<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _____________
COMMISSION FILE NUMBER: 0-25094
BTG, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
VIRGINIA 54-1194161
- -------------------------------------------------- --------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3877 FAIRFAX RIDGE ROAD, FAIRFAX, VIRGINIA 22030-7448
- ---------------------------------------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 383-8000
----------------------------------
</TABLE>
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
----- -----
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
<TABLE>
<S> <C>
CLASS OUTSTANDING AT AUGUST 1, 1997
- ------------------------------------------- -----------------------------
COMMON STOCK
</TABLE>
<PAGE> 2
BTG, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
NUMBER
-------
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets, June 30, 1997 and
March 31, 1997 3
Consolidated Statements of Operations for the three
months ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
three months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11-12
SIGNATURES 13
EXHIBIT INDEX 14
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS 15
</TABLE>
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BTG, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
------------ -----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,236 $ 99,017
Inventory, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,669 16,716
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,234 8,424
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,798 2,546
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 168,937 $ 126,703
---------- ----------
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . 7,619 6,461
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,632 16,267
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . 4,078 4,199
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,569 2,450
---------- ----------
$ 206,835 $ 156,080
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . $ 100 $ 100
Current maturities of capital lease obligations . . . . . . . . . . . . . 684 557
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,541 30,902
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,286 9,894
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,080 1,111
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655 588
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . $ 73,346 $ 43,152
Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,627 30,021
Long-term debt, excluding current maturities . . . . . . . . . . . . . . . 14,275 14,225
Capital lease obligations, excluding current maturities . . . . . . . . . . 1,301 1,179
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 770
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 488
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139,936 $ 89,835
---------- ----------
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized; no shares
issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
Common stock, no par value, 10,000,000 shares authorized; 8,523,919
and 8,443,844 shares issued and outstanding at June 30, 1997
and March 31, 1997, respectively . . . . . . . . . . . . . . . . . . . . 52,498 52,079
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,928 14,693
Treasury stock, at cost, 50,057 shares . . . . . . . . . . . . . . . . . (527) (527)
---------- ---------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . $ 66,899 $ 66,245
---------- ----------
$ 206,835 $ 156,080
========== ==========
</TABLE>
See notes to consolidated financial statements.
- 3 -
<PAGE> 4
BTG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------------------
1997 1996
---------- -----------
<S> <C> <C>
Revenues:
Contract revenue . . . . . . . . . . . . . . . . . . . $ 39,320 $ 20,529
Product sales . . . . . . . . . . . . . . . . . . . . . 80,560 54,913
---------- -----------
119,880 75,442
Direct costs:
Contract costs . . . . . . . . . . . . . . . . . . . . 26,627 10,948
Cost of product sales . . . . . . . . . . . . . . . . . 70,787 47,779
---------- -----------
97,414 58,727
Indirect, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . 20,101 14,071
Amortization and other operating costs, net . . . . . . . 603 448
---------- -----------
118,118 73,246
---------- -----------
Operating income . . . . . . . . . . . . . . . . . . . . 1,762 2,196
Interest expense . . . . . . . . . . . . . . . . . . . . (1,567) (1,266)
Equity in earnings of unconsolidated affiliates . . . . . 185 97
Other income . . . . . . . . . . . . . . . . . . . . . . 55 --
---------- -----------
Income before income taxes . . . . . . . . . . . . . . . 435 1,327
Provision for income taxes . . . . . . . . . . . . . . . 200 570
---------- -----------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 235 $ 757
========== ===========
Earnings per common and common
equivalent share . . . . . . . . . . . . . . . . . . . $ 0.03 $ 0.12
========== ===========
Weighted average shares of common stock
and common stock equivalents . . . . . . . . . . . . . 8,758 6,336
========== ===========
</TABLE>
See notes to consolidated financial statements.
- 4 -
<PAGE> 5
BTG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 235 $ 757
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . 1,297 852
Reserves for accounts receivable and inventory . . . . . . . . . . . . . . . (38) 190
Loss on sale of property and equipment . . . . . . . . . . . . . . . . . . . 76 11
Changes in assets and liabilities, net of the effects from purchases
of subsidiaries:
(Increase) decrease in restricted cash . . . . . . . . . . . . . . . . . . . -- (13)
(Increase) decrease in receivables . . . . . . . . . . . . . . . . . . . . . (18,789) (11,000)
(Increase) decrease in inventory . . . . . . . . . . . . . . . . . . . . . . (12,952) (3,524)
(Increase) decrease in prepaids and other . . . . . . . . . . . . . . . . . (2,257) (5,486)
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . 172 205
Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . 24,777 9,596
Increase (decrease) in accrued expenses . . . . . . . . . . . . . . . . . . 877 3,298
Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . (345) (1,828)
----------- ----------
Net cash used in operating activities . . . . . . . . . . . . . . . . $ (6,947) $ (6,942)
----------- ----------
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . (852) (166)
Purchase of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (200)
Purchase of note receivable . . . . . . . . . . . . . . . . . . . . . . . . . -- (300)
Purchases of subsidiaries, net of acquired cash . . . . . . . . . . . . . . . (10,129) --
Capitalized product development costs . . . . . . . . . . . . . . . . . . . . (380) --
----------- ----------
Net cash used in investing activities . . . . . . . . . . . . . . . . $ (11,361) $ (666)
----------- ----------
Cash flows from financing activities:
Net advances under line of credit . . . . . . . . . . . . . . . . . . . . . . 18,593 7,525
Principal payments on long-term debt and capital lease obligations . . . . . (704) (55)
Proceeds from the issuance of common stock . . . . . . . . . . . . . . . . . 419 138
----------- ----------
Net cash provided by financing activities . . . . . . . . . . . . . . $ 18,308 $ 7,608
----------- ----------
Increase in unrestricted cash and equivalents . . . . . . . . . . . . . . . . . -- --
Unrestricted cash and equivalents, beginning of period . . . . . . . . . . . . -- --
----------- ----------
Unrestricted cash and equivalents, end of period . . . . . . . . . . . . . . . $ -- $ --
=========== ==========
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE> 6
BTG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated interim financial statements included herein have
been prepared by BTG, Inc. and Subsidiaries (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC") and include, in the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of interim
period results. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The Company believes, however, that its disclosures are adequate to make the
information presented not misleading. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report to Stockholders for the
fiscal year ended March 31, 1997. The results of operations for the
three-month period ended June 30, 1997, are not necessarily indicative of the
results to be expected for the full fiscal year ending March 31, 1998.
2. BUSINESS COMBINATION
In June 1997, the Company acquired, for $10.0 million in cash, all of
the outstanding capital stock of Nations, Inc. ("Nations"), a systems
engineering and software development company headquartered in Tinton Falls, New
Jersey. The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the results of operations of Nations have been
included in the Company's consolidated statement of operations since the date
of acquisition, June 12, 1997. The excess of the purchase price over the fair
value of the net tangible and identifiable intangible assets acquired of
approximately $7.6 million has been recorded as goodwill and is being amortized
on a straight-line basis over the expected period of benefit, 30 years. In
connection with the acquisition, the Company also entered into both non-compete
and employment agreements with several members of Nations' senior management.
The following unaudited pro forma financial information presents the combined
results of operations of the Company and Nations as if the acquisition had
occurred as of the beginning of the three-month periods ended June 30, 1997 and
1996, after giving effect to the following adjustments: (i) amortization of
goodwill over a period of 30 years; (ii) interest expense on borrowings needed
to fund the cash portion of the purchase price; (iii) cost savings attributable
to the termination of the former president and principal shareholder of Nations
offset by consulting service payments to such individual; and (iv) the related
income tax effects from such adjustments. This pro forma financial information
does not necessarily reflect the results of operations that would have occurred
had the Company and Nations constituted a single entity during such periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
---------- ----------
(UNAUDITED)
(in thousands, except per share data)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 129,059 $ 84,712
========== ===========
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60 $ 910
========== ===========
Net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.06 $ 0.14
========== ===========
</TABLE>
- 6 -
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
BTG, Inc. ("BTG" or the "Company") is an information technology company
providing complete solutions to a broad range of complex systems and product
needs of the United States Government and its agencies and departments (the
"Government"), state and local governments and commercial clients. The Company
provides systems development, integration, engineering and network design,
implementation and security expertise services. In addition, the Company
resells computer hardware, software and integrated systems. The Company's
common stock is quoted on the NASDAQ National Market under the symbol "BTGI".
The Company's revenues are derived from both contract activities and
product sales. Contract revenue is typically less seasonal than product sales
but fluctuates month-to-month based on contract delivery schedules. Contract
revenue is typically characterized by lower direct costs than product sales,
yet generally requires a higher relative level of infrastructure support.
Year-to-year increases in contract revenue have generally resulted from
increases in volume, driven by additional work requirements under Government
contracts, rather than price increases, which are generally limited to
escalation factors of 3-4% on direct labor costs. Product sales tend to be
seasonal, with the Company's second and third fiscal quarters typically
accounting for the greatest proportion of revenues each year. Product sales
are characterized by higher direct costs than contract revenue; however,
indirect expenses associated with product sales are generally lower in
comparison. Year-to-year increases in product sales have generally been driven
by higher volumes as opposed to price increases.
On June 12, 1997, the Company acquired Nations, Inc. ("Nations"), which is
primarily involved in software engineering, modeling and simulation, program
management support services, systems engineering, and integrated logistics
support services. Nations contracts are principally with the Government.
- 7 -
<PAGE> 8
RESULTS OF OPERATIONS
The following table presents for the periods indicated: (i) the percentage of
revenues represented by certain income and expense items and (ii) the
percentage period-to-period increase (decrease) in such items:
<TABLE>
<CAPTION>
% PERIOD-TO-PERIOD
INCREASE (DECREASE)
PERCENTAGE OF REVENUE OF DOLLARS
--------------------- ---------------------
THREE MONTHS ENDED
JUNE 30, 1997
THREE MONTHS ENDED COMPARED TO
JUNE 30, THREE MONTHS ENDED
1997 1996 JUNE 30, 1996
---- ---- --------------
<S> <C> <C> <C>
Revenues:
Contract revenue . . . . . . . . . . . . . . . 32.8% 27.2% 91.5%
Product sales . . . . . . . . . . . . . . . . 67.2 72.8 46.7
Total revenues . . . . . . . . . . . . . . . 100.0 100.0 58.9
Direct costs:
Contract costs (as a % of contract revenue) . 67.7 53.3 143.2
Cost of product sales (as a % of product sales) 87.9 87.0 48.2
Total direct costs (as a % of total revenues) 81.3 77.8 65.9
Indirect, general and administrative expenses . . 16.8 18.7 42.9
Amortization and other operating costs, net . . . 0.5 0.6 27.1
Operating income . . . . . . . . . . . . . . . . 1.5 2.9 (16.9)
Interest expense . . . . . . . . . . . . . . . . 1.3 1.7 23.8
Equity in earnings of unconsolidated affiliates . 0.2 0.5 (53.3)
Other income . . . . . . . . . . . . . . . . . . 0.1 -- 100.0
Income before income taxes . . . . . . . . . . . 0.4 1.8 (69.1)
Provision for income taxes . . . . . . . . . . . 0.2 0.8 (69.2)
Net income . . . . . . . . . . . . . . . . . . . 0.2 1.0 (69.0)
</TABLE>
Three Months Ended June 30, 1997 Compared With Three Months Ended June 30, 1996
Revenues for the three months ended June 30, 1997 increased by $44.4 million,
or 58.9%, from the three months ended June 30, 1996. Of this increase, $18.8
million was attributable to contract revenue and $25.6 million was attributable
to product sales. The increase in contract revenue during the three months
ended June 30, 1997 was primarily due to $7.6 million of revenue recognized
under the Company's Integration for Command, Control, Communications, Computers
and Intelligence ("IC4I") contract; $4.2 million in increased revenue from the
commercial and state and local government sector; $2.4 million of revenue
recognized under contracts acquired in connection with the acquisition of
Nations in June 1997; and a net increase of $4.6 million from a variety of
contracts. The increase in product sales was primarily due to $14.5 million in
increased sales under General Services Administration ("GSA") Schedule
contracts, $12.0 million of which was attributable to a single transaction;
$9.2 million in increased sales under the Company's electronic computer store
contract with the National Institutes of Health; and $6.9 million in sales from
the Company's Army PC-2 contract, which was awarded in October 1996. These
increases were offset by decreases of $1.3 million in orders fulfilled under
the Systems Acquisition Support Services ("SASS") contract with the defense
intelligence community; and a net decrease of $3.7 million under a variety of
other contracts. In the three months ended June 30, 1997, approximately 88.4%
of the Company's revenues were derived from contracts or subcontracts with and
product sales to the Government, as compared with 88.1% for the three months
ended June 30, 1996.
Direct costs, expressed as a percentage of total revenue, increased
from 77.8% for the three months ended June 30, 1996 to 81.3% for the three
months ended June 30, 1997. Contract costs as a percentage of contract revenue
increased from 53.3% in the three months ended June 30, 1996 to 67.7% in the
three months ended June 30, 1997. Contract costs include labor costs,
subcontract costs, material costs and other costs directly related to contract
revenue. The increase in the percentage of contract costs to contract revenue
was primarily the result of revenues generated from the IC4I contract, the
nature of which requires higher levels of material purchases and/or
subcontractor involvement than the average for BTG's contract base. These
contracts also had a significant effect on the ratio of contract costs to
contract revenues. Cost of product sales as a
- 8 -
<PAGE> 9
percentage of product sales increased from 87.0% in the three months ended June
30, 1996 to 87.9% in the three months ended June 30, 1997.
Indirect, general and administrative expenses include the costs of
indirect labor, fringe benefits, overhead, sales and administration, bid and
proposal, and research and development. Indirect, general and administrative
expenses for the three months ended June 30, 1997 increased by $6.0 million, or
42.9%, from the same period in 1996. The increase was due primarily to an
increase in the overall volume of business as compared with the comparable
period of the prior year and $885,000 associated with the Company's increased
investment in Community Networks, Inc. ("CNI"), a new subsidiary formed by the
Company in August 1996. CNI was created to be a total solutions provider to
broadband network owners entering the Internet access market. Expressed as a
percentage of total revenues, indirect, general and administrative expenses
decreased for the three months ended June 30, 1997 to 16.8% from 18.7% in the
three months ended June 30, 1996. This decrease is primarily reflective of the
significant growth in product sales, which typically requires less
infrastructure support than does contract revenue.
Amortization and other operating costs, which include the amortization of
goodwill and other intangible assets as well as other operating expenses that
are non-reimbursable under Government contracts, increased by $155,000 in the
three months ended June 30, 1997 as compared with the comparable period of the
prior year. This increase was principally the result of the amortization of
product development costs which were capitalized in the latter half of fiscal
1997 and which primarily relate to the development of certain software products
designed for use by CNI.
Interest expense for the three months ended June 30, 1997 increased by
$301,000, or 23.8%, from the comparable period of the prior year. This
increase was due in large part to the significant revenue growth experienced by
the Company in the three months ended June 30, 1997, as well as the higher
volume of product orders projected for the quarterly period ending September
30, 1997, which resulted in higher receivable, inventory and prepaid expense
balances, thereby resulting in higher levels of required financing under the
Company's working capital line of credit facility.
Equity in the earnings of unconsolidated affiliates results from the
Company's interest in an unincorporated joint venture. The joint venture
entity, which is with an unrelated company, was formed for the purpose of
performing under a specific contract. Income from this source decreased by
$212,000 in the three months ended June 30, 1997, as compared to the comparable
period of the prior year as the result of a lower demand for products under
this contract vehicle.
The Company's effective tax rate increased to 46.0% in the three months
ended June 30, 1997 from 43.0% in the three months ended June 30, 1996. The
Company uses the estimated annual effective rate method for interim income tax
purposes. As a result of the acquisition of Nations, the Company anticipates a
higher effective income tax rate in fiscal 1998 as a result of the associated
goodwill amortization which will be non-deductible for income tax reporting
purposes.
Net income for the three months ended June 30, 1997 decreased by $522,000,
or 69.0%, from the three months ended June 30, 1996, due to the reasons
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of approximately $6.9 million was used in operating activities
during the three months ended June 30, 1997. This net use of cash largely
resulted from significant increases in accounts receivable and inventory, which
were due to both the revenue growth experienced by the Company during the three
months ended June 30, 1997 and to the higher volume of product orders projected
for the quarterly period ending September 30, 1997. These increases were
offset by an increase in accounts payable which was primarily the result of
higher inventory balances at June 30, 1997.
- 9 -
<PAGE> 10
Investing activities used cash of approximately $11.4 million during the
three months ended June 30, 1997. This was primarily due to the acquisition
of Nations in June 1997 for which the Company invested cash of approximately
$10.1 million. In addition, the Company invested cash of approximately
$852,000 in the purchase of both office and computer related equipment to be
used internally by Company personnel and leasehold improvements primarily
associated with the Company's physical relocation of its principal facilities,
which occurred in March and April 1997.
During the three months ended June 30, 1997, the Company's financing
activities provided cash of approximately $18.3 million. This financing
resulted from $18.6 million in increased borrowings under the Company's
revolving line of credit facility, $11.7 million of which was used to fund the
cash portion of the Nations purchase price and to repay borrowings outstanding
under Nations' existing line of credit facility. The remaining net advances
under the line of credit facility were used to finance the Company's increased
business volumes. The Company also made $704,000 in payments under both
outstanding debt and capital lease obligations, the former of which included
certain debt acquired in connection with the acquisition of Nations. In
addition, the Company received proceeds of $419,000 from sales of stock under
certain employee benefit plans during the three months ended June 30, 1997. As
of June 30, 1997, working capital was $95.6 million, compared to $83.6 million
at March 31, 1997. This increase is primarily due to an increase in the volume
of business in the three months ended June 30, 1997, which resulted in
significantly higher accounts receivable balances. At June 30, 1997, the
Company had approximately $14.4 million available for borrowing under its
revolving line of credit facility.
Due to the significant growth recently experienced by the Company, the
projected levels of product sales in the Company's second and third fiscal
quarters, and to provide for additional financing for BTG's acquisition
program,the Company is currently negotiating with its lenders to increase the
availability of funds under its revolving line of credit and inventory
financing facilities. During the month of July 1997, the outstanding balance
under the Company's line of credit facility exceeded $65.0 million. As a
result, the Company is not in compliance with borrowing limitations in its $15
million subordinated debt agreement. The Company has received assurances from
the debt holder that the agreement will be amended, which amendment is likely
to include an increase in the permitted level of borrowing under the Company's
credit facility as well as an increase in the interest rate under the
subordinated debt agreement. The Company believes that it will be able to
refinance its current financing facilities in a manner that will provide
sufficient funds for the Company's operations for the next year.
- 10 -
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company
or any subsidiary is a party or to which any of their property is
subject, other than ordinary routine litigation incidental to the
business of the Company or any subsidiary.
ITEM 2. CHANGES IN SECURITIES
During the three month period ended June 30, 1997, the Company issued
64,228 shares of common stock that were not registered under the
Securities Act of 1933 ("Unregistered Shares"), pursuant to the BTG
1990 Incentive Stock Option Plan and certain options to acquire stock
of BDS, Inc. converted to options to acquire BTG stock in 1992 as
follows: (i) 3 employees exercised options to buy 36,690 Unregistered
Shares at $2.22 per share; (ii) 3 employees exercised options to
acquire 3,875 Unregistered Shares at $3.25 per share; (iii) 6
employees exercised options to acquire 3,998 Unregistered Shares at
$3.45 per share; 1 employee exercised options to acquire 4,000
Unregistered Shares at $3.58 per share; 1 employee exercised options
to acquire 8,666 Unregistered Shares at $3.79 per share; 4 employees
exercised options to acquire 3,333 Unregistered Shares at $7.75 per
share; and 1 employee exercised options to acquire 3,666 Unregistered
Shares at $8.53 per share. The Company believes the issuance of the
unregistered shares to these employees is exempt pursuant to Section
4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No defaults upon senior securities have taken place.
ITEM 4. SUBMISSION OF MATTERS TO SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
period.
ITEM 5. OTHER INFORMATION
No information to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
The following exhibits are either filed with this Report or are
incorporated herein by reference:
3.1 Amended and Restated Articles of Incorporation of BTG, Inc.
(incorporated by reference to exhibit 3.2 to BTG, Inc.'s
registration statement on Form S-1 (File No. 33-85854)).
3.2 Amended and Restated By-laws of BTG, Inc. (incorporated by
reference to exhibit 3.4 to BTG, Inc.'s registration statement
on Form S-1 (File No. 33-85854)).
- 11 -
<PAGE> 12
4.1 Specimen certificate of share of Common Stock (incorporated by
reference to exhibit 4.3 to BTG, Inc.'s registration statement
on Form S-8 (File No. 33-97302)).
11 Statement regarding computation of per share earnings.
27 Financial data schedule.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - CONTINUED
B. REPORTS ON FORM 8-K
DATE OF REPORT SUBJECT OF REPORT
-------------- ----------------------------------------
June 12, 1997 On June 12, 1997, BTG, Inc. consummated
the acquisition of all of the issued and
outstanding shares of Nations, Inc.
- 12 -
<PAGE> 13
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.
Date: August 15, 1997 BTG, INC.
/s/ John M. Hughes
-----------------------------
John M. Hughes
Duly Authorized Signatory and
Chief Financial Officer
- 13 -
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of BTG, Inc.
(incorporated by reference to exhibit 3.2 to BTG, Inc.'s
registration statement on Form S-1 (File No. 33-85854)).
3.2 Amended and Restated By-laws of BTG, Inc. (incorporated by
reference to exhibit 3.4 to BTG, Inc.'s registration statement
on Form S-1 (File No. 33-85854)).
4.1 Specimen certificate of share of Common Stock (incorporated by
reference to exhibit 4.3 to BTG, Inc.'s registration statement
on Form S-8 (File No. 33-97302)).
11 Statement regarding computation of per share earnings.
27 Financial data schedule.
</TABLE>
- 14 -
<PAGE> 1
EXHIBIT 11
BTG, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Net income $ 235 $ 757
========= ========
Weighted average common stock
shares outstanding during the
period 8,476 6,132
Dilutive effect of common stock
equivalents 282 204
--------- --------
Weighted average shares of common
stock and common stock equivalents 8,758 6,336
========= ========
Earnings per common and common
equivalent share $ 0.03 $ 0.12
========= ========
</TABLE>
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 126,236
<ALLOWANCES> 548
<INVENTORY> 29,669
<CURRENT-ASSETS> 168,937
<PP&E> 16,209
<DEPRECIATION> 8,590
<TOTAL-ASSETS> 206,835
<CURRENT-LIABILITIES> 73,346
<BONDS> 64,902
0
0
<COMMON> 52,495
<OTHER-SE> 14,401
<TOTAL-LIABILITY-AND-EQUITY> 206,835
<SALES> 80,560
<TOTAL-REVENUES> 119,880
<CGS> 70,787
<TOTAL-COSTS> 97,414
<OTHER-EXPENSES> 20,742
<LOSS-PROVISION> (38)
<INTEREST-EXPENSE> 1,567
<INCOME-PRETAX> 435
<INCOME-TAX> 200
<INCOME-CONTINUING> 235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
