury stock purchase 619,000
Balance at end of year 1,875,000
-------------
Total stockholder's equity $ 1,713,055
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -4-
<PAGE> 7
NATIONS, INC.
Statement of Cash Flows
for the year ended December 31, 1996
<TABLE>
<CAPTION>
1996
-------------
<S> <C>
Cash flows from operating activities:
Net income $ 1,431,947
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 178,983
Deferred taxes (234,286)
Decrease/(increase) in:
Accounts receivable (2,326,489)
Prepaid expenses (135,000)
Other noncurrent assets (140,165)
Increase/(decrease) in:
Accounts payable 198,951
Accrued expenses, including payroll 950,759
Income tax payable 648,060
-------------
Net cash provided by operating activities 572,760
-------------
Cash flows from investing activities:
Purchase of fixed assets (354,944)
-------------
Net cash used in investing activities (354,944)
-------------
Cash flows from financing activities:
Net borrowings under bank revolving credit note 770,334
Decrease in book overdraft (20,540)
Loans to shareholder (156,024)
Payments of long term loans (84,000)
Payments related to treasury stock purchase agreements (660,000)
-------------
Net cash used in financing activities (150,230)
-------------
Net increase in cash 67,586
Cash at beginning of the year
-------------
Cash at end of the year $ 67,586
=============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 255,350
=============
Cash paid during the year for taxes $ 568,000
=============
Supplemental disclosure of non cash financing activities:
Note obligation incurred in 1996 for the purchase of treasury
stock $ 500,000
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -5-
<PAGE> 8
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Nature of Operations:
Nations, Inc. ("Nations or the "Company") a New Jersey Corporation started
business in 1983. The Company provides a broad range of services to the
United States Government, primarily software engineering, modeling and
simulation and program management support services. The Company presently
provides software support to the U.S. Army's legacy simulations and is also
supporting the new Army and Joint Service engineering simulation systems.
The Company participated in the SBA (8a) program for nine years and
graduated in September 1996. Management does not anticipate an adverse
effect to the operations of the Company based upon its graduation.
Substantially all of the Company's 1996 revenues were generated as a result
of contracts with the United States Government.
2. Summary of Significant Accounting Policies:
a. Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
b. Revenue Recognition - The Company's contracts with the United States
Government consist of cost plus, fixed fee and time and materials
contracts. Revenues under such contracts are recognized at the time
services are rendered or related costs are incurred. Billings (including
retainages) under such contracts are usually monthly or semi-monthly.
All of the Company's contracts (except fixed fee contracts) contain
retainage provisions whereby 5% of the contractual amounts are withheld,
up to a maximum amount of $50,000 for time and materials contracts and
$100,000 for cost-plus contracts. Under the terms of these provisions,
payment of retainage may be withheld pending satisfactory completion of
a contract audit by the Defense Contract Audit Agency ("DCAA"). The
Company records a receivable and the related revenue for retainage when
billed. Retainage billed and outstanding is approximately $405,000 at
December 31, 1996. Additionally, the Company records revenues on
indirect costs incurred on contracts that are in excess of the
provisional amounts billed. These costs are billable pursuant to the
contract to which they pertain and are subject to the DCAA audits. The
Company records these revenues at their net realizable value (see Note
3). Audits by the DCAA have been completed through 1992.
-6-
<PAGE> 9
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
c. Property and Equipment - Property and equipment are stated at cost and
are depreciated using the straight-line method over estimated useful
lives of the assets or terms of related leases. Estimated useful lives
range from 3 to 15 years for leasehold improvements and 3 to 5 years for
equipment, furniture and fixtures. Upon retirement or sale, the cost of
disposed assets and the related accumulated depreciation are removed
from the respective accounts and the resulting gain or loss is included
in operations. Expenditures for maintenance and repairs are charged to
operations as incurred. Renewals and betterments are capitalized.
d. Income Taxes - In accordance with Statement of Financial Accounting
Standards No. 109, deferred income taxes are provided using the
liability method whereby deferred tax assets are established for the
difference between the financial reporting and income tax basis of
assets and liabilities. Deferred tax assets are reduced by a valuation
allowance when, in the opinion on management, it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
3. ACCOUNTS RECEIVABLE:
Accounts receivable at December 31, 1996 is comprised of the following:
<TABLE>
<CAPTION>
1996
------------
<S> <C>
Billed $ 6,806,663
Unbilled 5,795,508
------------
12,602,171
Less, reserve 895,300
------------
Accounts receivable, net $11,706,871
============
</TABLE>
Unbilled receivables represent revenue which is not currently billable to
the U.S. Government under the terms of the contracts. Included within
unbilled receivables at December 31, 1996 is approximately $1,120,000,
related to indirect costs incurred on contracts currently in process.
Management expects that substantially all unbilled costs will be billed and
collected in the subsequent year. Included within unbilled receivables at
December 31, 1996 is approximately $143,000 due from the U.S. Government
related to a claim the Company has on one of its contracts with the U.S.
Government. Management expects this amount to be collected during 1997.
-7-
<PAGE> 10
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. BORROWINGS:
The Company has a Commercial Revolving Line of Credit (the "Line") with
Huntington National Bank, West Virginia, (the "Bank") for an amount not to
exceed $4,500,000 of which outstanding borrowings at December 31, 1996 is
$3,783,024. The line is in effect until April 30, 1998 and can be extended
at that time at the discretion of the Bank. Interest is at the Bank's prime
rate plus .5% for 1996 with a minimum or floor rate of 7.5%. This rate was
8.75% at December 31, 1996. Interest on outstanding borrowings is payable
monthly, with principal payable on demand. Under the terms and conditions
of the line, the Company is required to assign accounts receivable under
designated governmental contracts as collateral. Substantially all
receivables under contracts with the U.S. Government have been assigned at
December 31, 1996. Advances under the line can not exceed 75% of certain of
the Company's billed accounts receivable.
The Company also has three term loans with the Bank with an aggregate
balance outstanding of $684,000 at December 31, 1996. These loans require
monthly repayments with a balloon payment due in August of 1998 for two of
these term loans. The third term loan is due in monthly installments
through 1998. Interest is charged at prime plus 3% (11.25% at December 31,
1996) for two of these term loans. The third term loan is charged interest
at the Bank's prime rate plus .75% (9% at December 31, 1996) with a minimum
or floor rate of 7.5%. These term loans are collateralized by substantially
all of the Company's assets.
All borrowings of the Company from the bank are guaranteed by John A. Pla.,
CEO, the sole shareholder and President of the Company.
The line and term loan require the Company to maintain a minimum tangible
net worth. The line and term loan also contain a subjective acceleration
clause, which allows the Bank to accelerate repayment of the loan based
upon a material adverse change in the Company's operations. Annual
maturities of these term loans as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 334,000
1998 (including balloon) 350,000
----------
$ 684,000
==========
</TABLE>
Based on borrowing rates currently available to the Company for bank loans
with similar terms and average maturities, the fair value of bank loans
approximates its carrying value.
-8-
<PAGE> 11
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDER'S EQUITY:
The Company completed a transaction in 1996 for the purchase of stock from
a former director/shareholder of the Company. Included in the prior year
treasury stock balance is an estimated amount to complete such transaction.
The settlement reached in 1996 resulted in additional treasury stock of
$619,000.
6. RELATED PARTY TRANSACTIONS:
The Company formerly utilized the services of a third party claims
administrator, Benefits Plan Association ("BPA"), for it's employee medical
payments (effective January 1, 1997, the Company is utilizing Mass
Mutual/Unicare as its administrator). BPA is controlled by the son of a
former director/shareholder. Payments to BPA for reimbursement of employee
medical claims during 1996 totaled $621,043. Additionally, payments for
administrative fees associated with this service during 1996 were $554,039.
Included in the accompanying balance sheet at December 31, 1996 is an
accrual for incurred but not yet reported employee medical claims totaling
approximately $186,000.
The Company pays the premiums relating to three insurance policies on the
life of John A. Pla, CEO. The Company is the owner and beneficiary of all
three policies. Monthly premiums for all three policies are $7,625 for
1996. The Company also paid the premiums relating to an insurance policy on
a former director/shareholder for which the Company is not the named
beneficiary or owner. Monthly premiums for this policy totaled $5,474 for
1996. Subsequent to 1996, the Company is no longer obligated to pay the
premiums relating to the insurance policy on the former
director/shareholder.
The Company has made advances to John A. Pla, CEO and certain employees of
the Company, of which $268,125 are outstanding at December 31, 1996. The
advances are included in notes receivable in the balance sheet. The
advances bear interest at 7% and are payable in yearly installments through
1998.
7. EMPLOYEE BENEFIT PLANS:
Substantially all of the Company's full-time employees are eligible to
participate in the Company's 401k Savings Plan which provides benefits to
eligible employees. Under the Plan, employees may participate by
contributing between 1% and 20% of earnings, subject to IRS limitations.
The Company may match employee contributions. No Company contributions were
made during 1996. The Company does not provide any other post-retirement or
post-employment benefits.
-9-
<PAGE> 12
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES:
a. The Company leases office space in Tinton Falls, NJ from a former
director/shareholder of approximately 22,000 and 5,000 sq. ft., expiring
in January and August, 2007, respectively. The monthly rent under the
leases is approximately $30,000 and $7,000, respectively, and the
Company is also responsible for paying all charges relating to real
estate taxes through July, 1998. At December 31, 1996, the estimated
excess real estate taxes due on office space not used by the Company
approximates $95,000 and has been recorded in the accompanying balance
sheet.
The Company also leases other office space and various equipment under
noncancelable operating leases.
Future minimum rental payments under noncancelable leases, including
amounts under the Tinton Falls office leases, are:
<TABLE>
<S> <C>
1997 $ 1,167,395
1998 1,071,129
1999 1,039,528
2000 965,716
2001 470,539
Thereafter 2,659,248
------------
Total $ 7,373,555
============
</TABLE>
The Company's leases generally contain renewal and escalation clauses.
Total rental expense for 1996 was approximately $1,939,000.
b. The Company was served with a complaint in which the Plaintiff has
asserted a claim for a brokerage commission totaling approximately
$333,000 arising out of the Company's leased premises in Tinton Falls.
The Company denies that an exclusive brokerage agreement was in effect
at the time of leasing the premises. Discovery has been completed and
the matter is scheduled for trial in the second calendar quarter of
1997. Based on a number of factors, including the advice of legal
counsel, management believes that the eventual resolution will not have
a material adverse effect on the Company's financial position.
-10-
<PAGE> 13
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED):
c. The Company has a consulting agreement and covenant not to compete
with a former shareholder. Under the terms of the consulting agreement,
the Company is to pay the former shareholder $5,000 per month through
October 1997. At December 31, 1996, the Company recorded the remaining
amounts due of $50,000 in the accompanying balance sheet. Under the
terms of the covenant not to compete, the Company is to pay the former
shareholder $25,000 per calendar quarter through the first quarter of
1998. Additionally, the Company provides medical benefits to the former
shareholder and a relative of the former shareholder. Total premiums and
benefits paid in 1996 approximated $16,300. The Company is obligated to
continue these medical benefits through October of 1997.
d. The Company has entered into an agreement with an officer of the
Company providing that in the event of a sale of all or substantially
all of the capital stock or assets of the Company or a merger of the
Company with another entity the officer will receive immediately prior
to the closing of such transaction 319 shares of the Company's capital
stock (which number of shares if issued on December 31, 1996 would
constitute 20% of the then issued and outstanding shares of Nations
Capital stock) in consideration of services to the Company. The
agreement with the officer terminates in the event that the officer
voluntarily terminates his employment or is terminated for cause prior
to the issuance of the shares. In the event of the issuance of such
shares, the Company will incur compensation expense on the date of
issuance equal to the fair market value on such date of the capital
stock issued.
9. CONCENTRATION OF CREDIT RISK:
The Company's revenues and respective receivables are all with various
agencies of the United States Government, primarily with the U.S.
Department of Defense. Three contracts account for approximately 60% of
1996 revenues and 51% of billed receivables at December 31, 1996. One of
these three contracts accounts for approximately 24% and 23% of 1996
revenues and billed receivables at December 31, 1996, respectively.
-11-
<PAGE> 14
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES:
The 1996 provision/(benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1996
------------
<S> <C>
Current:
Federal $ 1,069,559
State 146,504
------------
Total current 1,216,063
------------
Deferred:
Federal (186,570)
State (47,716)
------------
Total deferred (234,286)
------------
Total provision $ 981,777
============
</TABLE>
The Company's effective tax rate differs from the statutory rate
principally due to state income taxes (net of federal benefit) and officers
life insurance.
The components of the net deferred tax asset at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
1996
------------
<S> <C>
Deferred tax assets:
Federal $ 517,276
State 132,296
------------
Total 649,572
Deferred tax liabilities:
Federal 126,832
State 32,438
------------
Total 159,270
------------
Net deferred tax asset $ 490,302
============
</TABLE>
Deferred tax assets consists primarily of an allowance for bad debts,
longer deprecation lives on fixed assets for tax purposes and certain
currently nondeductible accruals. Deferred tax liabilities consists
primarily of currently nontaxable receivables.
-12-
<PAGE> 15
NATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Based on the Company's historical and current pre-tax earnings, management
believes it is more likely than not that the Company will realize the
deferred tax assets recorded in the accompanying balance sheet.
-13-
<PAGE> 16
NATIONS, INC.
INTERIM BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Receivables, net ........................................ $ 9,123
Prepaid expenses and other .............................. 655
--------
Total current assets ................................. $ 9,778
--------
Property and equipment, net ................................... 528
Other ......................................................... 431
--------
$ 10,737
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt .................... $ 251
Line of credit .......................................... 1,803
Accounts payable ........................................ 3,069
Accrued expenses ........................................ 2,328
Other ................................................... 479
--------
Total current liabilities ............................ $ 7,930
--------
Long-term debt, excluding current maturities .................. 350
Other liabilities ............................................. 159
--------
Total liabilities .................................... $ 8,439
--------
Shareholders' equity:
Common stock, no par value, 2,500 shares authorized
1,276 shares issued and outstanding at March 31, 1997 $ 1
Retained earnings ....................................... 4,172
Treasury stock, at cost, 1,224 shares ................... (1,875)
--------
Total shareholders' equity ........................... $ 2,298
--------
$ 10,737
========
</TABLE>
See accompanying notes to unaudited interim financial statements.
<PAGE> 17
NATIONS, INC.
INTERIM STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Contract revenue ..................................................... $ 11,565 $ 9,270
Contract costs ....................................................... 8,468 6,972
-------- --------
3,097 2,298
-------- --------
Indirect, general and administrative expenses ........................ 2,050 1,743
-------- --------
Operating income ............................................... 1,047 555
-------- --------
Interest expense ..................................................... (57) (64)
Other income (expense), net .......................................... (4) 3
-------- --------
Income before income taxes ..................................... 986 494
Income tax expense ................................................... 401 201
-------- --------
Net income ..................................................... $ 585 $ 293
======== ========
</TABLE>
See accompanying notes to unaudited interim financial statements.
<PAGE> 18
NATIONS, INC.
INTERIM STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 585 $ 293
Noncash items included in net income:
Depreciation and amortization ..................... 45 45
(Increase) decrease in:
Receivables ................................... 2,584 768
Prepaid expenses and other .................... 135 46
Other assets .................................. 24 --
Increase (decrease) in:
Accounts payable .............................. (1,139) (558)
Accrued expenses .............................. 255 534
Other liabilities ............................. (527) (118)
------- -------
Net cash provided by operating activities ......... $ 1,962 $ 1,010
------- -------
Cash flows from investing activities:
Proceeds from notes receivable ....................... 35 2
------- -------
Net cash provided by investing activities ......... $ 35 $ 2
------- -------
Cash flows from financing activities:
Net advances (repayments) of line of credit .......... (1,980) 4,900
Principal payments of long-term debt ................. (85) --
------- -------
Net cash provided by (used in) financing activities $(2,065) $ 4,900
------- -------
Increase (decrease) in cash and equivalents ................ (68) 5,912
Cash and equivalents, beginning of period .................. 68 --
------- -------
Cash and equivalents, end of period ........................ $ -- $ 5,912
======= =======
</TABLE>
See accompanying notes to unaudited interim financial statements.
<PAGE> 19
NATIONS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim financial statements included herein have been prepared by
Nations, Inc. (the "Company"), without audit. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of interim period results have been included. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
These unaudited interim financial statements should be read in conjunction with
the Company's financial statements and notes thereto for its fiscal year ended
December 31, 1996, included elsewhere in this filing. The presentation of
certain amounts in the Company's financial statements for its fiscal year ended
December 31, 1996 have been reclassified in the interim financial statements.
The results of operations for the three-month period ended March 31, 1997, are
not necessarily indicative of the results to be expected for the full fiscal
year ending December 31, 1997.
2. SUBSEQUENT EVENT
On June 12, 1997, all of the issued and outstanding shares of the
Company were sold to BTG, Inc.
<PAGE> 1
EXHIBIT 99(b)
<PAGE> 2
BTG, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial
statements give effect to the acquisition of Nations, Inc. ("Nations") as
described in Note 2. Nation's fiscal year end is December 31, while the fiscal
year end of BTG, Inc. and Subsidiaries ("BTG") is March 31. The unaudited pro
forma condensed consolidated balance sheet as of March 31, 1997, has been
prepared by combining the consolidated balance sheet of BTG as of March 31,
1997, with the balance sheet of Nations as of March 31, 1997. The unaudited pro
forma condensed consolidated statement of operations for the fiscal year ended
March 31, 1997, has been prepared by combining BTG's consolidated statement of
operations for the fiscal year ended March 31, 1997, with Nation's consolidated
statement of earnings for the fiscal year ended December 31, 1996. BTG and
Nations, on a combined basis, are referred to herein as the "Company".
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Company's management and should be read in conjunction with the
historical financial statements of BTG and Nations and the related notes
thereto. The unaudited pro forma condensed consolidated statement of operations
is not necessarily indicative of the results of operations that may have
actually occurred had the acquisition taken place on April 1, 1996, or of the
future results of the Company.
<PAGE> 3
BTG, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
BTG NATIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Receivables, net ........................................ $ 99,017 $ 9,123 - $ 108,140
Inventory, net .......................................... 16,716 - - 16,716
Prepaid expenses and other .............................. 10,970 655 (93) (A) 11,532
--------- -------- ----------- ---------
Total current assets ................................. $ 126,703 $ 9,778 (93) $ 136,388
Property and equipment, net ................................... 6,461 528 - 6,989
Goodwill and other intangible assets, net ..................... 20,466 - 7,837 (B) 28,303
Other ......................................................... 2,450 431 (139) (A) 2,607
(135) (C)
--------- -------- ----------- ---------
$ 156,080 $ 10,737 $ 7,470 $ 174,287
========= ======== =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt .................... $ 100 $ 251 $ (163) (D) $ 188
Accounts payable ........................................ 30,902 3,069 - 33,971
Accrued expenses ........................................ 9,894 2,328 - 12,222
Other ................................................... 2,256 479 - 2,735
--------- -------- ----------- ---------
Total current liabilities ............................ $ 43,152 $ 6,127 $ (163) $ 49,116
Line of credit ................................................ 30,021 1,803 9,931 (E) 41,755
Long-term debt, excluding current maturities .................. 14,225 350 - 14,575
Other liabilities ............................................. 2,437 159 - 2,596
Shareholders' equity .......................................... 66,245 2,298 (2,298) (F) 66,245
--------- -------- ----------- ---------
$ 156,080 $ 10,737 $ 7,470 $ 174,287
========= ======== =========== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE> 4
BTG, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BTG NATIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Contract revenue ........................ $ 109,817 $ 45,292 $ - $ 155,109
Product sales ........................... 290,216 - - 290,216
--------- --------- --------- ---------
400,033 45,292 - 445,325
Direct costs:
Contract costs .......................... 66,665 34,062 - 100,727
Cost of product sales ................... 254,823 - - 254,823
--------- --------- --------- ---------
321,488 34,062 - 355,550
Indirect, general and administrative
expenses ................................ 64,587 8,520 (313)(G) 72,794
Amortization and other operating costs, net ... 1,916 - 261 (H) 2,177
--------- --------- --------- ---------
387,991 42,582 (52) 430,521
--------- --------- --------- ---------
Operating income .............................. 12,042 2,710 52 14,804
Interest expense .............................. (6,107) (311) (775)(I) (7,193)
Equity in earnings of unconsolidated affiliates 1,887 - - 1,887
Other income .................................. 107 15 - 122
--------- --------- --------- ---------
Income before income taxes .................... 7,929 2,414 (723) 9,620
Income tax expense ............................ 3,658 982 (180)(J) 4,460
--------- --------- --------- ---------
Net income .................................... $ 4,271 $ 1,432 $ (543) $ 5,160
========= ========= ========= =========
Net income per share .......................... $ 0.60 $ 0.72
========= =========
Weighted average shares outstanding ........... 7,141 7,141
========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE> 5
BTG, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. BTG HISTORICAL
The historical balances represent the financial position and results of
operations as of March 31, 1997 and for the fiscal year then ended, as reported
in the historical consolidated financial statements of BTG.
2. NATIONS ACQUISITION
On June 12, 1997, BTG acquired all of the outstanding stock of Nations
for $10.0 million in cash. In connection with the closing, BTG entered into
three year employment and non-compete agreements with certain of Nations'
officers and one year non-compete and consulting agreements with the former
principal shareholder of Nations. The consulting agreement permits BTG to
purchase technical and other professional services from the individual at
specified billing rates. The acquisition will be accounted for using the
purchase method of accounting. The purchase price was allocated to net tangible
and identifiable intangible assets and liabilities based on preliminary
estimates of fair value as of the date of acquisition. The excess of purchase
price over the estimated fair value of net tangible and identifiable intangible
assets and liabilities was allocated to goodwill. The final allocation of the
purchase price will be determined during the remainder of fiscal year 1998 when
appraisals or other studies are completed.
The historical balances of Nations as of March 31, 1997, were derived
from Nations' interim financial statements, included elsewhere in this filing.
The historical balances of Nations as presented in the accompanying unaudited
pro forma condensed consolidated statement of operations for the fiscal year
ended March 31, 1997, were derived using the actual audited results of
operations as presented in Nations' historical financial statements for its
fiscal year ended December 31, 1996, included elsewhere in this filing. Certain
amounts in Nations' historical financial statements have been reclassified to
conform to the presentation used in the accompanying unaudited pro forma
condensed consolidated financial statements.
The following pro forma adjustments for the acquisition of Nations are
reflected as of March 31, 1997, in the case of the unaudited pro forma condensed
consolidated balance sheet, and as of April 1, 1996, in the case of the
unaudited pro forma condensed consolidated statements of operations for the
fiscal year ended March 31, 1997.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(A) Repayment of notes owed to Nations by its principal shareholder.
(B) Goodwill resulting from the allocation of the purchase price.
(C) Distribution of a life insurance policy to Nations' principal
shareholder.
(D) Repayment of certain Nations' notes payable.
(E) Borrowings under BTG's line of credit facility to fund the cash
purchase price and the repayment of certain Nations' notes payable, net of
amounts owed to Nations by its principal shareholder.
<PAGE> 6
BTG, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS - CONTINUED
Unaudited Pro Forma Condensed Consolidated Balance Sheet - Continued
(F) Elimination of Nations' shareholders' equity upon consolidation
with BTG.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(G) Reduction of general and administrative expenses attributable to
the termination of Nations' principal shareholder's employment offset by
consulting service payments to such individual.
(H) Amortization of estimated goodwill on a straight line basis over
thirty years.
(I) Interest expense on net borrowings needed to fund the cash purchase
price using an effective annual interest rate of 7.80% for the fiscal year ended
March 31, 1997.
(J) Reduction of federal and state income tax expense resulting from
the additional interest expense net of the lower general and administrative
costs.
3. PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is computed by dividing pro forma net
income by BTG's historical weighted average number of shares outstanding.
