-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jdHOGo31eVx8REO5hxyMBNwRa/vDhW0On9503fEaIQ36NaQeZAyYPvZ8DIbJSWYE 8sy3DVuZZeZMOaHa9ujRvw== 0000898430-95-001161.txt : 19950627 0000898430-95-001161.hdr.sgml : 19950627 ACCESSION NUMBER: 0000898430-95-001161 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950626 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGICON INC /DE/ CENTRAL INDEX KEY: 0000311946 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 952126773 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07777 FILM NUMBER: 95549180 BUSINESS ADDRESS: STREET 1: 3701 SKYPARK DR CITY: TORRANCE STATE: CA ZIP: 90505-4794 BUSINESS PHONE: 3103730220X3237 MAIL ADDRESS: STREET 1: 3701 SKYPARK DRIVE CITY: TORRANCE STATE: CA ZIP: 90505-4794 10-K 1 10-K DATED 03/31/95 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K --------------------------- (Mark one) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: MARCH 31, 1995 Commission File Number: 1-7777 LOGICON, INC. (Exact name of registrant as specified in its charter) Delaware 95-2126773 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3701 Skypark Drive, Torrance, California 90505-4794 ------------------------------------------------------- (Address of principal executive offices) (Zip Code) (310) 373-0220 ----------------------------- Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.10 par value New York Stock Exchange, Inc. - ------------------------------- ------------------------------------ (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None ------------------ (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock as of a specified date within 60 days prior to the date of filing. $231,527,154 on June 1, 1995. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. $.10 par value common - 6,784,153 shares on June 1, 1995 DOCUMENTS INCORPORATED BY REFERENCE Portions of registrant's Annual Report to Stockholders for the fiscal year ended March 31, 1995 are incorporated by reference in Part II of this report. Portions of the registrant's definitive proxy statement dated June 26, 1995 are incorporated by reference in Part III of this report. ================================================================================ PART I ITEM 1. BUSINESS General Logicon, Inc., the Registrant (hereinafter referred to as Logicon or the Company), was incorporated in California on April 10,1961, and reincorporated in Delaware on July 28, 1978. The Company provides advanced technology systems and services to support national security, civil and industrial needs. On February 16, 1995, the Company acquired Syscon Corporation (Syscon), which operated as an indirectly wholly-owned subsidiary of Harnischfeger Industries, Inc., for a cash purchase price of $45 million. Syscon is engaged principally in the business of providing systems development, systems integration and systems services to the U.S. government and commercial enterprises. The acquisition was accounted for as a purchase and the excess of the purchase price over net assets acquired was $21.7 million. The Company's consolidated results of operations include the operations of Syscon from the acquisition date. Contracts with the U.S. government are the Company's primary revenue source. These revenues accounted for 99 percent of total revenues from services and systems for fiscal years 1993 through 1995. The current backlog value is composed of 46 percent fixed-price contracts, 41 percent cost type contracts, and 13 percent time and material type contracts. The Company is performing on a variety of contracts in the following defense markets: Command, Control, Communications & Intelligence Command, Control, Communications & Intelligence, commonly referred to as C/3/I, continues to be one of the Company's most important defense markets. Logicon has enjoyed longstanding relationships with both the U.S. Navy and the Marine Corps as a prime interoperability services provider. Logicon is also a main supplier of tactical data link diagnostic equipment for the Navy. In 1991, Logicon began to apply its interoperability expertise at the Joint Service level when it began supporting the Joint Interoperability Engineering Organization (JIEO). The Company continued work under the JIEO contract during fiscal 1995. This broad-based contract has given the Company the opportunity to apply its technical expertise in a variety of areas including development of joint interoperability standards, business process re-engineering and the engineering and prototype testing of advanced communications technologies. The Company's role in the development of a $32 million counter drug network for the four Southwestern states - California, Arizona, New Mexico and Texas - was highlighted in March, when an initial capability demonstration of the anti-drug network was conducted. Deployment of the system is scheduled for mid-1995. In another interoperability activity, Logicon supports the Joint Interoperability Test Center at Ft. Huachuca, Arizona. Logicon staff test and evaluate digital and analog switches, radio equipment, and tactical and strategic satellite equipment and information systems to determine whether they are operational, interoperable with other specified elements and in compliance with military specifications. At the U.S. Army's Experimentation Site at Ft. Lewis, Washington, Logicon experts help the Army evaluate and test prefielded versions of advanced C/3/ systems. Logicon-supported experiments and exercises are geared towards providing a realistic operational environment in which to evaluate the systems. In another C/3/I project, Logicon engineers provide combat systems engineering services for digital computer-based shipboard combat systems. The Company's work involves integrating combat systems into ships and submarines at all phases of a ship's life - from new construction to complete overhauls of existing vessels. Logicon engineers provide the whole spectrum of engineering services, including: design and performance specifications, system integration and introduction, and test and evaluation. Logicon also supports two Naval undersea surveillance programs. Logicon engineers have developed over 300,000 lines of Ada software code for a communications system that is used to transmit information in support of antisubmarine warfare activity. A specially equipped ship tows an array of acoustic sensors at low speeds in order to pick up submarine activity. The system processes the data on board the ship and communicates the information via satellite. -1- Weapon Systems Logicon's work in the Weapon Systems arena includes: the development and operational integration of mission planning systems, development and operation of weapon system simulations, software verification and validation, and life cycle engineering support services for combat systems. The Company has had a long history of involvement with the nation's ballistic and cruise missile programs, and continues to be active in the test and evaluation as well as the modification and maintenance of software for several missile systems including the Minuteman III and the Tomahawk. The Company also provides program office support to the Navy's Standard Missile Program. The scope of the Company's work as the developer of the B-2 aircraft's mission planning system over the past few years has been expanded to include support for unit level mission planning and precision guided conventional weapons. The initial version of the B-2 mission planning software is currently installed at Whiteman AFB and is supporting operational B-2 aircraft. An updated version of the software has undergone the required government qualification tests and is currently supporting the flight test program at Edwards AFB. Operational test and evaluation of the final version of this software is scheduled to begin in March 1996, and the software will be installed for operational use at Whiteman AFB in July 1996. Logicon develops and maintains planning, scheduling and analysis software for both aircraft and ballistic missile systems used by military leaders for planning responses in times of conflict. An example is Logicon's Combined Mating and Ranging Planning System (CMARPS), which is used to help orchestrate the aerial refueling of aircraft by producing flight plans and resource summaries for both the mission aircraft and the fleet of tankers involved in the refueling missions. CMARPS supports deployment missions in which assets are deployed to a theater of operations and employment missions in which aircraft are used to carry out in-theater warfare operations. Logicon is a preeminent supplier of services to the Navy's Aegis Program under several different contracts. In addition to providing testing, logistics, fleet introduction, system engineering and management support to the program office, Logicon engineers also provide a variety of life cycle support engineering services for the Aegis Combat System, which is installed in all Aegis class cruisers and destroyers. Life cycle support services include software IV&V, simulation system development and maintenance, analysis of proposed engineering modifications to the system, and support Aegis Combat System level testing and government acceptance for each current Aegis baseline. Logicon also provides technical and analytical support to the Navy's Standard Missile Program in the areas of program planning, foreign military sales, Management Information Systems (MIS), security planning and systems engineering. Science & Technology Logicon's capabilities in the Science and Technology area include management and engineering services, experimentation and research in the fields of nuclear and conventional weapons effects, high-energy lasers and sophisticated man-machine relationships. The Company has continuously supported research efforts at the Defense Nuclear Agency (DNA) since 1971 and at the U.S. Air Force's Phillips Laboratory at Kirtland AFB in Albuquerque, New Mexico, since 1977. In addition, Logicon researchers and experimental psychologists help design experiments and conduct research at the Armstrong Laboratory's Human Engineering Division at Wright-Patterson AFB in Dayton, Ohio. Other customers include the Navy Combat Systems Laboratory in Newport, Rhode Island, and NASA's Jet Propulsion Laboratory. Under the Company's most recent contract with DNA, awarded last year, research is continuing into conventional and nuclear weapons effects, ballistic missile defense system lethality and operability in environments disturbed by weapons employment, and countering the proliferation of weapons of mass destruction. The Logicon-developed Distributed Interactive Simulation provides the DNA with a model for studying the effects of conventional weapons used in an attack on a hardened structure. The Company's work in support of the Phillips Laboratory encompasses high-energy lasers and imaging system development, atmospheric propagation and lethality/effects. Company scientists and engineers are experts in communications, airborne and space electro-optical sensors, and imaging and control systems. Since 1990, the Company has operated and maintained the high- energy laser laboratories at Phillips. The Company has also developed a premiere comprehensive precision electro-optical-mechanical design and fabrication capability. At Armstrong Laboratory's Human Engineering Division, Logicon researchers support experiments aimed at determining human capabilities and limitations in operating modern complex flight systems. Experimental psychologists, engineers and technicians currently help design and conduct experiments in 20 labs. The information gleaned is used in designing the systems of the future. -2- At the Navy's Combat Systems Technology Laboratory in Newport, Rhode Island, Logicon personnel provide technical and management support on a number of laboratory activities. The focus of the work is on the development of new combat systems for submarines. Logicon provides computer operations, systems analysis, engineering and logistics support. The Company also supplies engineering services to the Jet Propulsion Laboratory on a variety of JPL unmanned space programs. Activities include research into the effects of radiation in space; identifying requirements for vibration, acoustic, shock, and thermal/climatic environments; and monitoring dynamics and thermal/climatic tests. Information Systems Revenues for Logicon's Information Systems business have grown at an average annual rate of 22 percent since 1991, the first year the Company began reporting on it separately. The Company's expertise in this area includes migration strategies for transitioning from mainframe-based legacy information systems to client/server networks, enterprise integration, systems engineering, software development, systems development and integration, and next generation software engineering environments, using CASE tools. The DoD's award of the I-CASE contract to Logicon in April 1994, was a milestone. It is the Company's largest single contract award to date. Under the contract, Logicon is providing the DoD with a single software engineering environment (SEE) called LOGICORE/TM/, which includes Sun Microsystems servers and workstations and over 50 software tools, including tools for management; software design and development; configuration management and testing; and services to assist in the implementation and use of the system. LOGICORE, a next generation software development environment, will reduce the risk and cost of software development and deployment of software applications within the government. Just after the close of the fiscal year, the I-CASE contract was opened to other government organizations as well, enabling them to order hardware, software and services under the contract. The Logicon-developed Case Management Control System (CMCS), used for the U.S. Air Force's Foreign Military Sales Program, is a large financial management information system that tracks, from start to finish, the sale of military equipment to foreign governments. Logicon software experts are currently developing new upgrades to the software and maintaining the system. The Company's Logicon Message Dissemination System (LMDS), a sophisticated message retrieval and dissemination software product, is constantly being enhanced to include new features, interfaces and capabilities that allow it to have broader application. Recently it was enhanced to operate with Lotus Notes and on a World Wide Web server. LMDS is currently used by various government agencies; Burrelle's, a financial information services organization; the Dow Jones News Service; and is the basis for an expanded future service planned by America Online. At the U.S. Patent and Trademark Office, Logicon staff are responsible for maintaining and processing all patent and trademark files in the United States. In the course of a typical week, nearly 8,000 new patents are processed. In another effort, Logicon provides a number of technical support services to the U.S. Department of Justice's Criminal and Civil Divisions. Services include network management, improving the department's automated office environments, operating the department's help desk, and developing application software for information systems. The Logicon-developed Integrated Communications and Administrative Support System (ICASS) is the backbone for communications at the National Archives and Records Administration (NARA). Logicon staff designed, developed, integrated, installed and tested the ICASS computer network. ICASS provides the networking infrastructure for all future NARA systems. Training & Simulation Logicon's activities in the Training & Simulation area include conducting hands- on training exercises as well as providing overall engineering and software support for the U.S. Army's Battle Command Training Program (BCTP), the Army's premiere training program for commanders and their staffs. The Company also provides similar support to the U.S. Army's I Corps and XVIII Corps Battle Simulation Centers, and the Army's Reserve Component Battle Projection Centers. Logicon also develops multimedia, interactive courseware for Army schools and other civilian government agencies under a contract with the U.S. Army's Training and Doctrine Command. As the managers of the NASA-Ames Simulation Laboratory, the Company is responsible for the operation of the largest vertical motion simulator in the world. Logicon experts developed a multi-warfare training system for the U.S. Navy that can be used in a variety of modes. In addition, the Company designs and maintains computer based training tools used to train Aegis crews. The genesis of Logicon's involvement with BCTP can be traced to its earlier support role in the development of the Corps Battle Simulation (CBS) system at the Jet Propulsion Laboratory. CBS, an interactive computer model of military field operations, is used by the Army to conduct the wargaming exercises that are at the heart of BCTP. -3- The Company's extensive experience with BCTP has spawned other work in this area. Logicon now supports combat training simulations for the U.S. Army's XVIII Airborne Corps at five U.S. sites and is helping the U.S. Army Reserves train their personnel for real-world conflicts by instructing battalion-, brigade- and division-level trainers on how to train their own staffs at four Army Reserve Battle Projection Centers. Logicon is also involved in training students at the Dragon Warfighter Center at the U.S. Army's Chemical School. Under a large omnibus contract with the U.S. Army's Training and Doctrine Command, Logicon is helping the Army stay current with the latest technology available for education and training. Logicon software experts are developing multimedia, interactive courseware and other training materials for the Army's distributed training program. Other government agencies, including those in the civilian sector, can also obtain training materials under this contract. Logicon staff oversee the operation of the NASA-Ames Simulation Laboratory (SimLab). The largest component of the SimLab is the vertical motion simulator, the largest of its kind in the world, which is used to train space shuttle astronauts scheduled for missions, as well as pilots of fighter aircraft, helicopters and transport planes. The simulator features four interchangeable cabs that simulate the different classes of aircraft. Logicon engineers operate the simulations and provide all related services including analysis, programming, systems integration, operations, data gathering and post simulation documentation. Logicon also provides a number of training support services to the Navy's Aegis Training Center. Logicon experts design, maintain and operate training tools used to train Aegis crews to operate equipment or perform various tasks. Much of the computer-based training uses interactive courseware and scenarios that have been developed by Logicon's staff. In another effort, the Company provides the Navy's fastest growing, most widely accepted medium fidelity multi-warfare trainer. This training system is used in many modes including tactical team training for communications, battle planning, tactical decision making and wargaming as well as for training surface warfare officers in basic Combat Information Center functions. Fifteen trainers have been installed nationwide with an additional ten planned during 1995-1996. The trainer has been selected as the shore-based training component for the Navy's Battle Force Tactical Training System. Backlog The dollar amount of backlog, including contract options and untasked indefinite quantity contract values at March 31, 1995, was approximately $1.7 billion, compared to approximately $727 million at March 31, 1994. Backlog from firm contracts at March 31, 1995, was approximately $518 million, compared to approximately $347 million at March 31, 1994. The funded portion of the March 31, 1995 and 1994 backlog was approximately $222 million and $181 million, respectively. It is estimated that approximately 72 percent of backlog from firm contracts will be expended by March 31, 1996. On April 12, 1994, the Company was awarded a U.S. Air Force contract to provide Integrated Computer-Aided Software Engineering (I-CASE) systems and related services to the Department of Defense. The estimated value of this fixed-price and fixed-price indefinite delivery/indefinite quantity contract for hardware and software products and labor hours is $670 million over a 10-year period. Revenues from this contract were $25 million for fiscal year 1995. Firm backlog related to the I-CASE contract was $14 million at March 31, 1995. The Company's backlog is not subject to any significant seasonal fluctuations but is likely to vary substantially as contracts near completion and in conjunction with the execution of major contract renewals or the award of major new contracts. Contract Terminations All of the Company's government contracts are subject to redirection or termination for convenience. Such action could occur as a result of reductions in government expenditures, changes in the allocations of spending or for other reasons and could have a material adverse effect on the Company's business. In the event of such actions, the Company is entitled to reimbursement of costs incurred plus a reasonable fee. Historically, there have been very few government contract terminations and those that have occurred have had a negligible impact. Competition Strong competition is encountered from numerous firms, many of which are larger and have greater financial resources than the Company. Direct competition comes from companies that market systems and services substantially the same as those provided by the Company. Additionally, indirect competition is encountered from many major industrial organizations and agencies of the government that perform services for themselves similar to those marketed by the Company. It is believed that the Company obtains only a small part of the available business in the markets served. -4- Research Activities Many of the Company's government contracts involve development of new systems or improvement of existing ones and, therefore, may be considered customer- sponsored research activities. Costs of Company-sponsored research activities during the fiscal years ended March 31, 1995, 1994 and 1993 were, respectively, $2,692,000, $2,751,000 and $2,338,000. Employee Relations The Company's success is dependent upon its ability to attract and retain highly trained professional and technical employees. At March 31, 1995, the Company had 4,514 employees, of whom 3,215 were on the technical staff. Of those on the technical staff, 83 percent held degrees, with 34 percent holding advanced degrees. The Company has had no work stoppages of any kind as a result of labor difficulties and believes it enjoys excellent relations with its employees. None of the Company's employees is represented by a labor union. Raw Materials, Energy and Environmental Matters Raw materials, energy shortages, and environmental protection and energy conservation laws have not had a material adverse effect on the Company's operations to date. It is impossible to predict what effect, if any, future raw materials and energy shortages or environmental and energy-related legislation would have on the Company's operations. ITEM 2. PROPERTIES Logicon's principal facilities, aggregating approximately 976,000 square feet, are occupied under leases expiring prior to April 2008. The principal facilities are located in the metropolitan areas of Los Angeles and San Diego, California, and Washington, D.C., and are suitable for offices, laboratories, or light manufacturing. ITEM 3. LEGAL PROCEEDINGS There are no pending or existing legal proceedings which, in the opinion of Company management, if decided against the Company, would have any material adverse effect on its financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the fourth quarter of fiscal year 1995 to a vote of security holders through the solicitation of proxies or otherwise. -5- PART II The information required by Items 5 through 8 of this report is set forth on page 1 and pages 25 through 39 of the 1995 Annual Report to Stockholders and is incorporated by reference in this Form 10-K Annual Report. Item 9 is not applicable. PART III The information required by Items 10 through 13 of this report is set forth in the sections entitled "Election of Directors", "Executive Compensation Committee Report", "Stock Options", "Other Remuneration Plans", "Long-Term Incentive Plan Awards Table", "Certain Transactions", "Shares Owned by Directors and Named Executive Officers", "Ownership of Certain Beneficial Owners", "Compliance With The Securities Exchange Act", "All Executive Officers of the Company" and "Common Stock Performance" in the Company's definitive proxy statement, dated June 26, 1995. Such information is incorporated by reference in this Form 10-K Annual Report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1 & 2. Financial Statements and Financial Statement Schedules: The Consolidated Financial Statements, together with the report thereon of Independent Accountants dated May 24, 1995, appearing on pages 28 through 38 of the accompanying 1995 Annual Report to Stockholders are incorporated by reference in this Form 10-K Annual Report. With the exception of the aforementioned information and the information incorporated in Items 5, 6, 7 and 8, the 1995 Annual Report to Stockholders is not to be deemed filed as part of this report. No financial statement schedules are required to be filed as part of this report. The Consent of Independent Accountants to Incorporation by Reference of Reports in Continuous Offerings on Form S-8 is located on page 9 of this report. 3. Exhibits: See index of exhibits on pages 10 and 11. (b) Reports on Form 8-K: A report on Form 8-K was filed on March 3, 1995, pursuant to Item 2 "Acquisition or Disposition of Assets" for the acquisition of Syscon Corporation by Logicon. The financial statements of Syscon Corporation for the period ended October 31, 1994, were part of that filing along with pro forma financial information for Logicon and Syscon Corporation. -6- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. LOGICON, INC. by J.R. WOODHULL --------------------------------- J.R. Woodhull, President and Chief Executive Officer
Signatures Title Date ---------- ----- ---- (1) Principal Executive Officer: J.R. WOODHULL --------------------------- J.R. Woodhull President and June 26, 1995 Chief Executive Officer (2) Principal Financial and Accounting Officer: RALPH L. WEBSTER --------------------------- Ralph L. Webster Vice President - June 26, 1995 Chief Financial Officer
-7- (3) Directors: CHARLES T. HORNGREN --------------------------- Charles T. Horngren Director June 17, 1995 W. EDGAR JESSUP, JR. --------------------------- W. Edgar Jessup, Jr. Director June 26, 1995 J.R. JOHNSON --------------------------- J.R. Johnson Director June 26, 1995 CHARLES F. SMITH --------------------------- Charles F. Smith Director June 26, 1995 ROLAND R. SPEERS --------------------------- Roland R. Speers Director June 26, 1995 ROBERT G. WALDEN --------------------------- Robert G. Walden Director June 26, 1995 J.R. WOODHULL --------------------------- J.R. Woodhull Director June 26, 1995
-8- CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statement on Forms S-8 (Nos. 2-82905, 2-82906, 2-82907, 33-45813 and 33-45815) of our report dated May 24, 1995, appearing on page 38 of the 1995 Annual Report to Stockholders of Logicon, Inc., which is incorporated in this Annual Report on Form 10-K. PRICE WATERHOUSE LLP Costa Mesa, California June 26, 1995 -9- LOGICON, INC. INDEX OF EXHIBITS
Exhibit No. Description - --- ----------- 3 Articles of Incorporation and Bylaws: (a) Certificate of Incorporation (2) (b) First amendment to the Certificate of Incorporation (5) (c) Second amendment to the Certificate of Incorporation (6) (d) Third amendment to the Certificate of Incorporation (7) (e) By-laws with Amendment (3) (f) Second amendment to the By-laws (5) (g) Third amendment to the By-laws (6) (h) Fourth amendment to the By-laws (7) (i) Fifth amendment to the By-laws (7) (j) Sixth amendment to the By-laws (9) (k) Seventh amendment to the By-laws (9) (l) Eighth amendment to the By-laws (12) (m) Ninth amendment to the By-laws (13) (n) Tenth and Eleventh amendment to the By-laws (14) 4 Instruments defining rights of security holders: (a) Common Stock Certificate (6) (b) Stockholder Rights Plan (8) 9 Voting trust agreement: (a) Trust agreement for Employee Stock Purchase Plan of Logicon, Inc. together with designation of Sanwa Bank California as trustee (3) 10 Material Contracts: (a) 1979 Restricted Stock Purchase Plan (1) (b) 1979 Performance Units Plan (2) (c) 1982 Incentive Stock Option Plan (4) (d) 1991 Stock Option Plan for Non-Employee Directors (10) (e) 1992 Employee Incentive Stock Option Plan (11) 11 Statement regarding computation of earnings per share 13 Annual Report to security holders 21 Subsidiaries of the registrant 23 Consents of experts and counsel: (a) Consent of Independent Accountants to incorporation by reference of reports in continuous offerings on Forms S-8 is located on page 9 of this report. 27 Financial Data Schedule
-10- Notes: (1) Filed with the Securities and Exchange Commission in Form S-8 on April 25, 1983, registration No. 2-82905. (2) Filed with the Securities and Exchange Commission in Form 10-K on June 26, 1981, registration No. 2-33461. (3) Filed with the Securities and Exchange Commission in Form 10-K on June 29, 1982, registration No. 2-33461. (4) Filed with the Securities and Exchange Commission in Form S-8 on April 25, 1983, registration No. 2-82906. (5) Filed with the Securities and Exchange Commission in Form 10-K on June 28, 1983, registration No. 2-33461. (6) Filed with the Securities and Exchange Commission in Form 8-A on December 14, 1984, registration No. 1-7777. (7) Filed with the Securities and Exchange Commission in Form 10-K on June 27, 1988, registration No. 2-33461. (8) Filed with the Securities and Exchange Commission in Form 8-A on May 7, 1990, registration No. 1-7777. (9) Filed with the Securities and Exchange Commission in Form 10-K on June 27, 1990, registration No. 1-7777. (10) Filed with the Securities and Exchange Commission in Form S-8 on February 19, 1992, registration No. 33-45815. (11) Filed with the Securities and Exchange Commission in Form S-8 on February 19, 1992, registration No. 33-45813. (12) Filed with the Securities and Exchange Commission in Form 10-K on June 21, 1993, registration No. 1-7777. (13) Filed with the Securities and Exchange Commission in Form 10-K on June 24, 1994, registration No. 1-7777 (14) Filed with the Securities and Exchange Commission in Form 10-K on June 26, 1995, registration No. 1-7777 -11- EX-3 2 10TH/11TH AMENDMENT TO BYLAWS EXHIBIT 3 TENTH AMENDMENT TO THE BY-LAWS THIS AMENDMENT is adopted and approved this 10th day of June, 1994, to be effective as of August 1, 1994, by Logicon, Inc., a Delaware corporation, with reference to the following facts: A. The By-Laws of Logicon, Inc. (the "By-Laws") were adopted by the incorporator of this Corporation by written action dated July 31, 1978. B. By Article Five of the Certificate of Incorporation of this Corporation and Article VIII of the By-Laws, the Board of Directors of Logicon, Inc. has the power (subject to certain limitations expressed in the Certificate of Incorporation and the By-Laws) to amend the By-Laws. NOW THEREFORE, the following By-Laws are hereby amended: 1. Section 2.2 of Article II of the By-Laws is hereby amended to read as follows: "Section 2.2 Number of Directors. The authorized number of ------------------- directors of the Corporation shall be eight (8) and the Board may from time to time increase or decrease the number of directors from this number by an amendment to these By-Laws. However, the number of directors shall not be increased or decreased by more than two (2) within any period of twelve months, whether by action of the Board or the stockholders, except upon the affirmative vote or written consent of the holders of not less than seventy-five percent (75%) of the outstanding voting stock. No reduction in the authorized number of directors shall remove any director prior to the expiration of his term of office." 2. Section 2.3 of Article II of the By-Laws is hereby amended to read as follows: "Section 2.3 Election and Term of Office of Directors. The Board ---------------------------------------- shall be divided into three classes as follows: Class I, two directors; Class II, three directors; Class III, three directors. The first term of office of the directors shall expire as follows: (1) for Class I, at the first annual meeting of stockholders following the first election of Class I; (2) for Class II, at the second annual meeting following such first election; and (3) for Class III, at the third annual meeting following such first election. After the first term of office of each Class, directors shall be chosen at each annual meeting of stockholders for a term of three (3) years to succeed those whose terms then expire and shall hold office until the third annual meeting of stockholders thereafter and until the election of their respective successors. At any annual meeting of stockholders, the persons receiving the greatest number of votes, up to the number then to be elected, shall be the directors elected." 3. In all other respects the By-Laws are reaffirmed and declared to be in full force and effect. IN WITNESS WHEREOF, this document has been executed this 10th day of June, 1994. LOGICON, INC. By: JOHN R. WOODHULL ---------------------------- John R. Woodhull, President ATTEST: By: E. BENJAMIN MITCHELL, JR. - ---------------------------------------- E. Benjamin Mitchell, Jr., Vice President-General Counsel/Secretary EXHIBIT 3 ELEVENTH AMENDMENT TO THE BY-LAWS --------------------------------- THIS AMENDMENT is made this 1st day of June, 1995 by Logicon, Inc., a Delaware corporation, with reference to the following facts: A. The By-Laws of Logicon, Inc. (the "By-Laws") were adopted by the incorporator of this Corporation by written action dated July 31, 1978. B. By Article Five of the Certificate of Incorporation of this Corporation and Article VIII of the By-Laws, the Board of Directors of Logicon, Inc. has the power (subject to certain limitations expressed in the Certificate of Incorporation and the By-Laws) to amend the By-Laws. NOW THEREFORE, the following By-Laws are hereby amended: 1. Section 2.2 of Article II of the By-Laws is hereby amended to read as follows: "Section 2.2 Number of Directors. The authorized number of -------------------- directors of the Corporation shall be seven (7) and the Board may from time to time increase or decrease the number of directors from this number by an amendment to these By-Laws. However, the number of directors shall not be increased or decreased by more than two (2) within any period of twelve months, whether by action of the Board or the stockholders, except upon the affirmative vote or written consent of the holders of not less than seventy-five percent (75%) of the outstanding voting stock. No reduction in the authorized number of directors shall remove any director prior to the expiration of his term of office." 2. Section 2.3 of Article II of the By-Laws is hereby amended to read as follows: "Section 2.3 Election and Term of Office of Directors. The ----------------------------------------- Board shall be divided into three classes as follows: Class I, two directors; Class II, two directors; Class III, three directors. The first term of office of the directors shall expire as follows: (1) for Class I, at the first annual meeting of stockholders following the first election of Class I; (2) for Class II, at the second annual meeting following such first election; and (3) for Class III, at the third annual meeting following such first election. After the first term of office of each Class, directors shall be chosen at each annual meeting of stockholders for a term of three (3) years to succeed those whose terms then expire and shall hold office until the third annual meeting of stockholders thereafter and until the election of their respective successors. At any annual meeting of stockholders, the persons receiving the greatest number of votes, up to the number then to be elected, shall be the directors elected." 3. In all other respects the By-Laws are reaffirmed and declared to be in full force and effect. IN WITNESS WHEREOF, this document has been executed this 1st day of June, 1995. LOGICON, INC. By: J.R. WOODHULL -------------------------- J.R. Woodhull, President ATTEST: By: E. BENJAMIN MITCHELL, JR ----------------------------------------- E. Benjamin Mitchell, Jr. Vice President-General Counsel/Secretary EX-11 3 COMP EARNING PER SHARE Exhibit 11 LOGICON, INC. COMPUTATION OF EARNINGS PER SHARE Earnings per share of common stock including common stock equivalents, have been computed based on the following weighted average number of shares:
For the Year Ended March 31 -------------------------------- 1995 1994 1993 ---- ---- ---- Average number of shares outstanding during the year 6,836,000 7,178,000 7,260,000 Net additional shares issuable in connection with dilutive stock options based upon use of the treasury stock method based on average market prices 266,000 324,000 306,000 --------- --------- --------- Average number of common shares, including common stock equivalents 7,102,000 7,502,000 7,566,000 ========= ========= =========
Earnings per share of common stock fully diluted are omitted because there is less than 3 percent dilution in any year. EX-13 4 ANNUAL REPORT SELECTED CONSOLIDATED FINANCIAL DATA
----------------------------------------------------------- For the Year Ended March 31 ----------------------------------------------------------- (dollars in millions) 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------- Revenues $345.2 $320.2 $325.1 $299.1 $260.0 Net Income 19.5 21.0 15.5 13.5 8.6 ----------------------------------------------------------- ----------------------------------------------------------- Per Share Amounts ----------------------------------------------------------- (dollars) 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------- Earnings $2.75 $2.80 $2.04 $1.74 $1.07 Dividends 0.32 0.28 0.24 0.195 0.18 Equity 15.92 14.11 12.39 10.86 9.29 ----------------------------------------------------------- ----------------------------------------------------------- March 31 ----------------------------------------------------------- (dollars in millions) 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------- Backlog $1,686.3 $727.4 $630.6 $657.6 $523.1 Total Assets 152.5 129.3 119.8 113.8 98.4 Working Capital 70.8 85.5 76.2 67.3 53.4 Stockholders' Equity 107.5 97.7 89.1 81.0 69.0 -----------------------------------------------------------
1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Revenues and Backlog Logicon provides advanced technology systems and services to support national security, civil and industrial needs in the following areas: Command, Control, Communications & Intelligence; Weapon Systems; Information Systems; Science & Technology; and Training & Simulation. Contracts with the U.S. government are the Company's primary revenue source, accounting for 99 percent of total revenues from services and systems for fiscal years 1993 through 1995. The Company performs its work under a variety of contractual types which are summarized in the table below. The Company's contractual revenue mix has shifted in recent years with a greater percentage of revenue being derived from "Time and Material" and "Fixed-Price" contracts. The Company's backlog is not subject to any significant seasonal fluctuations but is likely to vary substantially as contracts near completion and in conjunction with the execution of major contractual renewals or the award of major new contracts. All of the Company's contracts with the government are subject to redirection or termination for convenience. Backlog, including priced options, has more than doubled to $1.7 billion at March 31, 1995, from $727 million at March 31, 1994. This increase is principally from the award on April 13, 1994, by the U.S. Air Force of a contract to provide Integrated Computer- Aided Software Engineering (I-CASE) systems and related services. The U.S. Air Force estimated the value of this fixed-price and fixed-price labor hour contract at $670 million over a 10-year period. Revenues from this contract were $25 million for fiscal year 1995. Firm backlog related to the I-CASE contract was $14 million at March 31, 1995. In recent years, the Company's customers have awarded contracts for longer periods of performance, with options to extend the period of performance or with options to add or expand the contract tasks, based upon prices agreed to at the time of the contractual award. Management expects this practice to continue in fiscal year 1996. The following tables present an analysis of the Company's revenues and backlog by contract type for the past three years:
-------------------------------------- For the Year Ended March 31 -------------------------------------- (dollars in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------------- Contract revenues: Cost plus fixed fee $ 80,064 $ 93,795 $103,045 Cost plus award and incentive fee 125,668 128,501 142,644 Fixed-price 51,317 33,339 31,121 Time and material 84,798 62,581 46,815 -------------------------------------- $341,847 $318,216 $323,625 ======================================
25
---------------------------------------- March 31 ---------------------------------------- (dollars in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- Backlog: Firm contracts: Cost plus fixed fee $ 155,283 $139,118 $114,266 Cost plus award and incentive fee 163,044 102,952 120,733 Fixed-price 34,166 17,919 15,917 Time and material 165,385 87,078 50,333 ---------------------------------------- 517,878 347,067 301,249 ---------------------------------------- Contract options and untasked indefinite quantity contract values: Cost type 367,904 259,882 280,386 Fixed-price 743,261 98,521 19,749 Time and material 57,285 21,941 29,197 ---------------------------------------- 1,168,450 380,344 329,332 ---------------------------------------- Total backlog $1,686,328 $727,411 $630,581 ========================================
Profit Margins Profit margins from operations for the three years ended March 31, 1995, 1994 and 1993 were as follows:
-------------------------------- For the Year Ended March 31 -------------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------------------------- Return on revenue before tax 9.5% 10.8% 7.8% Return on revenue after tax 5.7% 6.6% 4.8% Effective income tax rate 40.5% 40.9% 38.6% Before-tax return on short-term portfolio 4.8% 3.2% 3.4% --------------------------------
The fiscal 1994 results include net income of $3.9 million or 51 cents per share and revenues of $4 million resulting from the settlement of two claims the Company had filed with the United States Court of Federal Claims. The claims were for increased costs relating to changes in contract requirements for two fixed-price development contracts with the U.S. Navy to provide air traffic controller training systems, which were delivered and accepted by the U.S. Navy in prior periods. Net income during fiscal 1994 was also increased by $635,000, or eight cents per share, as a result of the Company's adoption of Financial Accounting Standard No. 109 "Accounting for Income Taxes." This amount is the total cumulative effect on income for this change in accounting for income taxes. Excluding the non-recurring items mentioned above, after tax results improved for fiscal year 1995 by .5% over results for fiscal year 1994 due to an increase in interest income received on a larger average cash and marketable securities portfolio earning interest at higher short-term rates and to improved margins on award fees and time and material contracts. Prior to fiscal year 1993, selling and administrative expenses expressed as a percentage of revenues were typically in the 11% to 12% range. During fiscal year 1993, the Company relocated three operating unit headquarters and consolidated administrative support functions to achieve business and management efficiencies. These changes have contributed to the reduction in selling and administrative expenses to 8.8%, 8.6% and 9.1% of revenues for fiscal years 1995, 1994 and 1993, respectively. On February 16, 1995, the Company acquired Syscon Corporation (Syscon), which operated as an indirectly wholly-owned subsidiary of Harnischfeger Industries, Inc., for a cash purchase price of $45 million. Syscon is engaged principally in the business of providing systems development, systems integration and systems services to the U.S. government and commercial enterprises. The acquisition was accounted for as a purchase and the excess of the purchase price over net assets acquired was $21.7 million. The Company's consolidated results of operations include the operations of Syscon from the acquisition date. 26 Days sales in receivables increased to 69 days at March 31, 1995, compared to 45 days at March 31, 1994, and 63 days at March 31, 1993. The increase for fiscal year 1995 is due primarily to the acquisition of Syscon Corporation on February 16, 1995. The Company has adequate cash and credit lines available to fund such fluctuations. Inflation Inflation has had little impact on the Company's results of operations. The majority of revenues result from contracts in which the expected impact of inflation, including increased labor rates, is provided for in the contract pricing. The impact of inflation on replacement costs of plant and equipment has not been of great significance, because the investment is low and accelerated depreciation methods are used for both tax and cost recovery purposes. Liquidity and Capital Resources Cash provided by operating activities was $26.5 million, $38.3 million and $21.7 million in fiscal years 1995, 1994 and 1993, respectively, and is the Company's primary source of liquidity. The Company's working capital decreased to $70.8 million at the end of fiscal year 1995, from $85.5 million at the end of fiscal year 1994 and from $76.2 million at the end of fiscal year 1993. The decrease in working capital was primarily due to the acquisition of Syscon Corporation for $45 million, in cash. The Company's working capital position is reflected in the current ratio of 2.6 to 1, 3.7 to 1 and 3.5 to 1 for fiscal years 1995, 1994 and 1993, respectively. The Company's Consolidated Balance Sheet is exceptionally strong, with no debt. Management believes that the Company's existing capital resources are sufficient to provide for its operating needs and continued growth. A $25 million unsecured line of credit has been arranged with a bank to provide working capital for temporary requirements. There were no borrowings under the line during the last three fiscal years. Purchase of Treasury Stock On August 1, 1994, the Board of Directors granted the authority to spend up to $20 million to repurchase shares of the Company's common stock in open market transactions. The Company purchased 331,300 shares for an aggregate cost of $9.7 million during fiscal 1995. Over the last three fiscal years, the Company has purchased 1,255,400 shares for an aggregate cost of $29.6 million under this and prior authorizations. 27 CONSOLIDATED STATEMENT OF INCOME Logicon, Inc.
---------------------------------------- For the Year Ended March 31 ---------------------------------------- (shares and dollars in thousands except per share data) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------- Revenues: Contract revenues $341,847 $318,216 $323,625 Interest 3,344 1,976 1,447 ---------------------------------------- 345,191 320,192 325,072 - ------------------------------------------------------------------------------------------------------------------------- Costs and Expenses: Cost of contract revenues 282,074 258,165 270,451 Selling and administrative expenses 30,302 27,511 29,425 ---------------------------------------- 312,376 285,676 299,876 - ------------------------------------------------------------------------------------------------------------------------- Income before taxes on income 32,815 34,516 25,196 Provision for taxes on income (Note 8) 13,306 14,109 9,731 ---------------------------------------- Income before cumulative effect of a change in accounting principle 19,509 20,407 15,465 Cumulative effect, on prior years, of change in accounting for taxes on income (Note 8) 635 ---------------------------------------- Net income $ 19,509 $ 21,042 $ 15,465 ======================================== Earnings per share of common stock: Before cumulative effect of a change in accounting principle $2.75 $2.72 $2.04 Cumulative effect, on prior years, of change in accounting for taxes on income (Note 8) 0.08 ---------------------------------------- Net income $2.75 $2.80 $2.04 ======================================== Average number of common shares including common stock equivalents 7,102 7,502 7,566 ----------------------------------------
See notes to consolidated financial statements. 28 CONSOLIDATED BALANCE SHEET Logicon, Inc.
---------------------------- March 31 ---------------------------- (dollars in thousands) 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------ Assets Current assets: Cash and cash equivalents $ 31,564 $ 43,389 Marketable securities (Note 3) 9,210 27,350 Accounts receivable (Note 4) 64,233 38,865 Prepaid expenses 2,418 1,129 Deferred income tax benefits (Note 8) 8,308 6,387 ---------------------------- Total current assets 115,733 117,120 Property, plant and equipment (Note 4) 9,090 5,698 Excess of purchase price over net assets of businesses acquired, net of accumulated amortization of $2,490 and $1,925 27,654 6,511 ---------------------------- $152,477 $129,329 ============================ Liabilities and Stockholders' Equity Current liabilities: Accounts payable and other accrued liabilities $ 12,549 $ 6,537 Accrued salaries, wages and employee benefits (Note 4) 30,831 20,990 Estimated taxes on income (Note 8) 1,583 4,127 ---------------------------- Total current liabilities 44,963 31,654 ---------------------------- Commitments and contingent liabilities (Note 9) Stockholders' equity, per accompanying statement: Preferred stock, $.10 par value - Authorized 2,000,000 shares, none outstanding Common stock, $.10 par value - Authorized 40,000,000 shares, outstanding 6,753,000 and 6,922,000 shares 675 692 Other paid-in capital 14,416 11,976 Retained earnings 95,889 87,742 Unrealized loss on available for sale securities (Note 3) (159) (136) Unearned compensation and notes receivable under Restricted Stock Purchase Plan (Note 7) (3,307) (2,599) ---------------------------- Total stockholders' equity 107,514 97,675 ---------------------------- $152,477 $129,329 ============================
See notes to consolidated financial statements. 29 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Logicon, Inc.
-------------------------------------------------------- Common Stock --------------------- Other Paid- Retained (shares and dollars in thousands) Shares Amount in Capital Earnings - ----------------------------------------------------------------------------------------------------------------- Balance at March 31, 1992 7,457 $746 $8,621 $73,478 Retirement of treasury shares (461) (46) (794) (6,300) Transactions of stock plans 194 19 2,030 Cash dividends (1,740) Net income for year 15,465 - ----------------------------------------------------------------------------------------------------------------- Balance at March 31, 1993 7,190 719 9,857 80,903 Retirement of treasury shares (463) (46) (537) (12,198) Transactions of stock plans 195 19 2,656 Cash dividends (2,005) Net income for year 21,042 - ----------------------------------------------------------------------------------------------------------------- Balance at March 31, 1994 6,922 692 11,976 87,742 Retirement of treasury shares (331) (33) (449) (9,176) Transactions of stock plans 162 16 2,889 Cash dividends (2,186) Net income for year 19,509 - ----------------------------------------------------------------------------------------------------------------- Balance at March 31, 1995 6,753 $675 $14,416 $95,889 ========================================================
Stockholders' equity in the accompanying Consolidated Balance Sheet has been reduced by unearned compensation and notes receivable under the Restricted Stock Purchase Plan (Note 7) and by unrealized loss on available for sale securities (Note 3). See notes to consolidated financial statements. 30 CONSOLIDATED STATEMENT OF CASH FLOWS Logicon, Inc.
---------------------------------------- For the Year Ended March 31 ---------------------------------------- (dollars in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $19,509 $21,042 $15,465 Income charges (credits) not affecting cash - Depreciation and amortization 4,388 3,471 3,654 Provision for the collectibility of accounts receivable (2,000) Provision for (benefit from) deferred taxes (Note 8) (2,529) (3,014) 447 Amortization of deferred compensation 587 415 304 Effect of a change in accounting for income taxes (Note 8) (635) Changes in assets and liabilities, net of acquisition - Decrease in accounts receivable 1,304 18,820 4,146 Decrease (increase) in prepaid expenses 731 171 (35) Increase (decrease) in accounts payable and other accrued liabilities 2,123 (3,227) (1,264) Increase in accrued salaries, wages and employee benefits 2,892 285 1,348 Increase (decrease) in income taxes payable (2,462) 2,956 (2,391) ---------------------------------------- Net cash provided from operating activities 26,543 38,284 21,674 - -------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchase of property, plant and equipment, net of sales (2,397) (2,747) (3,385) Maturity of available for sale securities 61,519 Purchase of available for sale securities (43,402) (27,486) Payment for acquisition, net of cash acquired (Note 2) (43,854) Refund of escrow securing contingent purchase price 417 ---------------------------------------- Net cash used in investing activities (28,134) (30,233) (2,968) - -------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Cash dividends (2,186) (2,005) (1,740) Transactions of stock plans 1,610 2,035 1,252 Purchase and retirement of treasury shares (9,658) (12,781) (7,140) ---------------------------------------- Net cash used in financing activities (10,234) (12,751) (7,628) ---------------------------------------- Net increase (decrease) in cash and cash equivalents (11,825) (4,700) 11,078 Cash and cash equivalents at beginning of year 43,389 48,089 37,011 - -------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $31,564 $43,389 $48,089 ======================================== Cash paid for income taxes $18,215 $12,975 $11,097 ========================================
See notes to consolidated financial statements. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Logicon, Inc. - -------------------------------------------------------------------------------- Note 1. Summary of Accounting Policies Basis of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions are eliminated. Contract Revenues The Company's business is to provide advanced technology systems and services to support national security, civil and industrial needs. Revenues result from a variety of cost-reimbursement and fixed-price contracts, principally with the U.S. government. Contract revenues are recorded using the percentage of completion method, primarily based on contract costs incurred to date compared with total estimated costs at completion. Amounts in excess of contract price for customer changes and increases in contract requirements, errors in specification and design, customer-caused delays and disruptions or other causes of unanticipated additional costs are recognized as revenue if it is probable that the requests for equitable adjustment to the contract will result in additional revenue and the amount can be reasonably estimated. To the extent estimated costs at completion exceed estimated contract price, charges are made to current earnings in the period in which this is first determined, with a related reduction of unbilled amounts to estimated realizable value. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is provided using the declining-balance and straight-line methods over estimated useful lives of three to ten years for office furniture and equipment, three to eight years for computer and related equipment and fifteen to thirty years for buildings. Leasehold improvements are amortized over the shorter of their service lives or the remaining terms of the leases. Excess of Purchase Price Over Net Assets of Businesses Acquired The excess of purchase price over net assets of businesses acquired is amortized on a straight-line basis, generally over twenty years. The Company regularly reviews the individual components of the balances and recognizes, on a current basis, any decline in value. Research and Development The Company charges all research and development expenditures to costs and expenses as incurred. Research and development expenditures for fiscal years 1995, 1994 and 1993 were, respectively, $2,692,000, $2,751,000, and $2,338,000. Income Taxes Effective April 1, 1993, the Company prospectively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which changes the method of accounting for income taxes from the deferred method to an asset and liability method. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities. Statement of Cash Flows For purposes of the Consolidated Statement of Cash Flows, the Company considers cash equivalents to be short-term, highly liquid investments that mature within 90 days from the date of acquisition. 32 - -------------------------------------------------------------------------------- Note 2. Acquisition On February 16, 1995, the Company acquired Syscon Corporation (Syscon), which operated as an indirectly wholly-owned subsidiary of Harnischfeger Industries, Inc., for a cash purchase price of $45 million. Syscon is engaged principally in the business of providing systems development, systems integration and systems services to the U. S. government and commercial enterprises. The acquisition was accounted for as a purchase and the excess of the purchase price over net assets acquired was $21.7 million. The Company's consolidated results of operations include the operations of Syscon from the acquisition date. The following table summarizes the unaudited consolidated pro forma results of operations, assuming the acquisition had occurred at the beginning of each of the following periods and is not necessarily indicative of the actual results of operations that would have occurred:
--------------------------- For the Year Ended March 31 (unaudited) --------------------------- (dollars in thousands, except per share data) 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------- Revenues $455,842 $458,411 Income before cumulative effect of a change in accounting principle $ 18,151 $ 23,586 Cumulative effect, on prior years, of change in accounting for taxes on income 635 --------------------------- Net income $ 18,151 $ 24,221 =========================== Earnings per share of common stock: Before cumulative effect of a change in accounting principle $ 2.56 $ 3.15 Cumulative effect, on prior years, of change in accounting for taxes on income 0.08 --------------------------- Net income $ 2.56 $ 3.23 =========================== Average number of common shares including common stock equivalents 7,102 7,502 ===========================
The fiscal 1995 results of operations of Syscon, prior to acquisition, include $3.1 million of certain pre-tax non-recurring items. Had these items not been included in the combined pro forma results of operation, pro forma earnings per share for fiscal 1995 would have been $2.82. - -------------------------------------------------------------------------------- Note 3. Marketable Securities The details of the marketable securities caption are as follows:
--------------------------------------------------------------- Amortized Cost Fair Value Gross Unrealized (dollars in thousands) Basis (plus interest) (plus interest) Loss - -------------------------------------------------------------------------------------------------------------------------------- March 31, 1995 Available for Sale Securities (Mature within two years) U. S. government and government agencies $ 9,477 $ 9,210 $267 =============================================================== March 31, 1994 Available for Sale Securities (Mature within three years) U. S. government and government agencies $10,705 $10,477 $228 Commercial paper 16,873 16,873 - --------------------------------------------------------------- $27,578 $27,350 $228 ===============================================================
The specific identification method has been used to determine cost for each security. There have been no realized gains or losses from the sale of available for sale securities during fiscal 1995 or 1994. The net unrealized holding loss on available for sale securities which was included in stockholders' equity at March 31, 1995, and 1994, was $159,000 and $136,000, respectively. 33 - -------------------------------------------------------------------------------- Note 4. Details of Certain Consolidated Balance Sheet Captions
----------------------- March 31 ----------------------- (dollars in thousands) 1995 1994 - ------------------------------------------------------------------------------------------------------------- Accounts receivable: U.S. government, including unbillable of $13,259 and $10,431 $60,929 $37,844 Other 3,304 1,021 ----------------------- $64,233 $38,865 ======================= Property, plant and equipment: Office furniture and equipment $ 5,747 $ 5,699 Computer and related equipment 24,172 20,810 Land, buildings and leasehold improvements 5,041 3,183 ----------------------- 34,960 29,692 Less accumulated depreciation and amortization (25,870) (23,994) ----------------------- $ 9,090 $ 5,698 ======================= Accrued salaries, wages and employee benefits: Salaries and related expenses $14,592 $6,110 Personal leave 11,499 9,867 Benefit plans 4,740 5,013 ----------------------- $30,831 $20,990 =======================
Unbillable receivables under fixed-price contracts are normally billable upon acceptance of deliverables by the customer. Unbillable receivables under cost- type contracts are normally billable upon contract completion and acceptance of costs incurred. Unbilled amounts are classified as current assets, since substantially all of these amounts will be realized within one year. Costs related to certain contracts, including applicable indirect costs, are subject to audit and adjustment from negotiations between the Company and representatives of the U.S. government. Revenues for such contracts have been recorded in amounts that are expected to be realized on final settlement. - -------------------------------------------------------------------------------- Note 5. Short-Term Borrowings The Company has a $25 million unsecured line of credit with a bank that is renewable annually in July, subject to review of the Company's financial condition. Borrowings under the line bear interest at the bank's prime rate. The Company is expected to maintain an average collected demand deposit balance equal to 3.5 percent of the line. The compensating balances are not restricted and generally are composed of normal float and minimum operating balances. There were no borrowings under the unsecured line during the last three fiscal years. - -------------------------------------------------------------------------------- Note 6. Employee Benefit Plans The Company and its subsidiaries have various tax qualified employee benefit plans which provide retirement benefits to substantially all employees. Annual contributions to the various plans are discretionary and are determined by the Board of Directors. Charges to costs and expenses with respect to the various plans for fiscal years 1995, 1994 and 1993 were, respectively, $7,333,000, $7,350,000, and $7,956,000. Employees, except those of certain subsidiaries, are eligible to participate in the Company's Stock Purchase Plan by contributing up to six percent of their salary. The Company contributes an amount equal to one-half of each employee's contribution, less forfeitures. Company contributions vest and the purchased stock is distributed after the end of the second calendar year following the year of purchase. As of March 31, 1995, the Plan is authorized to purchase an aggregate of 322,672 additional shares of the 34 Company's common stock either on the open market or from the Company. The Plan held 172,404 shares of the Company's common stock at March 31, 1995. Charges to costs and expenses with respect to the Plan for fiscal years 1995, 1994 and 1993 were, respectively, $932,000, $385,000, and $374,000. The Company has incentive compensation plans for key employees that provide for current bonuses and deferred compensation based on the Company's current and future earnings. Charges to costs and expenses with respect to the plans for the fiscal years 1995, 1994 and 1993 were, respectively, $2,619,000, $2,909,000, and $2,733,000. - -------------------------------------------------------------------------------- Note 7. Stockholders' Equity The 1992 Employee Incentive Stock Option Plan provides for issuance of options to key employees to purchase shares of the Company's common stock at prices not less than market value at date of grant. These options become exercisable as determined in each case by the Executive Compensation Committee of the Board of Directors, but in no event shall any exercise period exceed ten years from the date of the grant of the option. No charges are made to earnings in connection with this Plan. The Plan authorizes issuance of 1,000,000 shares. Grants for 86,500 shares at prices ranging from $28.38 to $31.88 per share were made during fiscal year 1995. The 1991 Stock Option Plan for Non-Employee Directors provides the Company the ability to grant Non-Employee Directors options to purchase common stock of the Company. Options are granted according to a formula contained in the Plan at prices not less than the fair market value at date of grant, are exercisable on or after the second anniversary of the date of grant and expire five years from the date of grant. No charges are made to earnings in connection with this Plan. A total of 85,500 shares of common stock are reserved for future issuance under the Non-Employee Directors' Plan. Grants for 4,500 shares at a price of $32.00 per share were made during fiscal year 1995. A summary of stock option transactions follows:
-------------------------------------------------- Options Outstanding -------------------------------------------------- (in thousands) Shares Per Share Amount - --------------------------------------------------------------------------------------------------------------------------- March 31, 1992 (1,400 shares exercisable) 684,652 $ 7.50-$12.00 $6,014 Granted 76,350 14.50 1,107 Exercised (148,796) 7.50-12.00 (1,153) Canceled and expired (23,020) 7.50-12.00 (216) -------------------------------------------------- March 31, 1993 (236,156 shares exercisable) 589,186 7.50-14.50 5,752 Granted 91,000 21.25-26.75 2,012 Exercised (164,989) 7.50-14.50 (1,331) Canceled and expired (5,200) 12.00-21.88 (75) -------------------------------------------------- March 31, 1994 (228,397 shares exercisable) 509,997 7.50-26.75 6,358 Granted 91,000 28.38-32.00 2,654 Exercised (111,480) 7.50-26.75 (1,119) Canceled and expired (3,700) 14.50-28.38 (72) -------------------------------------------------- March 31, 1995 (241,067 shares exercisable) 485,817 $ 7.50-$32.00 $7,821 ==================================================
Under a Restricted Stock Purchase Plan, the Executive Compensation Committee of the Board of Directors selects eligible employees and determines the number of shares available for purchase by each participant. Eligible employees are entitled to purchase "restricted" shares of the Company's common stock at a discount from market value. Following the date of purchase, restrictions on the transfer of the stock may be removed from a discretionary amount of the shares by the Executive Compensation Committee. Legends prohibiting transfers remain on the certificates and are not removed until any loans which have been made in connection with the purchase have been satisfied. During fiscal year 1995, awards for 55,900 shares were granted. Charges to costs and expenses with respect to the Plan for fiscal years 1995, 1994 and 1993 were, respectively 35 $587,000, $415,000 and $304,000. At March 31, 1995, and 1994, unearned compensation of $682,000 and $877,000 and notes receivable of $2,625,000 and $1,722,000, respectively, related to the issuance of the stock are deducted from stockholders' equity in the accompanying Consolidated Balance Sheet. At March 31, 1995, 1,454,650 shares of authorized but unissued common stock were available for future grants under these plans. In April 1990, the Company established a Stockholder Rights Plan and declared a dividend of one right for each share of common stock. When the Board of Directors determines that an acquiring person, as defined, has acquired or intends to acquire 20 percent or more or, in certain circumstances, 15 percent or more of the Company's common stock, each right may be exercised to purchase stock in the Company equal to the result obtained by multiplying the then current per share purchase price, as defined by the Plan, by the number of shares currently held and dividing that product by 50 percent of the current per share market price or to acquire stock in an acquiring company by the same formula but where the current per share market price is of the acquiring company. An acquiring person is not entitled to any of the benefits of the Plan. The rights, which do not have voting privileges and automatically trade with the common stock after May 15, 1990, may be redeemed by an action of the Board of Directors at a price of $.01 per right within ten days after the announcement that a person has acquired 20 percent or more of the outstanding common stock of the Company. The Plan will expire on May 15, 2000, unless otherwise amended. - -------------------------------------------------------------------------------- Note 8. Taxes on Income Effective April 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." The cumulative effect of this adoption was an increase in net income of $635,000, or eight cents per share. Financial Statements for prior years have not been restated. The provision for taxes on income includes the following:
------------------------------------ For the Year Ended March 31 ------------------------------------ (dollars in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------- Current payable: Federal $12,831 $13,845 $7,350 State 3,004 3,278 1,934 ------------------------------------ 15,835 17,123 9,284 ------------------------------------ Tax effect of temporary differences: Federal (2,167) (2,515) 353 State (362) (499) 94 ------------------------------------ (2,529) (3,014) 447 ------------------------------------ $13,306 $14,109 $9,731 ====================================
The reasons for variance from the statutory federal income tax rates are as follows:
------------------------------------ For the Year Ended March 31 ------------------------------------ 1995 1994 1993 - --------------------------------------------------------------------------------------------------- Statutory federal income tax rate 35.0% 35.0% 34.0% State taxes, net of federal income tax benefit 5.2 5.2 5.3 Other 0.3 0.7 (0.7) ------------------------------------ Effective tax rate 40.5% 40.9% 38.6% ====================================
36 Deferred income tax benefits consist of the following:
---------------------- March 31 ---------------------- (dollars in thousands) 1995 1994 - ------------------------------------------------------------------------------------ Deferred employee benefits $5,570 $3,718 Non-deductible accrued costs 2,993 1,836 Contractually unbillable receivables (831) (436) R&D credit carryforward 701 State taxes 431 607 Depreciation 284 702 Loss limitation carryforwards 158 323 Other (691) 83 ---------------------- 8,615 6,833 Valuation allowance (307) (446) ---------------------- $8,308 $6,387 ======================
The valuation allowance relates primarily to loss limitation carryforwards and depreciation. Management believes that all other amounts will be realized. The R&D credit carryforward expires during fiscal years 2005 to 2009. - -------------------------------------------------------------------------------- Note 9. Commitments and Contingent Liabilities The Company leases certain facilities and computer-related equipment under operating leases providing for payment of fixed rentals and, in certain cases, property tax and price index increases over base-period amounts. The majority of the leases are for one to fifteen years, with options to extend the terms for up to five years beyond the original lease period. Facility and equipment rental expenses for fiscal years 1995, 1994 and 1993 were, respectively $15,438,000, $16,957,000 and $18,833,000. The amounts due in future fiscal years for the fixed terms of the leases total $119,849,000. Commitments for the five fiscal years 1996 through 2000 are, respectively, $15,947,000, $14,158,000, $12,364,000, $9,947,000 and $9,405,000. 37 REPORT OF INDEPENDENT ACCOUNTANTS Price Waterhouse LLP [LOGO APPEARS HERE] - -------------------------------------------------------------------------------- TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF LOGICON, INC. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of cash flows and of stockholders' equity present fairly, in all material respects, the financial position of Logicon, Inc. and its subsidiaries at March 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for income taxes during fiscal year 1994. /s/ Price Waterhouse LLP Price Waterhouse LLP Costa Mesa, California May 24, 1995 38 SELECTED UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL AND STOCK MARKET DATA
----------------------------------------------------------- For the Quarter Ended (unaudited) ----------------------------------------------------------- (dollars in thousands except per share data) June 30 Sept. 30 Dec. 31 March 31 - ------------------------------------------------------------------------------------------------------------------------------- Fiscal Year 1995 Revenues $75,957 $79,712 $80,900 $108,622 Gross profit 13,868 13,136 13,504 19,265 Income before taxes on income 6,774 7,532 7,817 10,692 Net income 4,005 4,454 4,726 6,324 Earnings per common share 0.56 0.62 0.67 0.90 Dividends per common share 0.08 0.08 0.08 0.08 Common stock price: High 31-1/4 33-1/8 31-1/4 34-3/8 Low 25-1/4 27-1/8 28-1/4 29-7/8 - ------------------------------------------------------------------------------------------------------------------------------- Fiscal Year 1994 Revenues $79,187 $83,186 $77,505 $80,314 Gross profit 14,258 19,687 11,450 14,656 Income before taxes on income 6,235 13,500 6,705 8,076 Net income 4,384/(1)/ 7,978/(2)/ 3,940 4,740 Earnings per common share 0.58 1.05 0.52 0.65 Dividends per common share 0.07 0.07 0.07 0.07 Common stock price: High 26 30-1/8 29-7/8 28-3/4 Low 19 21-5/8 27-1/8 25-1/8 - -------------------------------------------------------------------------------------------------------------------------------
(1) Net income for the quarter ended June 30, 1993, includes $635,000 or $.08 per share for the cumulative effect of the change in accounting for income taxes to SFAS 109. (2) Net income for the quarter ended September 30, 1993, includes $3.9 million or $.51 per share and revenues of $4 million from the settlement of two claims the Company had filed with the United States Court of Federal Claims. The common stock of Logicon, Inc. is listed on the New York Stock Exchange with the ticker symbol LGN. There were approximately 1,500 stockholder accounts of record at March 31, 1995. 39 EX-21 5 LIST OF SUBSIDIARIES Exhibit 21 LOGICON, INC. SUBSIDIARIES OF THE REGISTRANT
Country or State Subsidiary (name under which subsidiary does business): of Incorporation - ------------------------------------------------------- ---------------- Logicon Eagle Technology, Inc. Delaware Logicon Fourth Generation Technology, Inc. California Logicon Technical Services, Inc. California Logicon R&D Associates California Logicon Ultrasystems, Inc. Delaware Syscon Corporation District of Columbia Syscon Services, Inc. District of Columbia Syscon BVI, LTD British Virgin Islands Syscon Saudi Arabia, LTD Kingdom of Saudi Arabia
EX-27 6 FDS ART 5 DATED 03/31/95
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K, FY 1995 FOR THE PERIOD ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-31-1995 MAR-31-1995 31,564 9,210 64,233 0 0 115,733 34,960 25,870 152,477 44,963 0 675 0 0 106,839 152,477 341,847 345,191 282,074 312,376 0 0 0 32,815 13,306 19,509 0 0 0 19,509 2.75 2.75
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