<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
[ ] 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.
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(Exact Name of Registrant as Specified in its Charter)
Virginia 54-1194161
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3877 Fairfax Ridge Road, Fairfax, Virginia 22030-7448
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (703) 383-8000
-----------------------
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:
Class Outstanding at February 11, 1999
- --------------------------- ---------------------------------------
Common Stock 8,811,810
<PAGE> 2
BTG, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Interim Balance Sheets, December 31, 1998
(unaudited) and March 31, 1998 3
Consolidated Interim Statements of Operations for the three
months ended December 31, 1998 and 1997 and the nine
months ended December 31, 1998 and 1997 (unaudited) 4
Consolidated Interim Statements of Cash Flows for the nine
months ended December 31, 1998 and 1997 (unaudited) 5
Notes to Consolidated Interim Financial Statements (unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16-17
SIGNATURES 18
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BTG, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1998
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Investments, at fair value.................................................... $ 3,809 $ 22,286
Receivables, net.............................................................. 65,438 135,050
Inventory, net................................................................ 1,202 2,214
Prepaid expenses.............................................................. 4,076 3,338
Income tax receivable......................................................... 1,355 10,348
Other......................................................................... 4,572 9,128
----------- -----------
Total current assets........................................................ $ 80,452 $ 182,364
----------- -----------
Property and equipment, net..................................................... 3,933 4,508
Goodwill, net................................................................... 8,591 8,860
Other intangible assets, net.................................................... 387 874
Restricted investments, at cost................................................. 8,407 14,813
Other........................................................................... 674 1,020
----------- -----------
$ 102,444 $ 212,439
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.......................................... $ -- $ 15,000
Current maturities of line of credit.......................................... -- 31,417
Accounts payable.............................................................. 17,377 74,573
Accrued expenses.............................................................. 12,264 13,483
Other......................................................................... 2,470 4,079
----------- -----------
Total current liabilities.................................................. $ 32,111 $ 138,552
Line of credit.................................................................. 33,381 38,835
Other liabilities............................................................... 1,963 1,992
----------- -----------
Total liabilities........................................................... $ 67,455 $ 179,379
----------- -----------
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized; no shares
issued or outstanding........................................................ $ -- $ --
Common stock, no par value, 20,000,000 shares authorized; 8,811,439
and 8,634,451 shares issued and outstanding at December 31, 1998
and March 31, 1998, respectively............................................. 54,664 53,384
Accumulated deficit........................................................... (20,623) (20,530)
Treasury stock, at cost, 53,000 and 50,057 shares at December 31, 1998
and March 31, 1998, respectively............................................. (314) (527)
Unrealized gains on investments, net of related tax effects................... 1,262 733
----------- -----------
Total shareholders' equity.................................................. $ 34,989 $ 33,060
----------- -----------
$ 102,444 $ 212,439
=========== ===========
</TABLE>
See notes to consolidated interim financial statements.
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<PAGE> 4
BTG, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Contract revenue................................... $ 41,976 $ 40,479 $ 132,188 $ 115,239
Product sales...................................... 42,554 145,814 125,141 379,961
----------- ----------- ----------- -----------
84,530 186,293 257,329 495,200
Direct costs:
Contract costs..................................... 27,220 27,345 87,790 76,008
Cost of product sales.............................. 41,394 133,507 121,286 346,925
----------- ----------- ----------- -----------
68,614 160,852 209,076 422,933
Indirect, general and administrative expenses........ 13,177 22,879 42,977 66,201
Amortization expense................................. 153 453 523 1,367
Unusual charge....................................... 1,532 -- 1,532 --
----------- ----------- ----------- ----------
83,476 184,184 254,108 490,501
Operating income ................................. 1,054 2,109 3,221 4,699
Interest expense..................................... (790) (2,373) (3,323) (6,021)
Gain on sales of investments, net.................... 640 -- 1,287 --
Unusual charge....................................... (1,201) -- (1,201) --
Other income (expense), net.......................... (179) 233 (155) 491
------------ ----------- ------------ -----------
Loss from continuing operations before taxes...... (476) (31) (171) (831)
Income tax expense (benefit)......................... (208) 153 (78) (46)
------------ ----------- ------------ ------------
Loss from continuing operations................... (268) (184) (93) (785)
Loss from discontinued operations, net
of income taxes.................................... -- (614) -- (2,113)
------------ ------------ ------------ ------------
Net loss.......................................... $ (268) $ (798) $ (93) $ (2,898)
============ ============ ============ ============
Basic earnings per share:
Loss from continuing operations.................... $ (0.03) $ (0.02) $ (0.01) $ (0.09)
Loss from discontinued operations.................. -- (0.07) -- (0.25)
------------ ------------ ------------ ------------
Net loss.......................................... $ (0.03) $ (0.09) $ (0.01) $ (0.34)
============ ============ ============ ============
Diluted earnings per share:
Loss from continuing operations.................... $ (0.03) $ (0.02) $ (0.01) $ (0.09)
Loss from discontinued operations.................. -- (0.07) -- (0.25)
------------ ------------ ------------ -----------
Net loss.......................................... $ (0.03) $ (0.09) $ (0.01) $ (0.34)
============ ============ ============ ===========
Weighted average shares outstanding (used in
calculation of basic per share results)............ 8,796 8,563 8,760 8,522
=========== =========== =========== ===========
Weighted average shares outstanding (used in
calculation of diluted per share results).......... 8,796 8,563 8,760 8,522
=========== =========== =========== ===========
</TABLE>
See notes to consolidated interim financial statements.
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<PAGE> 5
BTG, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
----------------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................ $ (93) $ (2,898)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Loss on discontinued operations................................................... -- 2,113
Depreciation and amortization..................................................... 1,758 3,655
Deferred income taxes............................................................. (380) --
Reserves for receivables and inventory............................................ 1,479 961
Loss on disposal of property and equipment........................................ -- 76
Gain on sale of investments....................................................... (1,287) --
Unusual charge.................................................................... 1,706 --
Equity in earnings of unconsolidated affiliate.................................... (24) --
Changes in assets and liabilities, net of the effects from purchases of
subsidiaries:
(Increase) decrease in receivables............................................... 68,134 (60,004)
(Increase) decrease in inventory................................................. 1,012 (24,217)
(Increase) decrease in income taxes receivable................................... 8,994 --
(Increase) decrease in prepaid expenses and other current assets................. 3,397 (3,644)
(Increase) decrease in other assets.............................................. 346 749
Increase (decrease) in accounts payable.......................................... (57,196) 51,511
Increase (decrease) in accrued expenses.......................................... (1,219) (3,643)
Increase (decrease) in other liabilities......................................... (1,821) (597)
------------ ------------
Net cash provided by (used in) the operating activities
of continuing operations....................................................... 24,806 (35,938)
Net cash used in discontinued operations........................................ -- (3,552)
----------- ------------
Net cash provided by (used in) operating activities............................. $ 24,806 $ (39,490)
----------- ------------
Cash flows from investing activities:
Proceeds from sale of investments................................................. 26,108 --
Purchases of property and equipment............................................... (466) (1,574)
Purchase of subsidiaries, net of cash acquired.................................... -- (10,129)
Software development costs........................................................ -- (807)
----------- ------------
Net cash provided by (used in) investing activities............................. $ 25,642 $ (12,510)
----------- ------------
Cash flows from financing activities:
Net advances (repayments) on line of credit....................................... (36,871) 52,431
Principal payments on long-term debt and capital lease obligations................ (15,070) (1,099)
Payment of debt issue costs....................................................... -- (306)
Proceeds form issuance of common stock............................................ 1,807 974
Purchases of treasury stock....................................................... (314) --
------------ ------------
Net cash provided by (used in) financing activities............................. $ (50,448) $ 52,000
------------ ------------
Increase (decrease) in unrestricted cash and equivalents............................ -- --
Unrestricted cash and equivalents, beginning of period.............................. -- --
------------ ------------
Unrestricted cash and equivalents, end of period.................................... $ -- $ --
============ ============
</TABLE>
See notes to consolidated interim financial statements.
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<PAGE> 6
BTG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. BASIS OF PRESENTATION
The consolidated interim financial statements included herein have been
prepared by BTG, Inc. and Subsidiaries ("BTG" or 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 Shareholders for the
fiscal year ended March 31, 1998. The results of operations for the nine-month
period ended December 31, 1998, are not necessarily indicative of the results to
be expected for the full fiscal year ending March 31, 1999.
2. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income
("Statement 130"). Statement 130 establishes standards for reporting and
presenting comprehensive income and its components in consolidated financial
statements. Comprehensive income is defined as net income plus the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. For the three-month and
nine-month periods ended December 31, 1998, the Company had other comprehensive
income resulting from unrealized holding gains on available-for-sale
investments. The Company did not have other comprehensive income for the
three-month and nine-month periods ended December 31, 1997. Comprehensive income
for the three-month and nine-month periods ended December 31, 1998, was as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Net loss $ (268) $ (93)
Other comprehensive income:
Unrealized gains on investments, net of
income taxes of $24 and $480, respectively 40 782
--------- --------
Comprehensive income (loss) $ (228) $ 689
========= ========
</TABLE>
3. INVESTMENTS, AT FAIR VALUE
During the three-month and nine-month periods ended December 31, 1998,
the Company sold approximately 33,000 and 310,000 shares of Cisco Systems, Inc.
common stock for $2.2 million and $21.1 million respectively. The proceeds from
these sales were used to reduce outstanding borrowings under the Company's line
of credit facility. For the three-month and nine-months periods ended December
31, 1998, the Company recognized gains on such sales of $723,000 and $1.8
million respectively.
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<PAGE> 7
BTG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
4. LINE OF CREDIT
On November 9, 1998, the Company amended its working capital credit
facility to provide for, among other things, an extension of the maturity date
of the facility to August 31, 2002. The amended credit facility provides for
borrowings up to $50.0 million based on specified percentages of eligible
accounts receivable. Interest on outstanding borrowings under the amended
agreement is provided for at a rate equal to, at the Company's option, either
the lender's prime rate or LIBOR plus a percentage ranging from 2.25% to 3.25%,
depending on the Company's leverage ratio.
On January 26, 1999, the Company amended its working capital credit
facility as a result of the acquisition of STAC, Inc. ("STAC"). In addition to
permitting the additional borrowings required to satisfy the cash portion of the
purchase price, the credit facility amendment changed certain of the financial
covenants affected by the acquisition.
5. UNUSUAL CHARGES
On February 12, 1998, BTG and Government Technology Services, Inc.
("GTSI") entered into an Asset Purchase Agreement (the "APA") under which BTG
sold to GTSI (i) certain of the assets, principally inventory and property and
equipment, and (ii) certain of the existing contracts and outstanding customer
orders of the BTG operating division principally responsible for reselling
computer hardware and software products. As consideration for the sale, BTG was
to receive $8.0 million and 3.0 million shares of GTSI common stock. Ten percent
of the purchase price was placed in escrow for a one-year period to serve as
security for the Company's indemnification for potential obligations under the
APA.
During fiscal 1999, BTG and GTSI entered into a series of agreements in
order to settle a number of issues which arose subsequent to the APA. Under the
terms of the new agreements, BTG transferred to GTSI all of the cash portion of
the escrow and 200,000 shares of the GTSI common stock being held in the escrow.
In addition, BTG recorded a reserve of approximately $1.5 million due
to the impairment of certain assets of the Company's product reselling division,
which was previously sold to GTSI.
Total costs associated with these transactions amounted to
approximately $2.7 million, approximately $1.6 million on an after-tax basis,
and is included in both operating and non-operating income in the accompanying
consolidated interim statements of operations.
6. SUBSEQUENT EVENTS
Business Combination
On January 26, 1999, BTG completed the acquisition of STAC, an analysis
and software development company headquartered in Fairfax, Virginia. The Company
purchased all of the common stock of STAC for approximately $6.6 million, $1.5
million of which was contingent on certain stock market indices which have been
subsequently satisfied. The Company expects to account for this acquisition
using the purchase method of accounting. This acquisition does not have a
material effect on pro forma operations.
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<PAGE> 8
6. SUBSEQUENT EVENTS - CONTINUED
Sale of Restricted Investments
On February 10, 1999, BTG and GTSI entered into an agreement under
which GTSI issued a note payable to BTG as consideration for the purchase by
GTSI of 400,000 shares of its common stock at $5.00 per share. The note, which
bears interest at 8.0%, is payable in three annual installments beginning on
January 31, 2000. In addition, BTG granted GTSI an option to purchase, at $5.25
per share, the remaining 1.3 million shares of GTSI common stock held by BTG.
The option is for a five-year period ending in February 2004.
7. RECLASSIFICATIONS
Certain amounts in the prior period's interim financial statements have
been reclassified to conform to the fiscal 1999 presentation.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
BTG, Inc. ("BTG" or the "Company") is an information systems and technical
services company providing complete solutions to a broad range of the 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 services. In addition, in prior
fiscal years, the Company was significantly involved in the reselling of
computer hardware and software. The Company's common stock is quoted on the
NASDAQ National Market under the symbol "BTGI".
On February 12, 1998, BTG and Government Technology Services, Inc. ("GTSI")
completed the sale from BTG to GTSI of substantially all of the BTG operating
division responsible for reselling computer hardware, software and integrated
systems to the federal government (the "GTSI Transaction").
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, principally to the Government.
The Company's revenues are derived from both contract activities and product
sales. Contract revenue is typically less seasonal than product sales but
fluctuates monthly 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. Yearly 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% to 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. Higher volumes as opposed to price increases have
generally driven yearly increases in product sales. The Company's operating
performance is affected by both the number and type of contracts held, the
timing of the installation or delivery of the Company's services and products,
and the relative margins of the services performed or products sold. In general,
the Company recognizes its highest margins on its most specialized systems
engineering and software development projects and lower margins on sales of
commercial off-the-shelf products, whose sales tend to have lower services
components and a more competitive after-contract award environment. The
Company's product sales have been significantly reduced as a result of the GTSI
Transaction.
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<PAGE> 10
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
PERCENTAGE OF REVENUE INCREASE (DECREASE) OF DOLLARS
-------------------------------------------- ----------------------------------------
THREE MONTHS NINE MONTHS
THREE MONTHS ENDED NINE MONTHS ENDED ENDED DEC. 31, ENDED DEC. 31,
DECEMBER 31, DECEMBER 31, 1998 1998
-------------------- --------------------- COMPARED TO COMPARED TO
THREE MONTHS NINE MONTHS
ENDED DEC. ENDED DEC.
1998 1997 1998 1997 31, 1997 31, 1997
---- ---- ---- ---- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Contract revenue................. 49.7% 21.7% 51.4% 23.3% 3.7% 14.7%
Product sales.................... 50.3 78.3 48.6 76.7 (70.8) (67.1)
Total revenue.................. 100.0 100.0 100.0 100.0 (54.6) (48.0)
Direct costs:
Contract costs (as a % of
contract revenue).............. 64.8 67.6 66.4 66.0 (0.5) 15.5
Cost of product sales (as a %
of product sales).............. 97.3 91.6 96.9 91.3 (69.0) (65.0)
Total direct costs (as a %
of total revenue)............ 81.2 86.3 81.2 85.4 (57.3) (50.6)
Indirect, general and administrative
expenses......................... 15.6 12.3 16.7 13.4 (42.4) (35.1)
Amortization expense ............... 0.2 0.2 0.2 0.3 (66.2) (61.7)
Unusual charge...................... 1.8 0.0 0.6 0.0 (A) (A)
Operating income................. 1.2 1.2 1.3 0.9 (50.0) (31.5)
Interest expense.................... (0.9) (1.3) (1.3) (1.2) (66.7) (44.8)
Gain on sales of investments, net... 0.8 -- 0.5 -- (A) (A)
Unusual charge...................... (1.4) -- (0.5) -- (A) (A)
Other income (expense), net......... (0.2) 0.1 (0.1) 0.1 (176.8) (131.6)
Loss from continuing operations before
income taxes..................... (0.5) 0.0 (0.1) (0.2) (B) 79.4
Income tax expense (benefit)........ (0.2) 0.1 (0.1) 0.0 235.9 69.6
Loss from continuing operations..... (0.3) (0.1) 0.0 (0.2) (45.7) 88.2
Loss from discontinued operations, net
of taxes......................... -- (0.3) -- (0.4) 100.0 100.0
Net loss............................ (0.3) (0.4) 0.0 (0.6) 66.4 96.8
</TABLE>
(A) There was no expense for this item in the prior year.
(B) The year-to-year increase is in excess of 1,000%.
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER
31, 1997
The three months ended December 31, 1998 realized a net decrease in revenues
of $101.8 million, or 54.6%, from the three months ended December 31, 1997. A
contract revenue increase of $1.5 million was offset by a decrease of $103.3
million attributable to product sales. The increase in contract revenue during
the three months ended December 31, 1998 was due to a number of new contracts
generating a net increase of $5.4 million in contract revenue. This increase was
offset by a decrease of $3.9 million under the Company's Integration for
Command, Control, Communications, Computers, and Intelligence ("IC4I") contract.
The decrease in product sales was primarily due to the GTSI Transaction.
Included in product sales during the three months ended December 31, 1998 was
$30.7 million of revenue resulting from certain contracts awarded to BTG's
product reselling business unit in a prior year which were subcontracted to GTSI
as part of the GTSI Transaction (the "Royalty Contracts"). In accordance with an
agreement entered into as part of the GTSI Transaction, GTSI assumed
substantially all of the future performance requirements of the Royalty
Contracts and BTG received a fee of 1% or 2% on total product sales made under
such contracts. Pursuant to an agreement entered into by the Company and GTSI in
February 1999, BTG expects no future revenue from the Royalty Contracts. In the
three months ended December 31, 1998, approximately 92.9% of the Company's
revenues were derived from contracts or subcontracts with and product sales to
the Government, as compared with 95.7% for the three months ended December 31,
1997.
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<PAGE> 11
Direct costs, expressed as a percentage of total revenue, decreased from
86.3% for the three months ended December 31, 1997 to 81.2% for the three months
ended December 31, 1998. Contract costs include labor costs, subcontract costs,
material costs and other costs directly related to contract revenue. Contract
costs as a percentage of contract revenue decreased from 67.6% in the three
months ended December 31, 1997 to 64.8% in the three months ended December 31,
1998. This decrease was due in large part to the reduced revenues generated from
the IC4I contract, which has a significant materials requirement. Cost of
product sales as a percentage of product sales increased from 91.6% in the three
months ended December 31, 1997 to 97.3% in the three months ended December 31,
1998 due primarily to product sales recognized from the Royalty Contracts for
which gross margins of 1% to 2% are earned.
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 December 31, 1998 decreased by $9.7 million, or 42.4%,
from the same period in 1997. This decrease was due primarily to the GTSI
Transaction which resulted in a reduction in the number of Company employees,
space requirements, and other related indirect costs. Expressed as a percentage
of total revenues, indirect, general and administrative expenses increased for
the three months ended December 31, 1998 to 15.6% from 12.3% in the three months
ended December 31, 1997. This increase is primarily due to the significant
reduction in the amount of revenue resulted from product sales, which typically
requires a lower relative level of infrastructure support than does revenue
derived from contract activity. When compared to the three months ended
September 30, 1998, the ratio of indirect, general and administrative expenses
to total revenues decreased from the 16.9% reported in that period.
Amortization expense, which includes the amortization of both goodwill and
other intangible assets, decreased by $300,000 in the three months ended
December 31, 1998 as compared with the same period of the prior year. This
decrease was primarily the result of a formal restructuring of the Company's
operations which occurred in the prior fiscal year and which resulted in the
write-off of goodwill and certain other intangible assets which had become
impaired.
Interest expense for the three months ended December 31, 1998 decreased by
$1.6 million, or 66.7%, from the comparable period of the prior year. This
decrease was due to a significantly lower average balance outstanding under the
Company's line of credit facility and to the repayment in April 1998 of the
Company's long-term debt obligations. Cash used to reduce outstanding debt was
primarily generated from the collection of outstanding receivables and from
proceeds made available from the sale of investments.
The unusual charges in the three months ended December 31, 1998 resulted
both from a series of new agreements entered into by BTG and GTSI to settle a
number of outstanding issues related to the GTSI Transaction and from the
impairment of certain assets of the Company's product reselling division, which
was previously sold to GTSI. On February 12, 1998, BTG and GTSI entered into an
Asset Purchase Agreement (the "APA") under which BTG sold to GTSI (i) certain of
the assets, principally inventory and property and equipment, and (ii) certain
of the existing contracts and outstanding customer orders of the BTG product
reselling division. As consideration for the sale, BTG was to receive $8.0
million and 3.0 million shares of GTSI common stock. Ten percent of the purchase
price was placed in escrow for a one-year period to serve as security for the
Company's indemnification for potential obligations under the APA. Under the
terms of the new agreements, BTG transferred to GTSI all of the cash portion of
the escrow and 200,000 shares of the GTSI common stock being held in the escrow.
In addition, BTG recorded a reserve of approximately $1.5 million against
certain assets of the Company's former product reselling division. Total costs
associated with these transactions amounted to approximately $2.7 million,
approximately $1.6 million on an after-tax basis.
The income tax benefit, as a percentage of the loss from continuing
operations before income taxes, was 43.7% in the three months ended December 31,
1998. During the three months ended December 31, 1997, the Company recorded an
income tax expense of $153,000 even though a pre-tax loss of $31,000 was
realized. This unusual relationship was the result of certain expenses, such as
goodwill amortization, which are included in the pre-tax loss for book purposes,
however, are not deductible for income tax return purposes.
In August 1996, the Company formed Community Networks, Inc. ("CNI") to be a
total solutions provider to broadband network owners entering the Internet
access market. CNI's offerings were designed to allow network operators to sell
enhanced Internet services to residential consumers and businesses. During
fiscal 1998, it became evident to the Company that the subscriber base was not
growing as rapidly as was initially anticipated. As a result, the Company made a
decision to discontinue the operations of CNI rather than continue its
investment in this new venture. Accordingly, the fiscal 1998 operating results
of CNI have been
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<PAGE> 12
segregated from BTG's continuing operations and reported as a separate line item
on the consolidated interim statements of operations for the three and nine
month periods ended December 31, 1997.
Net loss for the three months ended December 31, 1998 decreased by $530,000
from the three months ended December 31, 1997, due to the reasons discussed
above.
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH NINE MONTHS ENDED DECEMBER 31,
1997
The Company realized a net decrease in revenues of $237.9 million, or 48.0%,
for the nine months ended December 31, 1998, as compared with the nine months
ended December 31, 1997. A contract revenue increase of $16.9 million was offset
by a decrease of $254.8 million attributable to product sales. The increase in
contract revenue during the nine months ended December 31, 1998 was primarily
due to an increase of $13.7 million of revenue recognized under contracts
acquired in connection with the acquisition of Nations and a number of new
contracts generating a net increase of $14.6 million in contract revenue. These
increases were offset by a decrease of $11.4 million in revenue under the IC4I
contract. The decrease in product sales was primarily due to the GTSI
Transaction. Included in product sales during the nine months ended December 31,
1998 was $93.4 million of revenue resulting from the Royalty Contracts. In the
nine months ended December 31, 1998, approximately 93.1% of the Company's
revenues were derived from contracts or subcontracts with and product sales to
the Government, as compared with 92.6% for the nine months ended December 31,
1997.
Direct costs, expressed as a percentage of total revenues, decreased from
85.4% for the nine months ended December 31, 1997 to 81.2% for the nine months
ended December 31, 1998. Contract costs as a percentage of contract revenue
remained relatively flat increasing slightly from 66.0% in the nine months ended
December 31, 1997 to 66.4% in the nine months ended December 31, 1998. Cost of
product sales as a percentage of product sales increased from 91.3% in the nine
months ended December 31, 1997 to 96.9% in the nine months ended December 31,
1998 due primarily to product sales recognized from the Royalty Contracts for
which gross margins of 1% to 2% are earned.
Indirect, general and administrative expenses for the nine months ended
December 31, 1998 decreased by $23.2 million, or 35.1%, from the same period in
1997. This decrease was due primarily to the GTSI Transaction which resulted in
a reduction in the number of Company employees, space requirements, and other
related indirect costs. Expressed as a percentage of total revenues, indirect,
general and administrative expenses increased for the nine months ended December
31, 1998 to 16.7% from 13.4% in the six months ended December 31, 1997. This
increase is primarily due to the significant reduction in the amount of revenue
resulted from product sales, which typically requires a lower relative level of
infrastructure support than does revenue derived from contract activity.
Amortization expense decreased by $844,000 in the nine months ended December
31, 1998 as compared with the same period of the prior year. This decrease was
primarily the result of a formal restructuring of the Company's operations which
occurred in the prior fiscal year and which resulted in the write-off of
goodwill and certain other intangible assets which had become impaired.
Interest expense for the nine months ended December 31, 1998 decreased by
$2.7 million, or 44.8%, from the comparable period of the prior year. This
decrease was due to a significantly lower average balance outstanding under the
Company's line of credit facility and to the repayment in April 1998 of the
Company's long-term debt obligations. Cash used to reduce outstanding debt was
primarily generated from the collection of outstanding receivables and from
proceeds made available from the sales of investments.
As presented in management's discussion of operating results for the three
months ended December 31, 1998, the unusual charges in the nine months ended
December 31, 1998 resulted both from a series of new agreements entered into by
BTG and GTSI to settle a number of outstanding issues related to the GTSI
Transaction and from the impairment of certain assets of the Company's product
reselling division, which was previously sold to GTSI.
The income tax benefit, as a percentage of the loss from continuing
operations before income taxes was 45.6% in the nine months ended December 31,
1998 as compared with 5.5% in the nine months ended December 31, 1997. This
decrease was principally attributable to a higher level of expenses, included in
the pre-tax loss for the nine months ended December 31, 1997, which are not
deductible for income tax return purposes.
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<PAGE> 13
In August 1996, the Company formed Community Networks, Inc. ("CNI") to be a
total solutions provider to broadband network owners entering the Internet
access market. CNI's offerings were designed to allow network operators to sell
enhanced Internet services to residential consumers and businesses. During
fiscal 1998, it became evident to the Company that the subscriber base was not
growing as rapidly as was initially anticipated. As a result, the Company made a
decision to discontinue the operations of CNI rather than continue its
investment in this new venture. Accordingly, the fiscal 1998 operating results
of CNI have been segregated from BTG's continuing operations and reported as a
separate line item on the consolidated interim statements of operations for the
three and nine month periods ended December 31, 1997.
Net loss for the nine months ended December 31, 1998 decreased by $2.8
million from the nine months ended December 31, 1997, due to the reasons
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of approximately $24.8 million was provided by operating activities
during the nine months ended December 31, 1998. This largely resulted from the
collection of outstanding receivables generated by the Company's product
reselling business unit. Due to the GTSI Transaction, the Company's product
sales revenue was significantly less than amounts recognized in the comparable
period of the prior year. A significant portion of the cash received from the
collection of outstanding receivables was used to reduce accounts payable.
Investing activities provided cash of approximately $25.6 million during the
nine months ended December 31, 1998. This was primarily due to the sale of
common stock held in Cisco Systems, Inc., which was acquired as a result of
BTG's investment in WheelGroup Corporation.
During the nine months ended December 31, 1998, the Company's financing
activities used cash of approximately $50.4 million. This resulted from $36.9
million in repayments of outstanding borrowings under the Company's revolving
line of credit facility and $15.1 million used to retire outstanding promissory
notes payable. In addition, the Company received proceeds of $1.8 million from
sales of common stock under both a private placement to the Company's directors
and certain employee benefit plans.
On January 26, 1999, BTG completed the acquisition of STAC, Inc. ("STAC"),
an analysis and software development company headquartered in Fairfax, Virginia.
The Company purchased all of the common stock of STAC for approximately $6.6
million, $1.5 million of which was contingent on certain stock market indices
which have been subsequently satisfied. In order to finance the acquisition, BTG
issued two promissory notes, totaling $3.4 million, to the financial
institutions that lend to the Company under its revolving line of credit
facility. The remaining purchase price was financed through additional
borrowings under the credit facility and a note to the primary shareholders of
STAC in the amount of approximately $2.0 million.
As of December 31, 1998, working capital was $48.3 million, compared to
$43.8 million at March 31, 1998. At December 31, 1998, the Company had
approximately $7.1 million in available borrowings under its revolving line of
credit facility.
On November 9, 1998, the Company amended its working capital credit facility
to provide for, among other things, an extension of the maturity date of the
facility to August 31, 2002. The amended credit facility provides for borrowings
up to $50.0 million based on specified percentages of eligible accounts
receivable. Interest on outstanding borrowings under the amended agreement is
provided for at a rate equal to, at the Company's option, either the lender's
prime rate or LIBOR plus a percentage ranging from 2.25% to 3.25%, depending on
the Company's leverage ratio.
On January 26, 1999, the Company amended its working capital credit facility
as a result of the acquisition of STAC. In addition to permitting the additional
borrowings required to satisfy the cash portion of the purchase price, the
credit facility amendment changed certain of the financial covenants affected by
the acquisition and permitted the Company to include the eligible accounts
receivable of STAC in the calculation of maximum borrowings available under the
facility.
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<PAGE> 14
YEAR 2000 COMPLIANCE
The "Year 2000" (or "Y2K") problem results from the fact that many computer
programs currently in use were not designed to process dates for years beyond
1999. A similar problem affects embedded systems in non-computer equipment.
Systems that do not properly recognize date-related information could, among
other things, fail to operate, operate incorrectly, or fail to exchange data
properly with other systems. This could result in major system failures and the
disruption of business operations. Assessments of the global impact of this
problem vary, and it is therefore not possible to predict what the impact on the
Company may be. In particular, the Company cannot estimate the extent to which
other parties with whom it exchanges data will use only Y2K compliant computer
programs, the extent of compatibility between such systems and the Company's, or
the likelihood or effect of any disruption of supply or delivery of goods and
services due to Year 2000 problems. In such events, the Company would, as a
contingency, seek to shift its sources of supply or delivery to other entities
not affected by such problems. Given the overall uncertainty, the Company is
continuing its analysis, planning and implementation to address the Year 2000
problem.
The Company has established a Year 2000 Committee to conduct this analysis,
to lead the Company's efforts to achieve Y2K compliance, and to advise senior
management on risks and solutions. The Committee has initiated a number of
assessments, gathered information, conducted tests, and prepared plans to
address the Year 2000 problem. The Company expects this process to continue
throughout calendar 1999. However, there can be no assurances that corrective
action will be completed before any Year 2000 problems occur, or that costs will
not be greater than anticipated.
The Company has reviewed its internal operations, including the physical
plant, computer programs, and other systems on which its operations rely. Based
on this assessment, an action plan has been developed. It includes obtaining
supplier certifications, obtaining and installing vendor-provided software
upgrades, and replacing affected systems where necessary. Specifically, the core
financial system currently utilized by the Company was not Y2K compliant. During
December 1998, the system was upgraded to a Y2K compliant version. The cost of
this upgrade was included in the normal, annual maintenance expenses for the
system. Other corporate systems are under evaluation to determine appropriate
courses of action. The Company expects to complete remediation of critical
internal systems by July 1999. In the ordinary course of its business, the
Company spends a portion of its information technology budget on maintenance and
upgrades to its corporate information technology infrastructure. During fiscal
1999, the Company expects to incur an additional $82,000 for specific Year 2000
remediation. The preliminary estimate for Year 2000 remediation, in addition to
ordinary information technology expenses, for fiscal 2000 (beginning April 1999)
is $550,000. A portion of this amount will be used to acquire capital equipment
which would not otherwise have been purchased until a future time.
The Company believes there is a risk that other parties with whom it deals
may be relying on systems that could experience Year 2000 problems. This
includes the Company's largest customer, the Government, whose Year 2000
remediation efforts are known to be underway. Based on information currently
available, the Company does not believe it will be materially and adversely
affected by the Year 2000 problems of the Government or its other customers,
unless customers reduce funding on contracts awarded to the Company, in order to
fund Year 2000 remediation. To the extent the Company is not the provider of
that remediation, this would affect the Company's revenues.
The Company is also taking steps to assure itself that the financial
institutions, utilities, and service providers with whom it deals will not
experience Year 2000 problems that would materially and adversely affect the
Company. In addition, the Company has obtained commitments from suppliers of
products for resale that such products will be Y2K compliant. Although the
Company believes that essential operations and services will not be affected,
any failures or delays could disrupt the Company's business and cause it to
incur substantial expense. Should Y2K noncompliance by the Government or any
other customer disrupt the Company's receipt of payments, the Company would
expect to increase its short-term borrowings, which could have a material
adverse effect on the Company in terms of increased interest costs.
The Company has undertaken an assessment of the extent to which products it
has developed and resold are Y2K compliant. The Company is aware that the
distribution of non-Y2K compliant products could give rise to customer claims
against the Company. With respect to BTG-branded products, which it stopped
manufacturing in 1998, the Company is in the process of reviewing and providing,
when and where appropriate, BIOS upgrades and software utilities, to bring such
products to a level of Year 2000 compliance, when possible. The Company cannot
estimate the outcome of such claims or their effect on the Company, but believes
that most such claims, if any, would be without merit.
The statements above describing the Company's plans and objectives for
handling Year 2000 issues and the expected impact of the Year 2000 issue on the
Company are forward-looking statements. Those statements involve risks and
uncertainties that could cause actual results to differ materially from the
results discussed
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<PAGE> 15
above. Factors that might cause such a difference include, but are not limited
to, delays in executing the plan outlined above and increased or unforeseen
costs associated with the implementation of the plan and any necessary changes
to the Company's systems.
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<PAGE> 16
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 December 31, 1998, the Company issued
784 shares of common stock, that were not registered under the Securities
Act of 1933, to three employees at $3.45 per share, pursuant to the BTG 1990
Incentive Stock Option Plan.
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 Amendment to the Amended and Restated Articles of Incorporation of
BTG, Inc. (incorporated by reference to BTG, Inc.'s Form 10-Q for the
quarter ended September 30, 1997).
3.2 Amended and Restated Articles of Incorporation of BTG, Inc.
(incorporated by reference to BTG, Inc.'s Form 10-Q for the quarter
ended September 30, 1997).
3.3 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)).
10.1 Fourth Modification to Amended and Restated Business Loan and
Security Agreement, dated January 26, 1999 by and among BTG, Inc.
and its subsidiaries, NationsBank, N.A. and Fleet Capital Corporation.
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<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - CONTINUED
11 Statement regarding computation of per share earnings.
27 Financial data schedule.
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1998.
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<PAGE> 18
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: February 16, 1999 BTG, INC.
/s/ Todd A. Stottlemyer
------------------------------
Todd A. Stottlemyer
Duly Authorized Signatory and
Chief Financial Officer
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<PAGE> 1
FOURTH MODIFICATION TO AMENDED AND RESTATED
BUSINESS LOAN AND SECURITY AGREEMENT
THIS FOURTH MODIFICATION TO AMENDED AND RESTATED BUSINESS LOAN AND
SECURITY AGREEMENT (this "Modification") is made as of the 26th day of January,
1999, by and among (i) NATIONSBANK, N.A., a national banking association
("NationsBank"), having an office at 8300 Greensboro Drive, Suite 550, McLean,
Virginia 22102; (ii) FLEET CAPITAL CORPORATION, a Rhode Island corporation
("Fleet"), having an office at 300 Galleria Parkway Northwest, Suite 800,
Atlanta, Georgia 30339; (iii) each other person or entity hereafter becoming a
"Lender" pursuant to the hereinafter defined Loan Agreement; (iv) NATIONSBANK,
N.A., a national banking association (acting in its capacity as Agent for the
Lenders), having an office at 8300 Greensboro Drive, Suite 550, McLean, Virginia
22102; (v) BTG, INC., a Virginia corporation ("BTG"); BTG TECHNOLOGY SYSTEMS,
INC., a Virginia corporation; DELTA RESEARCH CORPORATION, a Virginia
corporation; CONCEPT AUTOMATION, INC. OF AMERICA, a Virginia corporation; and
NATIONS, INC., a New Jersey corporation (collectively, the "Original
Borrowers"), all having principal offices at 3877 Fairfax Ridge Road, 4B,
Fairfax, Virginia 22030-7448; (vi) STAC, INC., a Virginia corporation ("STAC";
collectively with the Original Borrowers, the "Borrowers"), having its principal
place of business at 11250 Waples Mill Road, Suite 300, Fairfax, Virginia 22030;
and (vii) each other person or entity hereafter executing a "Joinder Agreement"
pursuant to the Loan Agreement. Capitalized terms used but not defined herein
shall have the meanings attributed to such terms in the Loan Agreement.
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms and conditions of that certain Amended and
Restated Business Loan and Security Agreement dated October 31, 1997 (as
heretofore amended and as the same may be hereafter amended or modified, the
"Loan Agreement"), by and among the Agent, Original Borrowers, Lenders and
Crestar Bank (acting in its capacity as a Lender), the Original Borrowers
obtained a loan (the "Loan") from the Lenders in the original aggregate maximum
principal amount of One Hundred Ten Million Dollars ($110,000,000), which
aggregate maximum principal amount had been heretofore reduced to Fifty Million
Dollars ($50,000,000), but continues to be evidenced by two (2) separate
Replacement Revolving Promissory Notes (as defined in EXHIBIT A hereto), in the
aggregate original maximum principal amount of Ninety-five Million Dollars
($95,000,000), and which Loan is secured by, among other things, certain
collateral (the "Collateral") more fully described in Section 1 of Article III
of the Loan Agreement; and
WHEREAS, the Borrowers have requested (a) that the Agent and Lenders
consent to a merger (the "Merger") pursuant to which BTG Acquisition Corp., a
Virginia corporation and wholly-owned subsidiary of BTG ("BTGAC"), will be
merged with and into STAC, immediately after which STAC shall be the surviving
entity and a wholly owned subsidiary of BTG; and (b) that the Lenders extend to
the Borrowers a new term loan ("Facility "B""), in addition to and not in
replacement of the existing revolving facility heretofore evidencing the Loan
("Facility "A""), in the original aggregate principal amount
<PAGE> 2
of Three Million Four Hundred Thousand Dollars ($3,400,000), the proceeds of
which shall be used to finance the costs and expenses incurred in connection
with the Merger, and which Facility "B" shall be secured by the Collateral; and
WHEREAS, the Agent and Lenders have agreed to grant such consent and make
available Facility "B" to the Borrowers, subject to the terms, covenants,
conditions and limitations set forth in this Modification, as hereinafter
provided.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. The foregoing recitals are hereby incorporated herein by this
reference and made a part hereof, with the same force and effect as if fully set
forth herein.
2. The Agent, acting for and on behalf of the Lenders, hereby
consents to the Merger and agrees to make Facility "B" available to the
Borrowers, subject to the terms, conditions, covenants and limitations set forth
in this Modification.
3. Simultaneously with the execution of this Modification, the
proceeds of Facility "B" shall be fully advanced to the Borrowers, and used
solely for the purpose of financing the merger consideration and other amounts
payable by BTG pursuant to that certain Agreement and Plan of Merger of even
date herewith, by and among BTGAC, BTG, STAC and the shareholders of STAC party
thereto (the "Merger Agreement"), as well as the transactional costs and
expenses incurred in connection with the Merger. From and after the initial
disbursement of the proceeds of Facility "B", neither the Agent nor any Lender
shall have any further obligation whatsoever to advance or readvance the
proceeds of Facility "B".
4. Concurrent herewith, the Borrowers shall execute and deliver (i)
to NationsBank, a Term Promissory Note No. 1 (the "NationsBank Facility "B"
Note"), in the original principal amount of One Million Nine Hundred One
Thousand Two Hundred Eighty and No/100 Dollars ($1,901,280.00), and (ii) to
Fleet, a Term Promissory Note No. 2 (the "Fleet Facility "B" Note), in the
original principal amount of One Million Four Hundred Ninety-eight Thousand
Seven Hundred Twenty and No/100 Dollars ($1,498,720.00); and (b) a First
Modification to Ancillary Loan Documents, pursuant to which the Borrowers shall
acknowledge and agree that all documents, instruments and agreements executed,
issued and/or delivered in connection with and securing the Loan, shall also
secure the repayment of the NationsBank Facility "B" Note, the Fleet Facility
"B" Note and all extensions, renewals, modifications and substitutions thereof
or therefor (collectively, the "Facility "B" Notes").
5. Notwithstanding anything set forth to the contrary in the Loan
Agreement, the maturity date of the promissory notes evidencing Facility "A"
shall be
2
<PAGE> 3
August 31, 2002, and the maturity date of the Facility "B" Notes shall be
January 26, 2001.
6. The definitions of "Agreement" or "Loan Agreement", "Borrower" and
"Borrowers", "Commitment Amount", "Loan", "Maturity Date", "Reduction Date"
"Subordinate Debt", "Subordinate Lenders", "Subordinate Note", and
"Subordination Agreement" set forth in the "Certain Definitions" section of the
Loan Agreement are hereby deleted in their entirety and the following
substituted in lieu thereof:
""AGREEMENT" or "LOAN AGREEMENT" shall mean this Amended
and Restated Business Loan and Security Agreement, together
with any and all amendments and modifications thereof or
therefor made in accordance with Section 10 of Article XII
hereof.
"BORROWER" AND "BORROWERS" shall mean, respectively, each
and all of the following entities: BTG, Inc., a Virginia
corporation; BTG Technology Systems, Inc., a Virginia
corporation; Delta Research Corporation, a Virginia
corporation; Concept Automation, Inc. of America, a
Virginia corporation; Nations, Inc., a New Jersey
corporation; STAC, Inc., a Virginia corporation; and each
other person or entity hereafter executing a Joinder
Agreement pursuant to Section 9 of Article I of this
Agreement.
"COMMITMENT AMOUNT" shall mean, collectively, the Facility
"A" Commitment Amount and the Facility "B" Commitment
Amount.
"LOAN" shall mean the loan made by the Lenders to the
Borrowers in the aggregate maximum principal amount of One
Hundred Thirteen Million Four Hundred Thousand and No/100
Dollars ($113,400,000.00), or so much thereof as shall be
advanced or readvanced from time to time, which are
represented by the Facilities, and which shall be evidenced
by, bear interest and be payable in accordance with the
terms and provisions set forth in the Notes.
"MATURITY DATE" shall mean the maturity dates set forth in
the Notes.
3
<PAGE> 4
"REDUCTION DATE" shall mean the date on which the
Borrowers, in accordance with Section 8 of Article I of
this Agreement, shall have (i) terminated the Lenders'
obligations to make additional advances under Facility "A",
or (ii) irrevocably reduced the Facility "A" Commitment
Amount.
"SUBORDINATE DEBT" shall mean the indebtedness owing to the
Subordinate Lenders in the original principal amount of One
Million Nine Hundred Ninety-nine Thousand Six Hundred
Seventy-five and No/100 Dollars ($1,999,675.00), pursuant
to the Subordinate Note.
"SUBORDINATE LENDERS" shall mean, collectively, Robert
Clark and Eleanor Clark.
"SUBORDINATE NOTE" shall mean that certain Subordinated
Promissory Note dated January 26, 1999, made by BTG and
payable to the order of the Subordinate Lenders in the
original principal amount of One Million Nine Hundred
Ninety-nine Thousand Six Hundred Seventy-five and No/100
Dollars ($1,999,675.00), together with any and all
extensions, renewals, modifications and substitutions
thereof or therefor approved in writing by the Agent.
"SUBORDINATION AGREEMENT" shall have the meaning attributed
to such term in Section 7 of Article VII of this
Agreement."
7. The following definitions of "Facility" or "Facilities", "Facility
"A"", "Facility "A" Commitment Amount", "Facility "B"", and "Facility "B"
Commitment Amount" are hereby added to the "Certain Definitions" section of the
Loan Agreement:
""FACILITY" or "FACILITIES" shall mean Facility "A" and/or
Facility "B", individually or collectively, as the context
may require.
"FACILITY "A"" shall mean the revolving credit facility
being extended pursuant to this Agreement on the basis of
Eligible Borrowing Base Receivables, Eligible Unbilled
Costs and Eligible Billed Foreign Accounts Receivable, in
the original maximum principal amount of One Hundred Ten
Million Dollars ($110,000,000).
4
<PAGE> 5
"FACILITY "A" COMMITMENT AMOUNT" shall mean Fifty Million
Dollars ($50,000,000), or if reduced pursuant to this
Agreement, such lesser amount.
"FACILITY "A" NOTES" shall mean those Notes executed,
issued and delivered from time to time which evidence
Facility "A".
"FACILITY "B"" shall mean the term loan facility being
extended pursuant to this Agreement, in the original
aggregate principal amount of Three Million Four Hundred
Thousand Dollars ($3,400,000).
"FACILITY "B" COMMITMENT AMOUNT" shall mean Three Million
Four Hundred Thousand Dollars ($3,400,000).
"FACILITY "B" NOTES" shall mean those Notes executed,
issued and delivered from time to time which evidence
Facility "B"."
8. Subsections (a) and (b) of Section 3 of Article I of the Loan
Agreement are hereby deleted in their entirety and the following substituted in
lieu thereof:
"(a) Maximum Advances.
(1) Facility "A". Notwithstanding any term or provision of
this Agreement or any other Loan Document to the contrary, it is
understood and agreed that in no event whatsoever shall the
Lenders be obligated to advance any amount under Facility "A" or
issue any Letter(s) of Credit hereunder if such advance or the
issuance of such Letter(s) of Credit would cause the aggregate
amount of Obligations outstanding with respect to Facility "A" to
exceed the lesser of:
A. The Facility "A" Commitment Amount, or
B. The aggregate of (the "Maximum Borrowing Base"):
(i) ninety percent (90%) of the Borrowers'
Eligible Borrowing Base Receivables representing
amounts due and owing from the Government, which are
outstanding less than one hundred
5
<PAGE> 6
twenty-one (121) days from the date of original
invoice; plus
(ii) eighty-five percent (85%) of the Borrowers'
Eligible Borrowing Base Receivables representing
amounts due and owing from domestic account debtors
(other than the Government), which are outstanding
less than ninety-one (91) days from the date of
original invoice; plus
(iii) the lesser of (y) fifty percent (50%) of the
Borrower's Eligible Unbilled Costs; or (z) Ten
Million Dollars ($10,000,000); plus
(iv) the lesser of (y) eighty percent (80%) of the
Borrower's Eligible Billed Foreign Accounts
Receivable; or (z) Three Million Dollars
($3,000,000.00).
All receivables included in the computation of the Maximum
Borrowing Base must be acceptable to the Agent in all respects.
Each request for an advance shall be deemed a representation by
the Borrowers that any Eligible Borrowing Base Receivable,
Eligible Unbilled Cost and Eligible Billed Foreign Accounts
Receivable on which such request is based satisfies the foregoing
requirements.
(2) Facility "B". Notwithstanding any term or provision of
this Agreement or any other Loan Document to the contrary, it is
understood and agreed that in no event whatsoever shall the
Lenders be obligated to advance any amount under Facility "B" or
have Obligations outstanding with respect to Facility "B" which
shall exceed the Facility "B" Commitment Amount."
(b) Borrowing Base Deficiency. If at any time the aggregate
outstanding principal amount of Facility "A" exceeds the Maximum
Borrowing Base (a "Borrowing Base Deficiency"), the Borrowers
shall immediately make a principal payment of not less than the
amount of the Borrowing Base Deficiency. Notwithstanding the
foregoing, in the event a Borrowing Base Deficiency shall occur as
a result of (i) the Agent's determination that a particular
receivable or a specific unbilled cost previously included in
computing the Maximum Borrowing Base is no longer eligible for
inclusion, or (ii) the Agent imposing any additional
6
<PAGE> 7
eligibility requirement which has not been previously imposed and
is not ordinarily used by the Agent as a basis for classifying
receivables or unbilled costs as ineligible, the Borrowers shall
make a principal payment of not less than the amount of the
resulting Borrowing Base Deficiency within three (3) Business Days
of the date on which the Borrower is advised by the Agent of the
ineligibility of the particular receivable or unbilled cost or the
additional eligibility requirement."
9. Section 4(a) of Article I of the Loan Agreement is hereby deleted
in its entirety and the following substituted in lieu thereof:
"4. ADVANCES.
(a) Agreement to Advance and Readvance; Procedure. So long
as no Event of Default shall have occurred and is
continuing, and no act, event or condition shall have
occurred which with notice or the lapse of time, or both,
shall constitute an Event of Default, and subject to the
terms and provisions of this Agreement, the Lenders shall
(i) advance and readvance the proceeds of Facility "A" to
the Borrowers from time to time at the request of the
Borrowers, and (ii) advance the proceeds of Facility "B",
in their entirety, to the Borrowers on January 26, 1999.
Requests for advances of Loan proceeds with respect to
Facility "A" shall be in the form of EXHIBIT 4 hereto and
may be made via facsimile or by telephone not later than
11:00 a.m. on any given Business Day if (i) the Borrower
provides the Agent, in advance, with a written list of the
names of the specific officers authorized to request
disbursements by telephone or facsimile; and (ii) each such
request is subsequently confirmed in writing by letter (in
the form of EXHIBIT 4 attached hereto). Any and all
advances of Loan proceeds shall be deposited into the
Borrowers' operating account maintained with the Agent.
Notwithstanding anything contained herein to the contrary,
the Lenders shall have no obligation to make any advance of
Loan proceeds with respect to Facility "A" after August 31,
2002.
10. Section 4(c) of Article I of the Loan Agreement is hereby deleted
in its entirety and the following substituted in lieu thereof:
7
<PAGE> 8
"(c) Authorization to Advance. In the event any payment is
not made under Facility "B" when due, or in the event any
payment is not made under the Subordinated Debt when due
and the Subordinated Creditors shall have issued a default
notice as a result thereof, the Agent and Lenders shall
have the right (but not the obligation), without further
approval or authorization of or from the Borrowers to cause
an advance to be made under Facility "A" and apply the
proceeds thereof to (i) amounts due under Facility "B";
and/or (ii) the Subordinate Lenders for application against
the Subordinated Debt."
11. Section 5 of Article I of the Loan Agreement is hereby deleted in
its entirety and the following substituted in lieu thereof:
"5. ADDITIONAL MANDATORY PAYMENTS; REDUCTION OF COMMITMENT.
In addition to all other sums payable by the Borrowers
pursuant to any of the Notes, this Agreement or any other
Loan Document, the Borrowers shall also make mandatory
payments under the Facility "B" Notes, in the amount of
fifty percent (50%) of the cash proceeds (net of reasonable
and customary costs paid to unrelated and unaffiliated
third parties in connection with the particular
transaction) arising from the sale or disposition by any
Borrower of the capital stock of Cisco Corporation, a
California corporation or Government Technology Services,
Inc., a Delaware corporation."
12. All references to the "Commitment Amount" and the "Notes"
referenced in Section 7 of Article I of the Loan Agreement are hereby deleted in
their entirety and substituted with the "Facility "A" Commitment Amount" and the
"Facility "A" Notes", respectively.
13. Section 8 of Article I of the Loan Agreement is hereby deleted in
its entirety and the following substituted in lieu thereof:
"8. TERMINATION OF ADVANCES; REDUCTION OF THE COMMITMENT
AMOUNT. The Borrowers may terminate the Lenders'
obligations to make additional advances under Facility "A"
or irrevocably reduce the Facility "A" Commitment Amount in
whole or in part, provided that (i) the Borrowers shall
have provided written notice thereof to the Agent at least
ten (10) days prior to the Reduction
8
<PAGE> 9
Date; and (ii) the Borrowers shall have paid to the
Lenders, on or before the Reduction Date (and in addition
to any prepayment or other required fees set forth in the
Notes or any other Loan Document), a termination fee (the
"Termination Fee") in the amount of Five Hundred Thousand
Dollars ($500,000), but only if the Reduction Date shall
occur on or before October 31, 1999, after which date no
such Termination Fee shall be payable. Notwithstanding the
foregoing, the Termination Fee shall not be payable in
connection with a permanent reduction of the Facility "A"
Commitment Amount, if such permanent reduction is made in
connection with a contemporaneous public stock offering or
public or private sale of BTG, any Subsidiary or any of
their respective collective assets (with no new replacement
indebtedness or debt refinancing of any kind, directly or
indirectly)."
14. Any and all references to "Notes" set forth in Section 2 of
Article II of the Loan Agreement are hereby deleted in their entirety and
substituted with "Facility "A" Notes".
15. Section 3(c) of Article VI of the Loan Agreement is hereby deleted
in its entirety and the following substituted in lieu thereof:
"(c) at least once each calendar week within three (3)
Business Days of the date as of which the report was
prepared, the Borrowers will submit to the Agent and each
Lender a Borrowing Base Certificate in the form of EXHIBIT
5 hereto, which certificate shall be certified by an
authorized officer of the Borrowers and accompanied by a
detailed current accounts receivable agings report. The
Borrowers shall elect, between the seventh (7th) and
seventeenth (17th) day of each calendar month, which of the
Borrowing Base Certificates submitted to the Agent and the
Lenders during each particular calendar month shall be used
in the calculation of the Maximum Borrowing Base for such
calendar month;"
16. Section 15(a) of Article VI of the Loan Agreement is hereby
deleted in its entirety and the following substituted in lieu thereof:
"(a) Tangible Net Worth. The Borrowers, on a consolidated
basis, will maintain at all times during the
9
<PAGE> 10
following periods, Tangible Net Worth of not less than the
following amounts:
<TABLE>
<CAPTION>
Required Tangible
Periods Net Worth
------- ---------
<S> <C>
From December 1, 1998 $23,750,000.00
through December 31,
1998
From January 1, 1999 $15,000,000.00, plus 67% of
through the Maturity net income (as determined on
Date a consolidated basis in
accordance with GAAP at the
end of each fiscal quarter)
</TABLE>
For purposes of this Agreement, "Tangible Net Worth" shall
mean all capital stock, paid in capital and retained
earnings, less all treasury stock, amounts due from
officers, directors, stockholders and members of their
immediate families, amounts due from affiliates (to the
extent such amounts are part of the Borrowers' consolidated
net worth), investments in non-marketable securities, notes
receivable of affiliates (to the extent that such amounts
are part of the Borrowers' consolidated net worth),
leasehold improvements, goodwill, non-competition
agreements, capitalized organization and development costs,
capitalized expenses, loan costs, patents, trademarks,
copyrights, franchises, licenses and other intangible
assets."
17. Section 15(c) of Article VI is hereby deleted in its entirety and
the following substituted in lieu thereof:
"(c) Funded Debt to Consolidated EBITDA Ratio. The
Borrowers, on a consolidated basis, will maintain at all
times during the following periods, a ratio of Funded Debt
to Consolidated EBITDA as follows:
<TABLE>
<CAPTION>
For the Fiscal
Quarter Ended Not Greater than:
------------- -----------------
<S> <C>
March 31, 1999 and the 5.00 to 1.00
three (3) fiscal quarter ends
thereafter
</TABLE>
10
<PAGE> 11
<TABLE>
<S> <C>
March 31, 2000 and each 4.50 to 1.00
fiscal quarter end thereafter
</TABLE>
For purposes hereof, (i) "Funded Debt" shall mean the
outstanding principal balance of borrowed funds pursuant to
this Agreement (including, without limitation, the face
amount of outstanding Letters of Credit), plus all other
interest bearing obligations of the Borrowers as of the
date of determination; and (ii) ."Consolidated EBITDA"
shall mean as of the date of the particular determination,
earnings before interest, taxes, depreciation and
amortization calculated on a consolidated basis in
accordance with GAAP, excluding all non-operating results
(including, but not limited to, the results of Government
Technology Services, Inc. as included in the Borrowers'
consolidated income statement and the profit or loss from
the sale of Cisco Systems, Inc. stock or the GTSI Stock).
Consolidated EBITDA shall be calculated as of each fiscal
quarter end on a rolling four (4) quarter basis.
18. Section 7 of Article VII of the Loan Agreement is hereby deleted
in its entirety and the following substituted in lieu thereof:
"7. INDEBTEDNESS; GRANTING OF SECURITY INTERESTS. Suffer or
permit any Borrower to incur any new indebtedness for
borrowed money (except for intercompany indebtedness by and
among the Subsidiaries and/or BTG, with no third party
financing or participation, and trade debt incurred in the
ordinary course of business), or guarantee or otherwise
become obligated for any indebtedness of others (except for
indebtedness of another Borrower as expressly permitted
above in this Section 7), or mortgage, assign, pledge,
hypothecate or otherwise encumber or permit any lien,
security interest or other encumbrance, including purchase
money liens, whether under conditional or installment sales
arrangements or otherwise, to affect the Collateral or any
other assets or properties of any Borrower (except for
Permitted Liens). Notwithstanding anything contained in
this Section 7 of Article VII to the contrary, it is
understood and agreed that the negative covenant set forth
in this Section 7 (prohibiting new indebtedness for
borrowed money) shall not be violated by the Subordinate
Debt; provided that BTG and the Subordinate Lenders shall
have executed and delivered to the Agent a subordination
agreement (the
11
<PAGE> 12
"Subordination Agreement"), in form and substance
acceptable to the Agent in all respects, pursuant to which
the Subordinate Debt, including without limitation, any and
all rights of payment and/or collection thereof, and/or
enforcement of the Subordinated Note, shall be subordinated
in every respect to the payment and collection of the Loan.
Furthermore, each of the Borrowers agrees that it will not
enter into any agreement or understanding with any person
or entity pursuant to which any of the Borrowers agrees to
be bound by a covenant not to encumber all or any part of
the property or assets of any Borrower."
19. Section 10 of Article VII of the Loan Agreement is hereby deleted
in its entirety and the following substituted in lieu thereof:
"10. CAPITAL EXPENDITURES. On a consolidated basis make any
cash investment or cash capital expenditure, including but
not limited to, expenditures for leasehold improvements or
the acquisition of the assets of any other firm, person,
company, corporation or enterprise, during any of the
Borrowers' fiscal year in excess of One Million Five
Hundred Thousand and No/100 Dollars ($1,500,000.00);"
20. The last sentence of Section 3 of Article IX of the Loan Agreement
is hereby deleted in its entirety and the following substituted in lieu thereof:
"Notwithstanding anything contained in this Section 3 to
the contrary, any and all funds obtained by the Agent
pursuant to this Section shall first be applied (a) first
against the Borrower's debts owed to the Lenders in
connection with Facility "B", ratably in accordance with
each Lender's Percentage, until each Lender is paid in full
all sums owing to them in connection with Facility "B", (b)
second against the Borrower's debts owed to the Lenders in
connection with Facility "A", ratably in accordance with
each Lender's Percentage, until each Lender is paid in full
all sums owing to them in connection with Facility "A", and
(c) then to and then shall be applied to any other debts of
the Borrower owing to NationsBank or any of its
affiliates."
12
<PAGE> 13
21. Section 1(k) of Article IX of the Loan Agreement is hereby deleted
in its entirety and the following substituted in lieu thereof:
"(k) If a default shall have occurred under the Subordinate
Note, the Subordination Agreement or any other document,
instrument or agreement entered into in connection with the
Subordinate Debt."
22. Simultaneously with the effectiveness of this Modification,
EXHIBIT 5 to the Loan Agreement shall be deleted in its entirety and EXHIBIT 5
attached to this Modification shall be substituted in lieu thereof.
23. By executing this Modification, STAC hereby (i) agrees to become a
"Borrower" under the Loan Agreement; (ii) joins in, becomes a party to, and
agrees to comply with and be bound by the terms and conditions of the Loan
Agreement and each and every other Loan Document, to the same extent as if STAC
were an original signatory thereto; (iii) grants and conveys to the Agent, for
the ratable benefit of the Lenders, a valid and enforceable security interest in
and to all of its assets constituting Collateral, free and clear of all liens,
claims and encumbrances (other than Permitted Liens and any other liens
expressly approved in writing by the Agent); and (iv) makes all of the
representations and warranties set forth in the Loan Agreement and each other
Loan Document. STAC shall hereafter be jointly and severally liable for the
performance of any and all past, present and future obligations of any Borrower
in connection with any of the Notes, the Loan Agreement and/or the other Loan
Documents. STAC hereby represents and warrants to the Agent and each Lender that
in accordance with the terms of a certain First Amendment to Amended and
Restated Contribution Agreement of even date herewith (the "First Amendment to
Contribution Agreement"), STAC has become a party to the Contribution Agreement
and that the Contribution Agreement (as amended by the First Amendment to
Contribution Agreement) remains unmodified and in full force and effect. STAC
further hereby represents and warrants to the Agent and each Lender that both
prior to and after giving effect to the transactions contemplated by the terms
and provisions of this Modification, STAC (a) owned and owns property
(including, without limitation, contribution rights against the other
Borrower(s), evidence of which, if required by the Agent as a condition
precedent to the transactions contemplated hereby, must be in form and substance
reasonably satisfactory to the Agent) whose fair salable value is greater than
the amount required to pay all of STAC's Indebtedness (including contingent
debts), (b) was and is able to pay all of its Indebtedness as such Indebtedness
matures, and (c) had and has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage.
For purpose hereof, "Indebtedness" means, without duplication (i) all items
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of STAC's balance sheet, as of the date on which
Indebtedness is to be determined, (ii) all obligations of any other person or
entity which STAC has guaranteed, (iii) reimbursement obligations in connection
with letters of credit issued for STAC's benefit, and (iv) the Obligations.
13
<PAGE> 14
24. The Borrowers acknowledge and agree that the Merger Agreement
shall not be altered, modified or amended in any respect without the Agent's
prior written consent.
25. In consideration of the transactions contemplated by this
Modification, the Borrowers shall pay to the Agent, for the benefit of the
Lenders (pro rata based on each Lender's Percentage), a commitment fee in the
amount of Twenty-five Thousand and No/100 Dollars ($25,000.00), which fee shall
be paid in cash on or before the date of this Modification.
26. Each Borrower hereby acknowledges, agrees, represents and warrants
that, as of the date hereof (i) there are no set-offs or defenses against the
Notes, the Loan Agreement or any other Loan Document; (ii) except as
specifically amended hereby, all of the terms and conditions of the Notes, the
Loan Agreement and the other Loan Documents shall remain unmodified and in full
force and effect; (iii) the Notes, the Loan Agreement (as modified hereby) and
the other Loan Documents are hereby expressly approved, ratified and confirmed;
and (v) the execution, delivery and performance by each Borrower of this
Modification (a) is within its corporate powers, (b) has been duly authorized by
all necessary corporate action, and (c) does not require the consent or approval
of any other person or entity.
27. The Borrowers shall pay all of the Agent's costs and expenses
associated with this Modification and the transactions referenced herein or
contemplated hereby, including, without limitation, the Agent's reasonable legal
fees and expenses.
28. This Modification shall be governed by the laws of the
Commonwealth of Virginia and shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
29. This Modification may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall be
deemed one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have signed, sealed and delivered
this Modification on the day and year first above written.
BORROWERS:
[Corporate Seal] BTG, INC.,
ATTEST: a Virginia corporation
By: /s/ Marilynn D. Bersoff By: /s/ Edward H. Bersoff
------------------------- -------------------------
Name: Marilynn D. Bersoff Name: Edward H. Bersoff
Title: Secretary Title: President and CEO
[Corporate Seal] BTG TECHNOLOGY SYSTEMS, INC.,
ATTEST: a Virginia corporation
By: /s/ Marilynn D. Bersoff By: /s/ Edward H. Bersoff
------------------------- -------------------------
Name: Marilynn D. Bersoff Name: Edward H. Bersoff
Title: Secretary Title: President
[Corporate Seal] DELTA RESEARCH CORPORATION,
ATTEST: a Virginia corporation
By: /s/ Marilynn D. Bersoff By: /s/ Edward H. Bersoff
------------------------- -------------------------
Name: Marilynn D. Bersoff Name: Edward H. Bersoff
Title: Secretary Title: CEO
[Corporate Seal] CONCEPT AUTOMATION, INC. OF
ATTEST: AMERICA, a Virginia corporation
By: /s/ Marilynn D. Bersoff By: /s/ Edward H. Bersoff
------------------------- -------------------------
Name: Marilynn D. Bersoff Name: Edward H. Bersoff
Title: Secretary Title: CEO
[Corporate Seal] NATIONS, INC.,
ATTEST: a New Jersey corporation
By: /s/ Marilynn D. Bersoff By: /s/ Edward H. Bersoff
------------------------- -------------------------
Name: Marilynn D. Bersoff Name: Edward H. Bersoff
Title: Secretary Title: President and CEO
[signatures continue on the following page]
15
<PAGE> 16
[Corporate Seal] STAC, INC., a Virginia corporation
ATTEST:
By: /s/ Deborah Fox By: /s/ Edward H. Bersoff
------------------------- -------------------------
Name: Deborah Fox Name: Edward H. Bersoff
Title: Secretary Title: CEO
AGENT:
NATIONSBANK, N.A., a
national banking association, acting in its
capacity as Agent
By: /s/ Douglas T. Brown
-------------------------
Name: Douglas T. Brown
Title: Vice President
LENDER(S):
NATIONSBANK, N.A., a
national banking association
By: /s/ Douglas T. Brown
-------------------------
Name: Douglas T. Brown
Title: Vice President
FLEET CAPITAL CORPORATION, a
Rhode Island corporation
By: /s/ Stuart J. Solomon
-------------------------
Name: Stuart J. Solomon
Title: Senior Vice President
16
<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 NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------------------------
1998 1997 1998 1997
---------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $ (268) $ (798) $ (93) $(2,898)
======= ======= ======= =======
Weighted average common stock shares
outstanding during the period (used in
the calculation of basic per share results) 8,796 8,563 8,760 8,522
Dilutive effect of common stock options and
common stock purchase warrants (1) -- -- -- --
------- ------- ------- -------
Weighted average common stock and potentially
dilutive securities outstanding during the period
(used in the calculation of diluted per share
results) 8,796 8,563 8,760 8,522
======= ======= ======= =======
Basic loss per share $ (0.03) $ (0.09) $ (0.01) $ (0.34)
======= ======= ======= =======
Diluted loss per share $ (0.03) $ (0.09) $ (0.01) $ (0.34)
======= ======= ======= =======
</TABLE>
- -----------------------------
(1) Outstanding common stock options and common stock purchase warrants were
not included in the calculation of diluted per share results for the
three and nine month periods ended December 31, 1998 and 1997 since the
effect of which would result in antidilutive per-share results given the
Company's reported net loss during such periods.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 3,809
<RECEIVABLES> 69,137
<ALLOWANCES> 3,699
<INVENTORY> 1,202
<CURRENT-ASSETS> 80,452
<PP&E> 11,302
<DEPRECIATION> 7,369
<TOTAL-ASSETS> 102,444
<CURRENT-LIABILITIES> 32,111
<BONDS> 33,381
0
0
<COMMON> 54,664
<OTHER-SE> (19,675)
<TOTAL-LIABILITY-AND-EQUITY> 102,444
<SALES> 42,554
<TOTAL-REVENUES> 84,530
<CGS> 41,394
<TOTAL-COSTS> 68,614
<OTHER-EXPENSES> 13,383
<LOSS-PROVISION> 1,479
<INTEREST-EXPENSE> 790
<INCOME-PRETAX> (476)
<INCOME-TAX> (208)
<INCOME-CONTINUING> (268)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (268)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
