-----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, OjiN/5dYx60wT4er/ZKnSkRVWWQBOpkH3naZky236fNHinG/JYqeDLDfTHFxc+I/ 9or1S6t6T9ASqn2xfaJqdA== 0000806388-97-000004.txt : 19970115 0000806388-97-000004.hdr.sgml : 19970115 ACCESSION NUMBER: 0000806388-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NICHOLS RESEARCH CORP /AL/ CENTRAL INDEX KEY: 0000806388 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 630713665 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15295 FILM NUMBER: 97505603 BUSINESS ADDRESS: STREET 1: 4040 MEMORIAL PKWY SOUTH CITY: HUNTSVILLE STATE: AL ZIP: 35802 BUSINESS PHONE: 2058831140 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 _____________________ FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended November 30, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From _____________ To _____________ _____________________ Nichols Research Corporation Commission File Number 0-15295 (Exact name of registrant as specified in its charter) _____________________ DELAWARE 63-0713665 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification no.) 4040 Memorial Parkway, South Huntsville, Alabama 35802-1326 (205) 883-1140 (Address, including zip code, of principal offices) _____________________ NO CHANGE (Former name, address and fiscal year if changed since last report) _____________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / /_ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. COMMON STOCK, $.01 PAR VALUE 11,600,848 SHARES OUTSTANDING ON November 30 ,1996 _____________________ ================================================================================ FORM 10-Q NICHOLS RESEARCH CORPORATION QUARTERLY REPORT FOR THE PERIOD ENDED NOVEMBER 30, 1996 INDEX Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statements of Income for the Three Months Ended November 30, 1996 and November 30, 1995 (Unaudited) Balance Sheets as of November 30, 1996 and August 31, 1996 (Unaudited) Statements of Changes in Stockholders' Equity for the Three Months Ended November 30, 1996 and November 30, 1996 (Unaudited) Statements of Cash Flows for the Three Months Ended November 30, 1996 and November 30, 1995 (Unaudited) Notes to Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signatures FORM 10-Q NICHOLS RESEARCH CORPORATION PART I - FINANCIAL INFORMATION Item 1 - Financial Statements CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended November 30, November 30, 1996 1995 ------------------------------- (amounts in thousands except share data) Revenues............................... $ 82,847 $ 49,030 Costs and expenses: Direct and allocable costs........... 72,648 41,671 General and administrative expenses.. 5,802 4,421 -------------------------------- Total costs and expenses......... 78,450 46,092 -------------------------------- Operating profit....................... 4,397 2,938 Other income (expense): Other income, principally interest... 262 272 Interest expense..................... (68) (39) Equity in earnings of unconsolidated affiliates......................... 137 - Minority interest in consolidated subsidiary......................... (120) - --------------------------------- Income before income taxes............. 4,608 3,171 Income taxes........................... 1,673 1,157 --------------------------------- Net income............................. $ 2,935 $ 2,014 ================================= Net income per common share............ $ .24 $ .20 ================================= Weighted average number of common and common equivalent shares.............. 12,193,169 9,963,457 NOTE: The Company has not declared or paid dividends in any of the periods presented. All references to the number of shares and per share amounts have been restated to reflect the effect of a three-for-two stock split effective October 21, 1996. FORM 10-Q NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) November 30, August 31, 1996 1996 ---------------------------------- (amounts in thousands) ASSETS Current assets: Cash and temporary cash investments....... $ 4,721 $ 21,419 Accounts receivable....................... 110,195 90,232 Deferred income taxes..................... 1,519 1,519 Other..................................... 2,822 2,384 ---------------------------------- Total current assets.................. 119,257 115,554 Long-term investments...................... 4,472 4,483 Property and equipment: Computers and related equipment........... 17,991 17,182 Furniture, equipment and improvements..... 7,127 6,915 Equipment-contracts....................... 5,771 5,771 ---------------------------------- 30,889 29,868 Less accumulated depreciation.............. 15,563 14,721 Net property and equipment................ 15,326 15,147 Goodwill (net of accumulated amortization.. 20,784 21,004 Other assets............................... 6,380 5,776 ---------------------------------- Total assets............................... $ 166,219 $ 161,964 ================================== NOTE: All references to the number of shares and per share amounts have been restated to reflect the effect of a three-for-two stock split effective October 21, 1996. FORM 10-Q NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) CONTINUED November 30, August 31, 1996 1996 ----------------------------------- (amounts in thousands except per share data) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable..................... $ 29,452 $ 31,032 Accrued compensation and benefits.... 10,072 9,037 Income taxes payable................. 1,873 238 Current maturities of long-term debt. 763 764 Other................................ 906 1,808 --------------------------------- Total current liabilities........ 43,066 42,879 Deferred income taxes................. 1,340 1,340 Long-term debt: Industrial development bonds......... 1,777 1,777 Long-term notes...................... 2,873 3,007 --------------------------------- Total long-term debt.............. 4,650 4,784 Minority interest in consolidated subsidiary........................... 120 - Stockholders' equity: Common stock, par value $.01 per share Authorized - 20,000,000 shares Issued - 11,769,348 and 11,651,018 shares, respectively............... 118 117 Additional paid-in capital........... 60,217 59,071 Retained earnings.................... 57,996 55,061 Less cost of treasury stock - 168,500 shares...................... (1,288) (1,288) --------------------------------- Total stockholders'equity........ 117,043 112,961 --------------------------------- Total liabilities and stockholders' equity............................... $ 166,219 $ 161,964 NOTE: All references to the number of shares and per share amounts have been restated to reflect the effect of a three-for-two stock split effective October 21, 1996. FORM 10-Q NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Additional Total Common Stock Paid-In Retained Treasury Stockholders' ------------------------------------------------------------------------- (amounts in thousands except share data) For the Three Months Ended November 30, 1996 -------------------------------------------- Balance, August 31, 1996...... 11,651,018 $117 $59,071 $55,061 $ (1,288) $ 112,961 Exercise of stock options..... 102,051 1 809 - - 810 Employee stock purchases...... 16,279 - 337 - - 337 Net income.................... - - - 2,935 - 2,935 ------------------------------------------------------------------------- Balance, November 30, 1996... 11,769,348 $118 $60,217 $57,996 $ (1,288) $ 117,043 ========================================================================= For the Three Months Ended November 30, 1995 -------------------------------------------- Balance, August 31, 1995...... 9,658,840 $ 97 $24,225 $45,669 $ (2,143) $ 67,848 Exercise of stock options..... 152,986 1 850 - - 851 Employee stock purchases...... 15,172 - 200 - - 200 Net income.................... - - - 2,014 - 2,014 ------------------------------------------------------------------------- Balance, November 30, 1995.... 9,826,998 $ 98 $25,275 $47,683 $ (2,143) $ 70,913 ========================================================================= NOTE: All references to the number of shares and per share amounts have been restated to reflect the effect of a three-for- two stock split effective October 21, 1996. FORM 10-Q NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended November 30, November 30, 1996 1995 ----------------------------- (amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................. $ 2,935 $ 2,014 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization...... 1,318 1,017 Equity in earnings of unconsolidated affiliates........ (137) - Minority interest.................. 120 - Changes in assets and liabilities net of effects of acquisitions: Accounts receivable................... (20,163) (6,817) Other assets.......................... (761) (296) Accounts payable...................... (1,580) (3,738) Accrued compensation and benefits..... 1,035 255 Income taxes payable.................. 1,635 255 Other current liabilities (902) 292 ----------------------------- Total adjustments..................... (19,435) (9,032) ----------------------------- Net cash used by operating activities........................ (16,500) (7,018) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment..... (1,021) (1,100) Payment for investment in affiliates... (189) (400) ----------------------------- Net cash used by investing activities........................ (1,210) (1,500) FORM 10-Q NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) CONTINUED For the Three Months Ended November 30, November 30, 1996 1995 ----------------------------- (amounts in thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock................................. 1,147 1,051 Payments of long-term debt............. (135) (240) ----------------------------- Net cash provided by financing activities........................ 1,012 811 ----------------------------- Net decrease in cash and temporary cash investments........................... (16,698) (7,707) Cash and temporary cash investments at beginning of period................... 21,419 17,196 ----------------------------- Cash and temporary cash investments at end of period......................... $ 4,721 $ 9,489 ============================= NON-CASH TRANSACTIONS: Adjustment to purchase price allocation............................ $ 200 $ - FORM 10-Q NICHOLS RESEARCH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) November 30, 1996 NOTE 1 - BASIS OF PRESENTATION --------------------- The condensed consolidated financial statements (and all other information in this report) have not been examined by independent auditors, but in the opinion of the Company, all adjustments, consisting of the normal recurring accruals necessary for a fair presentation of the results for the period, have been made. The condensed consolidated financial statements include the accounts of Nichols Research Corporation and its majority-owned subsidiaries and joint ventures. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's earnings in unconsolidated affiliates and joint ventures are accounted for using the equity method. NOTE 2 - STOCK SPLIT ----------- On October 9, 1996 the Board of Directors declared a three-for-two stock split which was paid to shareholders of record on October 21, 1996. The split was effected on November 4, 1996 by a stock dividend of one share for every two shares of common stock outstanding, with cash paid in lieu of fractional shares based on the stock value on record date. All references to the number of shares and per share amounts have been restated to reflect the effect of the split for all periods presented. NOTE 3 - NEW PRONOUNCEMENTS ------------------ The Company adopted Financial Accounting Standards Board Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, on September 1, 1996. The Company has reviewed long-lived assets and identifiable intangible assets used in operation of the business and concluded the assets are not impaired. If events or changes occur to indicate that an impairment does exist, an assessment of the need for an impairment write-down will be performed. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OEPRATIONS Results of Operations - --------------------- The Company is a leading provider of technical and information technology (IT) services, including information processing, systems development and systems integration. The Company provides these services to a wide range of clients, including the DOD, other federal agencies, state and local governments, healthcare and insurance organizations, and commercial enterprises. The Company's business strategy consists of three key elements: (i) maintain the Company's leadership in technology; (ii) apply the Company's technology to create solutions for new clients; and (iii) make strategic acquisitions and form alliances to expand the business of the Company and gain industry knowledge. The Company's business and financial performance are subject to risks and uncertainties, including those discussed below. The Company is organized in four strategic business units, reflecting the particular market focus of each line of business. Nichols Federal provides technical services primarily to U.S. government defense agencies. Nichols InfoFed provides information and technology services to a variety of governmental agencies. Nichols InfoTec provides information and technology services to various commercial clients, other than healthcare or insurance industry clients. Nichols SELECT provides information services to clients in the healthcare and insurance industries. For the quarter ended November 30, 1996, the percentage of total revenues attributable to the four business units were approximately 52% for Nichols Federal, 38% for Nichols InfoFed, 5% for Nichols InfoTec, and 5% for Nichols SELECT. Expansion through acquisitions is an important component of the Company's overall business strategy. The Company has successfully completed seven strategic acquisitions and alliances since September 1, 1994. The Company's continued ability to grow by acquisitions is dependent upon, and may be limited by, the availability of compatible acquisition candidates at reasonable prices, the Company's ability to fund or finance acquisitions on acceptable terms, and the Company's ability to maintain or enhance the profitability of any acquired business. As part of the Company's business strategy to enter new markets, the Company intends to pursue large systems integration contracts in both the government and commercial markets, although competition for such contracts is intense and many of the Company's competitors have greater resources than the Company. While such contracts are working capital intensive, requiring large equipment and software purchases to be funded by the Company before payment from the customer, the Company believes such contracts offer attractive revenue growth and margin expansion opportunities for the Company's range of technical expertise and capabilities. The Company's revenues and earnings may fluctuate from quarter to quarter based on such factors as the number, size and scope of projects in which the Company is engaged, the contractual terms and degree of completion of such projects, expenditures required by the Company in connection with such projects, any FORM 10-Q NICHOLS RESEARCH CORPORATION Results of Operations (continued) - --------------------------------- delays incurred in connection with such projects, employee utilization rates, the adequacy of provisions for losses, the accuracy of estimates of resources required to complete ongoing projects, and general economic conditions. Under certain contracts, the Company is required to purchase, integrate and deliver to the customer large computer processing systems and other equipment. Revenues are accrued as costs to deliver these systems are incurred and as a result, quarterly revenues will be impacted by fluctuations related to significant system integration contracts which occur on a periodic basis depending on contract terms and modifications. The Company's services are provided primarily through three types of contracts: fixed-price, time-and-materials and cost-reimbursement contracts. Fixed-price contracts require the Company to perform services under a contract at a stipulated price. Time-and-materials contracts reimburse the Company for the number of labor hours expended at an established hourly rate negotiated in the contract, plus the cost of materials incurred. Under cost- reimbursement contracts, the Company is reimbursed for all actual costs incurred in performing the contract to the extent that such costs are within the contract ceiling and allowable under the terms of the contract, plus a fee or profit. FORM 10-Q NICHOLS RESEARCH CORPORATION The following tables set forth, for the periods indicated, the percentage which certain items in the consolidated statements of income bear to consolidated revenues, and the percentage change of such items for the periods indicated: Percentage of Revenue For the Three Months Ended November 30, November 30, Percentage 1996 1995 Change ----------------------------------------- Revenues......................... 100.0% 100.0% 69.0% Costs and expenses: Direct and allocable costs...... 87.7 85.0 74.3 General and administrative expenses....................... 7.0 9.0 31.2 --------------------------- Total costs and expenses....... 94.7 94.0 70.2 --------------------------- Operating profit................. 5.3 6.0 49.6 Interest expense................. (0.1) (0.1) 74.4 Other income..................... 0.3 0.6 2.6 --------------------------- Income before income taxes....... 5.5 6.5 45.3 Income taxes..................... 2.0 2.4 44.6 --------------------------- Net income....................... 3.5% 4.1% 45.7% =========================== The table below presents contract award and backlog data for the periods indicated: Quarter Ended November 30, 1996 1995 -------------------------- (amounts in thousands) Contract award amount............ $ 21,000 $ 16,458 Backlog (with options)........... 946,783 473,727 Backlog (without options)........ 498,882 261,924 FORM 10-Q NICHOLS RESEARCH CORPORATION COMPARISON OF OPERATING RESULTS FOR FISCAL FIRST QUARTER 1997 WITH FISCAL FIRST QUARTER 1996 REVENUES. Revenues increased $33.8 million (69.0%) for the three months ended November 30, 1996 as compared to the three months ended November 30, 1995. First quarter revenues increased as a result of revenue from the HPCM contracts and the acquisition of AME completed in May 1996, but decreased as a result of the completion of the FedEx contract in 1996. OPERATING PROFIT. Operating profit increased $1.5 million (49.6%) for the three months ended November 30, 1996. Costs and expenses were 94.7% of revenues for the three months ended November 30, 1996 as compared to 94.0% for the three months ended November 30, 1995. The increase in direct and allocable costs as a percentage of revenues was primarily the result of hardware purchases under the recently awarded HPCM contracts. The increase of $1.4 million in general and administrative expenses is primarily from the amortization of goodwill as well as general and administrative expenses of AME acquired in 1996. OTHER INCOME (EXPENSE). Other income consists primarily of interest income. Substantially all available cash is invested in interest-bearing accounts or fixed income instruments. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES. Equity in earnings of unconsolidated affiliates primarily represents the Company's share of earnings from TXEN, Inc. The increase is due to increased revenues and improved profitability of TXEN for the period ended November 30, 1996. MINORITY INTEREST. Minority interest represents the majority partners share of earnings of Holland Technology Group, a joint venture. The increase is a result of the increased profitability of this venture which began in fiscal 1996. INCOME TAXES. Income taxes as a percentage of income before taxes was 36.3% for the three months ended November 30, 1996 as compared to 36.5% for the three months ended November 30, 1995. NET INCOME. Net income increased $0.9 million (45.7%) for the three months ended November 30, 1996 as compared to the three months ended November 30, 1995. The increase is the result of the reasons discussed above. FORM 10-Q NICHOLS RESEARCH CORPORATION Liquidity and Capital Resources - ------------------------------- Historically, the Company's positive cash flow from operations and available credit facilities, have provided adequate liquidity and working capital to fully fund the Company's operational needs and support the acquisition activities. Working capital was $76.2 million and $72.7 million at November 30, 1996 and 1995, respectively. Operating activities used cash of $16.5 million and $7.0 million for the three months ended November 30, 1996 and 1995, respectively. The Company realized proceeds from the sale of Common Stock of $1.1 million and $1.0 million for three months ended November 30, 1996 and 1995, respectively. The Company has a bank line of credit of $73.5 million which expires in March 1997, unless renewed. The credit agreement provides for interest at London Interbank Offered Rate plus 1.25% and a commitment fee on the unused portion of the line of credit. Outstanding borrowings are secured primarily by accounts receivable. As of November 30, 1996 there were no outstanding borrowings under the line of credit. Purchases of property and equipment were $1.0 and $1.1 million for the three months ended November 30, 1996 and 1995, respectively. In fiscal 1996, the Company was awarded the HPCM Contracts for information system development and computer system integration activities, which will require the Company to acquire substantial amounts of computer hardware as part of these integrated systems. The Company continues to actively pursue other contracts that could require the integration of significant computer equipment components. The timing of payments to suppliers and payments from customers under the Company's system integration contracts could cause cash flows from operations to fluctuate from period to period. The Company believes that its existing capital resources, together with available borrowing capacity, will be sufficient to fund operating needs, finance acquisitions of property and equipment for information technology programs and computer system integration activities, and make strategic acquisitions, if appropriate. Effects of Inflation - -------------------- Substantially all contracts awarded to the Company have been based on proposals which reflect estimated cost increases due to inflation. Historically, inflation has not had a significant impact on the Company. FORM 10-Q NICHOLS RESEARCH CORPORATION PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (b) The Company has not filed any reports on Form 8-K for the three months ended November 30, 1996. FORM 10-Q NICHOLS RESEARCH CORPORATION SIGNATURES MANAGEMENT REPRESENTATION ------------------------- The accompanying unaudited Consolidated Balance Sheets at November 30, 1996, and August 31, 1996 as well as the Consolidated Statements of Income, Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statements of Cash Flows for the three months ended November 30, 1996 and 1995, have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. January 14, 1997 Allen E. Dillard - ------------------------------- __________________________ Date Allen E. Dillard Vice President and Chief Financial Officer (Principal Finance and Accounting Officer) 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. NICHOLS RESEARCH CORPORATION January 14, 1997 By - ------------------------------- ----------------------- Date Allen E. Dillard Vice President and Chief Financial Officer (Principal Finance and Accounting Officer)
EX-27 2
5 1,000 3-MOS AUG-31-1997 NOV-30-1996 4,721 0 110,195 0 0 119,257 30,889 15,563 166,219 43,066 4,650 0 0 118 116,925 166,219 82,847 82,847 72,648 72,648 0 0 68 4,608 1,673 2,935 0 0 0 2,935 .24 .24
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