-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TU/wt/QYLORlg1KCo7KCM5FdvOwZt8lTKQiUZPAVSG5eSDWLaqgbqpGtzIU9nMkW KnUzRBGcVR5/cNRFYX0jzA== 0000030822-97-000007.txt : 19970812 0000030822-97-000007.hdr.sgml : 19970812 ACCESSION NUMBER: 0000030822-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNAMICS RESEARCH CORP CENTRAL INDEX KEY: 0000030822 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 042211809 STATE OF INCORPORATION: MA FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02479 FILM NUMBER: 97655037 BUSINESS ADDRESS: STREET 1: 60 CONCORD ST CITY: WILMINGTON STATE: MA ZIP: 01887 BUSINESS PHONE: 5084759090 MAIL ADDRESS: STREET 1: 60 CONCORD ST CITY: WILMINGTON STATE: MA ZIP: 01887 10-Q 1 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [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. OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to . Commission File No.1-7348 DYNAMICS RESEARCH CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2211809 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 60 Frontage Road, Andover, Massachusetts 01810-5498 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (508) 475-9090 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 . The number of shares outstanding of the Registrant's Common stock, par value $.10 per share, at July 23, 1997 was 6,275,943 shares. DYNAMICS RESEARCH CORPORATION INDEX Page Part I Financial Information Number Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1997 and December 28, 1996. . . 3 Consolidated Statements of Income - Three and Six Months Ended June 30, 1997 and Twelve and Twenty-four Weeks Ended June 15, 1996. 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1997 and Twenty-four Weeks Ended June 15, 1996 . . . . . 5 Notes to Consolidated Financial Statements . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . 7 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . . 9 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 PART I. FINANCIAL INFORMATION DYNAMICS RESEARCH CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars except share data) (unaudited) ASSETS June 30, 1997 December 28, 1996 CURRENT ASSETS: Cash and cash equivalents $ 441 $ 234 Receivables, less allowances of $329 in 1997 and $340 in 1996 22,959 19,436 Unbilled expenditures and fees on contracts in process 20,773 22,690 Inventories 3,517 3,211 Refundable income taxes 1,136 1,436 Prepaid expenses and other current assets 1,104 1,247 Total current assets 49,930 48,254 Property, plant and equipment, at cost Land 1,126 1,126 Building 7,774 7,774 Machinery and equipment 43,315 40,970 Less accumulated depreciation and amortization (29,575) (28,266) Net property, plant and equipment 22,640 21,604 Excess of purchase price over net assets of business acquired, net 936 1,244 Total assets $ 73,506 $ 71,102 LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Notes payable $ 12,100 $ 10,600 Accounts and drafts payable 7,359 8,925 Accrued payroll and employee benefits 8,881 6,998 Other accrued expenses 1,438 894 Accrued and current deferred income taxes 6,851 6,091 Current portion of long-term debt - 1,201 Total current liabilities 36,629 34,709 Long-term debt - 300 Deferred income taxes 600 854 SHAREHOLDERS' INVESTMENT: Preferred stock, par value $.10 per share - 5,000,000 shares authorized, none issued Common stock, par value $.10 per share - Authorized - 15,000,000 shares Issued - 7,326,256 shares in 1997 and 6,689,767 in 1996 733 669 Less: Treasury stock - 1,050,313 1997 and 996,108 in 1996, at par value (105) (100) Capital in excess of par value 14,616 9,516 Retained earnings 21,033 25,154 Total shareholders' investment 36,277 35,239 Total liabilities and shareholders' investment $ 73,506 $ 71,102 The accompanying notes are an integral part of these consolidated financial statements. DYNAMICS RESEARCH CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share data) (unaudited) Three Months Twelve Weeks Six Months Twenty-Four Ended Ended Ended Weeks Ended June 30, 1997 June 15, 1996 June 30, 1997 June 15, 1996 Product sales and contract revenue: Contract revenue $ 33,322 $ 21,490 $ 60,196 $ 41,964 Product sales 6,824 6,883 12,958 13,036 Total revenue 40,146 28,373 73,154 55,000 Costs and expenses: Cost of contract revenue 30,044 19,419 53,815 37,953 Cost of goods 5,210 4,731 10,379 9,290 Selling, engineering and administrative expenses 3,283 3,350 6,587 6,450 Total costs and expenses 38,537 27,500 70,781 53,693 Operating income 1,609 873 2,373 1,307 Interest expense, net 193 69 398 169 Income before provision for income taxes 1,416 804 1,975 1,138 Provision for income taxes 592 306 825 431 Net income $ 824 $ 498 $ 1,150 $ 707 Net income per common share: * $ .13 $ .08 $ .18 $ .11 Weighted average common shares outstanding* 6,271,188 6,239,974 6,268,737 6,229,091 The accompanying notes are an integral part of these consolidated financial statements. * Retroactively adjusted for the April 1997 stock dividend. DYNAMICS RESEARCH CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) (unaudited) Six Twenty-Four Months Ended Weeks Ended June 30, 1997 June 15, 1996 Cash provided by operations: Net income $ 1,150 $ 707 Depreciation and amortization 2,440 2,448 Deferred income taxes (254) - Provision for receivable reserves (11) 11 3,325 3,166 Cash provided by (used for) working capital: Receivables (3,512) (3,248) Unbilled expenditures and fees on contracts in process 1,917 2,497 Inventories (306) (663) Refundable income taxes 300 2 Prepaid expenses and other current assets 143 229 Accounts and drafts payable (1,566) (288) Accrued payroll and employee benefits 1,883 1,088 Other accrued expenses 540 (119) Accrued and current deferred income taxes 760 65 Net cash provided by (used for) operations 3,484 2,729 Cash used for investing activities: Additions to property, plant and equipment, net (3,043) (5,215) Excess of purchase price over net assets of business acquired, net (125) (1,990) Net cash used for investing activities: (3,168) (7,205) Cash provided by (used for) financing activities: Net borrowings (repayments) under line of credit agreements 1,500 4,493 Principal payments under long-term borrowings (1,500) (600) Proceeds from the exercise of stock options 363 260 Purchase of treasury shares (472) 0 Net cash provided by (used for) financing activities (109) 4,153 Net increase (decrease) in cash and cash equivalents 207 (323) Cash and cash equivalents at the beginning of the year 234 777 Cash and cash equivalents at the end of the period $ 441 $ 454 Supplemental disclosures of cash flow information: Cash paid during the twenty-four week period for: Interest $ 384 $ 196 Income taxes $ 325 $ 676 The accompanying notes are an integral part of these consolidated financial statements. DYNAMICS RESEARCH CORPORATION Notes to Consolidated Financial Statements Note 1. The unaudited consolidated financial statements presented herein have been prepared by the registrant pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information in footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to such rules and regulations, although the registrant believes that the disclosures are adequate to make the information presented not misleading. The accompanying consolidated financial statements have not been audited by independent accountants, but in the opinion of the management such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to fairly present the results of operations. The results of operations for the three months and six months ended June 30, 1997 may not be indicative of the results that may be expected for the fiscal year ending December 31, 1997. Note 2. Inventories are comprised of the following (in thousands of dollars): June 30, 1997 December 28, 1996 Work in process $ 1,767 $ 1,411 Raw materials and subassemblies 1,750 1,800 Total inventories $ 3,517 $ 3,211 Note 3. Prior to 1997, the Company used a 13-period accounting year with the first three fiscal quarters containing twelve weeks and the fourth fiscal quarter containing sixteen weeks. In 1996, the Company's fiscal year ended on December 28, 1996. The Company now employs a calendar-month accounting year. Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations Results of Operations During 1997, comparability of quarterly financial information is effected by the change in fiscal calendar as described in Note 3 to the financial statements. Other than the factors discussed below and the additional length of the 1997 second quarter, the Company is not aware of any factors that would materially affect the comparability of the financial information. Total Revenue The Company's total revenue increased $11,773,000 or 41% for the second quarter of 1997 compared to the second fiscal quarter of 1996 as a result of growth in the Company's systems and services business segment. Contract Revenue Contract revenue for the systems and service segment increased 55% for the second quarter of 1997 compared to the second fiscal quarter of 1996. This growth was attributable primarily to revenue generated under contract awards announced during 1995 and 1996, including increases in the Company's technical and management services programs with the U.S. Air Force and Army, added work under the Company's long running core Navy program, and the commencement of work on the State of Ohio information technology products and services contract awarded in February 1997. Much of the Company's contract revenue relates to the development and operation of computer-based management information and logistics support systems, as well as other information technology services. The Company is continuing to pursue additional opportunities both within the Department of Defense, other Federal agencies and state governments. Product Sales Product sales decreased 1% for the second quarter of 1997 compared to the second twelve weeks of 1996. Sales of electroformed components decreased in the second quarter. The Company's major electroform parts customer, a manufacturer of ink- jet printers, reduced unit volumes of nozzle plates supplied by the Company. This reduction was partially offset by increased business from other customers, including a medical equipment manufacturer, for whom the Company supplies miniature flex circuits. Cost of Contract Revenue Cost of contract revenue as a percentage of contract revenue remained the same at 90% for the second quarter of both 1997 and 1996. Cost of Goods Cost of goods as a percentage of product sales for the second quarter of 1997 increased to 76% from 69% in 1996. This increase was attributed principally to the decreased production levels of electroformed components for the second quarter of 1997. Selling, Engineering and Administrative Expenses Selling, engineering and administrative expenses decreased 2% from 1996. This decrease was the result of a decrease in the Company's level of research and development spending during the second quarter of 1997, partially offset by an increase in general and administrative spending. Interest Expense, Net Interest expense, net increased to $193,000 during the second quarter of 1997 from $69,000 for the second twelve weeks of 1996, due to an increase in the average level of the Company's borrowing as a result of working capital requirements associated with the substantial increase in revenue as well as capital spending during 1996. Provision (Benefit) for Income Taxes The effective income tax rate for the second quarter of 1997 was 41.8% compared to 38.1% for the second fiscal quarter of 1996. The Company accounts for income taxes using the liability method as set forth in Statement of Financial Accounting Standards No. 109 (SFAS 109). The 1996 rate was favorably affected be a somewhat lower net state tax rate. Liquidity and Capital Resources The Company's primary sources of liquidity have been cash flow from operations and bank credit lines. The principal drivers of cash flow are earnings, adjusted for depreciation and amortization, aggregate billed and unbilled receivables in the Company's government business, and capital expenditures. The sum of billed and unbilled receivables increased $1,606,000 to $43,732,000 during the first six months of 1997, principally as a result of the 41% increase in revenue. Capital spending during the first six months of 1997 was $3,043,000 consisting principally of manufacturing production equipment and office computer equipment. At June 30, 1997, $6,900,000 was available under the Company's current lines of credit. The Company believes that its liquid assets, cash flow from operations and available bank lines of credit will be sufficient to support its normal operating and capital requirements for the balance of 1997. In February 1997, the Company announced that it had been awarded a $36 million, five-year contract by the State of Ohio to provide information technology products and services. During the second half of 1997, significant expenditures are expected to be made to acquire and install computer hardware under this contract, which may require additional levels of borrowings and the Company is currently arranging to increase bank credit lines. The Company does not have any significant capital commitments at June 30, 1997 outside the ordinary course of business. Forward Looking Information This report includes certain forward-looking statements about the Company's business including the anticipated capital spending, and cash flow requirements. Such forward-looking statements are subject to risk and uncertainties that could cause the actual results to vary materially. These risks and uncertainties, discussed in more detail in the Company's form 10- k for the year ended December 28, 1996, include possible reductions in funding for the Company's customers and potential customers, concentration of customers, risks of sustaining existing contracts and orders thereunder at the same or increasing levels and obtaining of new contracts, high levels of competition and difficulties of entering new markets, government contracting issues including audit adjustments and costs of completing fixed price contracts, supply difficulties, warranty claims, and factors affecting the business segments in which the Company operated and the economy generally. PART II. OTHER INFORMATION Item 6. (a) Exhibits (27.1) Financial Data Schedule Item 6. (b) Reports on Form 8-K The Registrant did not file any reports on Form 8-K during the three month period for which this report is filed. SIGNATURE 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. DYNAMICS RESEARCH CORPORATION (Registrant) Date: August 11, 1997 By: /s/ Douglas R. Potter Douglas R. Potter Vice President of Finance and Chief Financial Officer (Principal financial and accounting officer) EX-27 2
5 1000 6-MOS DEC-31-1997 JUN-30-1997 441 0 43,732 0 3,517 49,930 52,215 29,575 73,506 36,629 1 0 0 733 35,544 73,506 12,958 73,154 10,379 64,194 6,587 11 398 1,975 825 1,150 0 0 0 1,150 .18 .18
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