-----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, DH+q/FO3aWwVlyVAxF4atrgqtW1jpS2O9MPjsJF7D4hNx+j/1r7JpSAsS0uHxWgV HtxfcIqBo/L5r1xpJt1Pxw== 0000022989-95-000018.txt : 19951002 0000022989-95-000018.hdr.sgml : 19951002 ACCESSION NUMBER: 0000022989-95-000018 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950928 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER DATA SYSTEMS INC CENTRAL INDEX KEY: 0000022989 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 520882982 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06002 FILM NUMBER: 95577070 BUSINESS ADDRESS: STREET 1: ONE CURIE COURT CITY: ROCKVILLE STATE: MD ZIP: 20850-4389 BUSINESS PHONE: 3019217000 MAIL ADDRESS: STREET 1: ONE CURIE COURT CITY: ROCKVILLE STATE: MD ZIP: 20850-4389 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended JUNE 30, 1995 Commission file number 1-6002 COMPUTER DATA SYSTEMS, INC. (Exact name of registrant as specified in its charter) MARYLAND 52-0882982 (State or other jurisdiction (IRS Employer ID No.) of incorporation or organization) ONE CURIE COURT ROCKVILLE, MARYLAND 20850-4389 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (301) 921-7000 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.10 PER SHARE (Title of class) 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 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. ( X ) The aggregate market value of the voting stock held by non-affiliates of the Company at September 1, 1995 was $53,698,622, based on the closing price of $10.25 per share. As of that date, 5,737,842 shares of Common Stock were issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE DOCUMENT PART OF 10-K Portions of the Definitive Proxy Statement filed pursuant to Regulation 14A Part III, Items 10-13 PART I ITEM 1. BUSINESS Principal Services Rendered - --------------------------- Computer Data Systems, Inc. (the "Company"), was incorporated in the State of Maryland in 1968. The Company provides information technology services and products including system integration, software engineering/re-engineering, development and maintenance, data base support, data center management and processing services, and telecommunications engineering. The Company's products include CASE tools as well as financial and accounting, debt management, loan and mortgage processing, and biometric identification systems. The Company's 3,400 employees serve a wide array of government and private industry customers with information technology expertise, systems, and products. The Company provides information technology solutions on more than 100 current contracts from 21 office locations. The Company's operations are concentrated in two business segments. Information with respect to such business segments may be found in Note 9 to the Company's Consolidated Financial Statements. Of these business segments, the larger Professional Services Group primarily markets its expertise in software programming and network engineering to those federal government agencies that demand highly technical information technology solutions. The Company's Professional Services Group applies proven information technology to design, implement, and operate data center facilities, networks, imaging systems, interactive databases, automated biometric identification tools, and information management and reporting systems. The Company's Data Processing Support Services Group provides financial systems and services to include debt collection, pension trust fund support, loan processing, cash management, mortgage servicing, and fulfillment systems and services. In addition, this group markets the Company's proprietary software packages and CASE re-engineering tools. The group's suite of CASE tools enhances the development and maintenance of COBOL programs and increases operational reliability and maintainability. The Data Processing Support Services Group also operates a modern data center, which services the information processing requirements, both mainframe and client-server, of numerous federal and commercial clients. Data center services include the full range of associated technical support: LAN administration, system and data security, data integrity, user training, office automation support, hotline support, and courier services. Recent awards include new contracts with the Resolution Trust Corporation, the New York Higher Education Services Corporation, and the Naval Air Systems Command. In addition, the Company reached a settlement with the Department of Energy and another contractor pursuant to which the Company will continue to provide approximately 50% of the previous support levels on the new contract. In March 1995, the Company's Argentine subsidiary along with the prime contractor NetStar S.A., was awarded a contract with the Banco Social de Cordoba to automate the state-owned Quinela lottery. However, after successfully completing acceptance testing on the prototype and investing $11 million in hardware and software development in the contract, a decree was issued by the outgoing Governor of Cordoba on his last day in office effectively cancelling all work on the contract and reopening the bidding process from the initial receipt of proposals. An appeal has been made to the new Governor to reconsider the decree and reinstate the contract. The prime contractor and the Company have joined efforts to protest vigorously the cancellation of the contract. No determination as to the resolution of the contract or recovery of the costs can be made at this time. During the past year, the Company lost the reprocurements of the General Services Administration Central Zone and Department of Justice Immigration and Naturalization contracts. Each contract generated approximately $18-19 million in annual revenues. The Company completed performance on these contracts in October 1994 and September 1995, respectively. Most contracts are awarded on the basis of competitive bidding, and are generally structured as time-and-materials, cost-plus-fixed-fee, fixed- price, or unit-price contracts. Such contracts include specific objectives and performance periods ranging upwards of several years. Under time-and-materials contracts, the Company receives a fixed hourly rate intended to cover salary costs attributable to work performed under the contract, including related expenses and a specified profit margin. Under cost-plus-fixed-fee contracts, the Company is reimbursed for allowable costs and is paid a negotiated fee. Under fixed-priced and unit-priced contracts, the Company bears the risk of increased or unexpected costs and benefits if its costs are lower than estimated. Key factors in the award of such contracts have been technical expertise, past performance, and pricing. Market and Competition - ---------------------- A substantial number of companies offer information technology services and products that overlap and are competitive with those offered by the Company. These include: (1) companies that offer one or more information technology services as a main line of their business; (2) computer manufacturers who offer the same information technology services as adjunct technical support for their equipment or as separate functions; and (3) companies primarily engaged in other businesses that also outsource their information technology facilities, services and expertise. The Company has many competitors in each of the areas in which it does business. Some of its competitors are large, diversified firms having substantially greater financial resources and larger technical staffs than the Company. The primary competitive factors in the market are technical qualifications, management performance, and price. Greater emphasis on value rather than simply price considerations has been noted in recent contract awards. While the federal market for the Company's services is projected to grow 5-8% annually, increasing federal regulation, continuing competition for qualified technical personnel, and narrow profit margins are characteristic of this highly competitive industry. In recent years, the trend toward consolidation of existing contracts and an emphasis on fixed-price contracts has grown. Economic uncertainty and federal budget pressures continued to affect the marketplace in 1995. Dependence on Government Contracts - ---------------------------------- The Company's business with the federal government is subject to various risks, including the reduction or modification of contracts due to changing government needs and requirements. The Company's contracts are not subject to renegotiation of profits. In the event of termination for convenience, the Company would be reimbursed for the costs of terminating the contract. In fiscal year 1995, professional services sales to the General Services Administration and the Department of Energy were $89,117,600 (40%) and $46,160,400 (21%) respectively. Data processing support services revenues from the Department of Education was $25,642,500 (12%) in fiscal year 1995. In fiscal year 1994, professional services sales to the General Services Administration, and Department of Energy were $82,837,900 (40%) and $48,491,600 (24%), respectively. In fiscal year 1993, professional services sales to the Department of Energy, General Service Administration, and Department of Justice were $48,676,300 (27%), $72,467,400 (40%) and $19,489,000 (11%), respectively. Backlog - ------- As of June 30, 1995, the Company had a funded backlog of approximately $179,998,200 compared to $165,310,500 as of June 30, 1994. The Company expects that virtually all of the backlog will be fulfilled during the current fiscal year. Most contracts are subject to termination at the convenience of the government client. Other Matters - ------------- The Company is not materially dependent upon any raw materials for its products and holds no material patents, licenses, or franchises. However, the Company offers for license its proprietary software products: Information Engineered Financial Accounting and Reporting System (i.e. FARSTM); Debt Management and Collection System (DMCS); Cash Management System (CMS); Automated Biometric Identification System (ABIDSTM); and a suite of re-engineering tools including SCAN/COBOL, SUPERSTRUCTURE(R), RETOOL(C), COBOL-METRICS, and SLEUTH. The Company does not experience any seasonal variations in its levels of operations, and neither the Company nor its subsidiaries currently have any significant foreign operations. ITEM 2. PROPERTIES The Company owns its corporate headquarters building at One Curie Court, Rockville, Maryland. The 130,000 square foot facility is used by both business segments. The Company is a partner in a general partnership which owns a 25,000 square foot office building in California, Maryland. The building has been leased to a tenant through September 1998. In connection with certain professional services contracts, the Company leases general office space in the following locations: Huntsville and Montgomery, Alabama; Rosslyn, Virginia; Atlanta, Georgia; Fort Worth and San Antonio, Texas; Beavercreek, Ohio; Des Plaines, Illinois; Vicksburg, Mississippi; Pensacola, Florida; Kansas City, Kansas; St. Louis, Missouri; Denver, Colorado; Washington, D. C.; and Germantown, Maryland. The leases provide space ranging from 500 to 62,000 square feet and annual extension options concurrent with the Company's current contract performance periods. The Company leases a warehouse in Elkridge, Maryland for a fulfillment contract. The 100,000 square foot facility is leased through September 1995, the completion date of the contract. In the opinion of management, the Company's current space is adequate for its operating needs. ITEM 3. LEGAL PROCEEDINGS The Company is party to various legal proceedings arising in the normal course of its business. Management of the Company does not believe that the outcome of any of these proceedings will have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock, par value $.10 per share ("Common Stock") is publicly traded on The Nasdaq Stock Market's National Market ("Nasdaq") and is quoted under the symbol "CDSI." As of September 1, 1995, there were approximately 733 record holders of Common Stock. The number of record holders was determined from the records of the Company's transfer agent and does not include beneficial owners of Common Stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies. The Company estimates that there are approximately 3,000 stockholders. The following table sets forth the high and low sales prices on the Nasdaq for the Common Stock and dividends per share paid for fiscal years 1994 and 1995. On July 29, 1993, the Company declared a two-for-one stock split of its Common Stock effected as a 100% stock dividend to stockholders of record on August 23, 1993. The per share amounts and prices shown are on a post-split basis.
1994 - 1995 1993 - 1994 DIVIDENDS PER SHARE ----------- ----------- ------------------- Quarter High Low High Low 1995 1994 - ------- ---- --- ---- --- ---- ---- First $14 1/4 $10 3/4 $14 1/2 $ 8 3/4 $ .05 $ .04 Second 12 1/2 8 3/4 19 1/2 11 3/4 Third 10 1/2 8 1/2 24 16 3/4 .05 .05 Fourth 11 1/4 9 1/2 21 3/4 11 3/4
The Company has paid semi-annual dividends since 1976. The payment and amount of any future dividends will necessarily depend upon the existing conditions, including the Company's earnings, financial condition, working capital requirements, and other factors. ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991 ---- ---- ---- ---- Revenues $220,667,000 $205,923,300 $180,958,500 $141,698,600 $129,660,900 Costs & expenses 207,903,800 193,706,500 172,245,800 136,296,900 125,281,700 ----------- ----------- ----------- ----------- ----------- Income from operations 12,763,200 12,216,800 8,712,700 5,401,700 4,379,200 Interest and other income, net 420,000 290,400 71,000 198,200 15,300 ----------- ----------- ----------- ----------- ----------- Income before income taxes 13,183,200 12,507,200 8,783,700 5,599,900 4,394,500 Provision for income taxes 5,132,300 4,777,800 3,276,300 2,088,800 951,200 ----------- ----------- ----------- ----------- ----------- Net Income $ 8,050,900 $ 7,729,400 $ 5,507,400 $ 3,511,100 $ 3,443,300 =========== =========== =========== =========== =========== Net Incom per Common Share $ 1.36 $ 1.31 $ .97 $ .64 $ .63 Dividends per Common Share $ .10 $ .09 $ .08 $ .075 $.07 Total assets $ 84,923,000 $ 77,295,900 $ 68,189,300 $ 57,665,800 $ 52,356,300 Long-term debt $ 4,533,300 $ 6,133,300 $ 10,905,200 $ 10,958,700
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1995 Compared With 1994 - ----------------------- Revenues in fiscal year 1995 increased approximately 7% from 1994. The increase resulted primarily from the Data Processing Support Services Group's Department of Education contract and growth on several contracts in the Professional Services Group. Data Processing Support Services Group revenues grew 70% primarily as a result of $14 million growth in the Department of Education contract. The expiration of two large Professional Services Group contracts during 1994 and the reduced contract scope resulting from the settlement of the Department of Energy contract protest partially offset the increase in revenues. In fiscal year 1995, Professional Services accounted for 80% of consolidated revenues and 89% of income from operations. Data Processing Support Services accounted for 20% of consolidated revenues and 11% of income from operations for the year. Costs and expenses increased at approximately the same rate as the growth in revenues. Costs which contributed to the increase in expenses included corporate investments in software development, marketing initiatives, and continuing development of Centers of Expertise. Increases in expenses were mitigated by cost reduction efforts which included reduced interest expense resulting from the repayment of the note payable ($370,600) and operating efficiencies realized on the expanding contract base. Income from operations was $12,763,200 compared to $12,216,800 in the prior period. Operating margins decreased to 5.7% from 5.9%. Lower margins in the initial phases of new contracts in the Data Processing Support Services Group and the corporate investments noted above contributed to the decline in operating margins. Interest and other income, net increased by $129,600, principally due to a $115,000 gain on the unwinding of an interest rate swap associated with the note payable, prepaid in September 1994. The provision for income taxes increased due to higher operating income before income taxes and an increase from 38.2% to 38.9% in federal and state tax rates. Net income increased by $321,500 due to improved operating results. 1994 Compared With 1993 - ----------------------- Revenues in fiscal year 1994 increased approximately 14% from 1993. The increase resulted primarily from new contracts in the Professional Services and Data Processing Support Services Groups and increased funding on several major contracts in the Professional Services Group. The increase was tempered by the loss of the General Services Administration Eastern Zone contract ($12 million annual revenues), which expired in March 1994. Data Processing Support Services Group revenues grew 45% as the new Department of Education contract more than offset reduced licensing and mainframe processing services. In fiscal year 1994, Professional Services accounted for 87% of consolidated revenues and 85% of income from operations. Data Processing Support Services accounted for 13% of consolidated revenues and 15% of income from operations for the year. Costs and expenses increased approximately 12%, a lower rate than the increase in revenues. This resulted from operating efficiencies realized as the Company's business base expanded, higher margins on new contracts replacing previous contracts, and a $732,100 savings in interest expense charged to other general and administrative expenses due to the April 1993 refinancing of the headquarters building mortgage. The positive effects were offset in part by increased bid and proposal expenses, legal costs associated with the Department of Energy bid protest, and software development costs of $600,000. Income from operations was $12,216,800 compared to $8,712,700 in the prior period. Operating margins improved to 5.9% from 4.8%. The improvement is attributable to higher margins on new contracts and operating efficiencies. Interest and other income, net increased by $219,400 due to higher available investment balances, reduced line of credit borrowings, and investment gains. The provision for income taxes increased due to higher operating income and higher federal and state tax rates. Net income increased by $2,222,000 due to the improved operating results. 1993 Compared With 1992 - ----------------------- Revenues in fiscal year 1993 increased approximately 28% over the prior year. The increase resulted primarily from the award of new contracts from the General Services Administration and modest expansion of staffing on existing contracts in the Professional Services Group. Data Processing Support Services Group revenues declined 14% due to reduced licensing and product sales and mainframe processing services. In fiscal year 1993, Professional Services accounted for 90% of consolidated revenues and 94% of income from operations. Data Processing Support Services accounted for 10% of consolidated revenues and 6% of income from operations for the year. Costs and expenses increased approximately 26% over the prior year. The increase was due to expanded staffing levels on government contracts and related contracts costs, offset in part by reduced interest expense charged to other general and administrative expenses due to refinancing of the headquarters building mortgage. Income from operations was $8,712,700 compared to $5,401,700 in the prior period. Income from operations increased to 4.8% from 3.8% of revenues. The increase was attributable to improvement in operating margins on new and recompeted contracts in the Professional Services Group, offset in part by the 77% decline in operating income in the Data Processing Support Services Group. The decline resulted from a $750,000 writedown of proprietary software products, approximately $250,000 in software development costs, and lower margins on the reduced processing levels. Interest and other income, net decreased by $127,200 due to lower interest rates on smaller investment balances during the year and a $28,200 increase in interest expense due to higher borrowings on the Company's line of credit to fund working capital requirements. The provision for income taxes increased due to higher operating income. Net income increased by $1,996,300 due to the improvement in operating results. Liquidity - --------- The Company's working capital increased by $83,300 to $26,013,800 at June 30, 1995. The increase was attributable to additional income retained after dividends paid of $571,600 offset by capital expenditures of approximately $7 million including $4.3 million for the Argentina contract. As the Company bids larger, more complex contracts in both the government and commercial markets, capital expenditures may be required that are not directly reimbursable. Such commitments and other working capital requirements are expected to be met with internally generated funds. In addition, the Company has available its bank line of credit facilities. The eventual resolution of the canceled Argentina contract may have an effect on the future financial position and results of operations of the Company. However, the outcome of this matter cannot be determined at this time. At June 30, 1995 the Company had invested $4.3 million, primarily in equipment and had total additional commitments of approximately $6.7 million. Successful rewins of incumbent contracts is an integral part of the Company's long term growth. The Company has experienced a higher level of losses on incumbent recompetitions in the past 18 months. The Company is continuing to invest in its business development, marketing, and proposal resources to address the recent incumbent losses. Capital Resources - ----------------- Capital expenditures in fiscal year 1995 were approximately $7,000,000 for data processing equipment and software and were funded internally. Capital expenditures for fiscal year 1996 are expected to approximate $9,500,000, including approximately $6,700,000 committed on the Argentina contract and are anticipated to be funded from internally generated working capital and existing credit facilities. Effects Of Inflation - -------------------- The majority of the Company's contracts provide for annual adjustments on prices. Increases in revenues are primarily the result of increased levels of service and product sales rather than price increases. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Page Report of Independent Auditors Report of Independent Accountants Consolidated Statements of Operations for the years ended June 30, 1995, 1994 and 1993 Consolidated Balance Sheets as of June 30, 1995 and 1994 Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1994 and 1993 Consolidated Statements of Changes in Stockholders' Equity for the years ended June 30, 1995, 1994 and 1993 Notes to Consolidated Financial Statements for the years ended June 30, 1995, 1994 and 1993 Report of Independent Auditors To the Board of Directors and Stockholders of Computer Data Systems, Inc. We have audited the accompanying consolidated balance sheets of Computer Data Systems, Inc. and its subsidiaries, as of June 30, 1995 and 1994 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended. 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. The accompanying consolidated statements of operations, changes in stockholders' equity and cash flows for the year ended June 30, 1993, were audited by other auditors whose report dated July 29, 1993, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 1995 and 1994 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Computer Data Systems, Inc. and its subsidiaries at June 30, 1995 and 1994, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. As discussed in Note 8 to the consolidated financial statements, in 1994, the Company changed its method of accounting for income taxes to conform with Statement of Accounting Standards No. 109. /s/ Ernst & Young LLP Washington, D.C. July 26, 1995 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Computer Data Systems, Inc. Rockville, MD 20850 We have audited the accompanying consolidated statements of operations, changes in stockholders' equity and cash flows of Computer Data Systems, Inc. and its subsidiary for the year ended June 30, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows for the year ended June 30, 1993 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Washington, D.C. July 29, 1993
COMPUTER DATA SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended June 30 ------------------- 1995 1994 1993 ---- ---- ---- Revenues $220,667,000 $205,923,300 $180,958,500 Costs and Expenses: Salaries, wages and benefits 138,758,200 141,577,500 124,638,400 Subcontractors 47,469,900 31,791,900 26,237,200 Travel, relocation, and subsistence 2,600,500 2,293,200 1,940,200 Rental of space and equipment 4,058,000 3,295,100 2,800,200 Depreciation and amortization 2,937,500 2,089,400 2,981,300 Other operating and administrative costs 12,079,700 12,659,400 13,648,500 ----------- ----------- ----------- 207,903,800 193,706,500 172,245,800 ----------- ----------- ----------- Income from operations 12,763,200 12,216,800 8,712,700 Interest and other income, net 420,000 290,400 71,000 Income before income taxes 13,183,200 12,507,200 8,783,700 Provision for income taxes Current 4,678,300 4,946,100 3,670,400 Deferred 454,000 (168,300) (394,100) ----------- ----------- ----------- 5,132,300 4,777,800 3,276,300 Net Income $ 8,050,900 $ 7,729,400 $ 5,507,400 =========== =========== =========== Net Income per Common Share $ 1.36 $ 1.31 $ .97 =========== =========== =========== See notes to consolidated financial statements.
COMPUTER DATA SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS June 30 1995 ------- 1994 ---- ---- ASSETS Current Assets: Cash and cash equivalents $ 1,237,000 $ 8,182,100 Trade accounts receivable 52,236,900 42,197,400 Deferred income taxes 456,600 738,700 Income tax refunds receivable 151,400 188,700 Prepaid expenses and deposits 1,948,300 1,271,100 ---------- ---------- Total Current Assets 56,030,200 52,578,000 Long-term investments 1,584,800 1,303,600 Land, building, and equipment 26,452,900 22,649,500 Other assets 855,100 764,800 ---------- ---------- Total Assets $84,923,000 $77,295,900 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $15,652,600 $12,312,000 Accrued wages and related benefits 14,363,800 12,735,500 Note payable 1,600,000 ---------- ---------- Total Current Liabilities 30,016,400 26,647,500 ---------- ---------- Note payable 4,533,300 Deferred compensation 4,245,500 3,414,200 Deferred income taxes 599,500 427,800 Stockholders' Equity Common stock, par value $.10; 30,000,000 shares authorized; 5,737,842 shares outstanding in 1995 and 5,689,919 shares in 1994 573,800 569,000 Capital in excess of par value 6,014,500 5,564,200 Retained earnings 43,473,300 36,139,900 ---------- ---------- Total Stockholders' Equity 50,061,600 42,273,100 ---------- ---------- Commitments and contingencies (Note 10) Total Liabilities and Stockholders' Equity $84,923,000 $77,295,900 ========== ========== See notes to consolidated financial statements.
COMPUTER DATA SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended June 30 ------------------- 1995 1994 1993 ---- ---- ---- Net Income $ 8,050,900 $ 7,729,400 $ 5,507,400 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 2,937,500 2,089,400 2,981,300 Deferred income taxes 454,000 (168,300) (394,100) Deferred compensation 849,100 682,200 625,500 Other (121,800) (52,600) (112,100) Net cash provided by (used in) changes in operating assets and liabilities: Accounts receivable (10,002,200) 3,498,300 (14,586,100) Prepaid expenses and deposits (677,400) 104,200 (203,400) Accounts payable and accrued liabilities 3,326,200 1,352,000 6,001,400 Accrued wages and related benefits 1,628,300 461,500 1,446,800 ---------- ---------- ---------- Net cash provided by operating activities 6,444,600 15,696,100 1,266,700 ---------- ---------- ---------- Cash flows from investing activities: Capital expenditures (6,982,800) (6,101,400) (1,926,800) Proceeds from sale of equipment 207,100 23,800 28,300 Purchase of long-term investments (166,800) (165,000) Other (33,700) (148,400) (10,600) ---------- ---------- ---------- Net cash used in investing activities (6,976,200) (6,391,000) (1,909,100) ---------- ---------- ---------- Cash flows from financing activities: Payments on notes payable (7,633,300) (1,600,000) (11,223,900) Borrowings on note payable 1,500,000 8,000,000 Cash dividends (571,600) (506,800) (440,800) Exercise of stock options 309,200 951,200 747,600 Payment of deferred compensation (17,800) (68,600) (19,600) ---------- ---------- ---------- Net cash used in financing activities (6,413,500) (1,224,200) (2,936,700) ---------- ---------- ---------- Net (decrease) increase in cash and cash equivalents (6,945,100) 8,080,900 (3,579,100) Cash and cash equivalents at beginning of year 8,182,100 101,200 3,680,300 Cash and cash equivalents at end of year $ 1,237,000 $ 8,182,100 $ 101,200 ========== ========== ========== Supplemental cash flow information: Interest paid $ 95,100 $ 448,500 $ 1,343,100 Income taxes paid $ 4,513,100 $ 4,627,200 $ 3,234,600 See notes to consolidated financial statements.
COMPUTER DATA SYSTEMS, INC. Consolidated Statements of Changes in Stockholders' Equity Capital in Common Stock Excess of Retained Shares Amount Par Value Earnings Total ------ ------ ---------- -------- ----- Balance at June 30, 1992 2,726,760 $272,700 $3,736,500 $24,275,900 $28,285,100 Exercise of stock options, net 58,179 5,800 686,400 (66,200) 626,000 Tax benefit arising from exercise of non- qualified stock options 121,600 121,600 Cash dividends (440,800) (440,800) Stock spilt effected in form of 100% dividend 2,784,939 278,500 (278,500) Net income for the year 5,507,400 5,507,400 Balance at June 30, 1993 5,569,878 557,000 4,266,000 29,276,300 34,099,300 Exercise of stock options, net 120,041 12,000 926,600 (359,000) 579,600 Tax benefit arising from exercise of non- qualified stock options 371,600 371,600 Cash dividends (506,800) (506,800) Net income for the year 7,729,400 7,729,400 Balance at June 30, 1994 5,689,919 569,000 5,564,200 36,139,900 42,273,100 Exercise of stock options, net 47,923 4,800 318,100 (145,900) 177,000 Tax benefit arising from exercise of non- qualified stock options 132,200 132,200 Cash dividends (571,600) (571,600) Net income for the year 8,050,900 8,050,900 Balance at June 30, 1995 5,737,842 $573,800 $6,014,500 $43,473,300 $50,061,600 See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1995, 1994, and 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidtion. The consolidated financial statements include the accounts of Computer Data Systems, Inc. and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. Revenue Recognition. Revenues on time and material contracts are recorded at the contractual rates as the labor hours and direct expenses are incurred. Revenues on cost-type contracts are recorded as reimbursable costs are incurred. Revenues on fixed-price contracts are recorded on the percentage of completion basis, determined by the ratio of total incurred costs to anticipated total costs of the project. Revenues on unit-price contracts are recorded at contractual selling prices of work completed and accepted by the customer. Contract award fees are recorded based on estimated current performance levels and historical experience. Revenues on equipment and software sales are recorded when the units are delivered and installed. Immediate recognition is made of any anticipated losses. Depreciation and Amortization. Furniture, equipment, and leasehold improvements are recorded at cost and are depreciated over their estimated useful lives on the straight-line basis. Building and improvements are depreciated over a useful life of forty years. The useful lives of furniture and equipment range from five to ten years. Investments. Cash equivalents are carried at cost that approximated market. Deferred annuity contracts included in long-term investments are carried at cost plus accrued interest. Income Taxes. Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109 changed the computation of deferred income taxes from a deferral to a liability method. Under the liability method, deferred taxes are based on timing differences between financial statement and income tax purposes, using the enacted tax rates in effect during the years in which the differences are expected to reverse. Previously, under the deferral method, deferred income taxes were provided using the rates in effect when the timing differences occurred. Net Income Per Common Share. Net income per share of common stock is based on the weighted average number of common and common stock equivalent shares outstanding during each year. Common stock equivalent shares include the number of shares issuable upon exercise of outstanding stock options, reduced by the number of shares that could have been repurchased with the proceeds of such options. Statements of Cash Flows. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Reclassifications. Certain reclassifications have been made to prior year amounts to conform to current year classifications. 2. TRADE ACCOUNTS RECEIVABLE Trade accounts receivable contain no allowance for doubtful accounts. The components of trade accounts receivable are as follows:
June 30, 1995 June 30, 1994 ------------- ------------- U.S. Government $ 50,693,600 $ 40,901,200 Commercial 1,543,300 1,296,200 ----------- ----------- $ 52,236,900 $ 42,197,400 =========== ===========
Trade accounts receivable include unbilled costs and accrued profits on contracts as follows:
June 30, 1995 June 30, 1994 ------------- ------------- Excess of actual indirect costs over amounts currently billable under cost reimbursable contracts $ 869,200 $ 578,600 Contract retainages not currently billable 364,000 290,300 Fixed price work not currently billable 6,856,600 3,974,100 ----------- ---------- $ 8,089,800 $ 4,843,000 ========== ==========
To the extent not billable at June 30, 1995 and 1994, unbilled costs and accrued profits above are billable upon delivery or acceptance of services, upon receipt of contract funding, or upon contract completion. Of the above unbilled costs and accrued profits at June 30, 1995, approximately $1,218,600 are not expected to be billed and collected within one year. 3. LAND, BUILDING, AND EQUIPMENT June 30, 1995 June 30, 1994 ------------- ------------- Land $ 2,200,000 $ 2,200,000 Furniture 12,921,000 9,143,000 Computer equipment and software 13,900,000 12,012,300 Building and improvements 15,132,000 14,970,500 ---------- ---------- 44,153,000 38,325,800 Less accumulated depreciation and amortization (17,700,100) (15,676,300) ---------- ---------- $26,452,900 $22,649,500 ========== ========== 4. OTHER ASSETS The Company maintains a program to provide senior executives with additional life insurance coverage, supplementing the coverage available under the Company's group insurance plan. Under the program, officers participate with the Company in the payment of premiums. The Company has an interest in such policies to the extent of its premium payments. 5. NOTE PAYABLE In September 1994, the Company repaid $6,133,000, the balance of an unsecured, five-year amortizing term loan at an interest rate of LIBOR plus 140 basis points. Interest expense on the note for 1995, 1994, and 1993 of $61,600; $432,200; and $1,164,300, respectively, is included in other operating and administrative costs. The Company has an $8 million, three-year revolving line of credit and a $14 million demand facility. Interest rates on these unsecured facilities are at LIBOR plus 110-120 basis points. Interest expense on the Company's line of credit facilities was $1,600, $3,200, and $30,300 in 1995, 1994, and 1993, respectively. Such interest expense is included in interest and other income, net. 6. STOCK OPTIONS The Company has granted incentive and non-qualified stock options to certain employees and non-employee directors under the 1982 plan, which expired in 1992. The employee options are exercisable in cumulative annual installments after one year and before the end of the fourth year from date of grant. The non-employee director options become exercisable in annual installments over a five-year period. At June 30, 1995, options to purchase 10,002 shares are exercisable. The following table summarizes the changes in the number of common shares under the 1982 option plan during fiscal years 1995, 1994, and 1993.
Number Per Share 1982 Plan of Shares Option Price - --------- --------- ------------ Outstanding Balance at June 30, 1992 396,400 $4.32 - $7.69 Exercised (101,764) 4.32 - 7.69 Expired (104,800) 5.50 - 7.44 ------- ------------ Outstanding Balance at June 30, 1993 189,836 4.88 - 7.69 Exercised (117,734) 4.88 - 7.69 Expired (29,700) 4.88 - 7.69 ------- ------------ Outstanding Balance at June 30, 1994 42,402 4.88 - 5.50 Exercised (32,400) 5.50 ------- ------------ Outstanding Balance at June 30, 1995 10,002 $ 4.88 ======= ============
In November 1991, the stockholders approved a long-term incentive plan that provides for the granting of incentive awards to various employees and officers of the Company. The plan also provides for the annual grant of non-qualified options for 1,500 shares to each of the non-employee directors. The employee options are exercisable in cumulative annual installments after one year and before the end of the fifth year. The non-employee options become exercisable after one year and must be exercised before the end of the fifth year. At June 30, 1995, options to purchase 172,780 shares are exercisable. The following table summarizes the changes in the number of common shares under the 1991 option plan during fiscal years 1995, 1994, and 1993.
Number Per Share 1991 Plan of Shares Option Price - --------- --------- ------------ Outstanding Balance at June 30, 1992 151,600 $ 4.19 Granted 167,000 5.63 - 9.50 Exercised (14,600) 4.19 Expired (5,850) 4.19 - 9.50 ------- ------------ Outstanding Balance at June 30, 1993 298,150 4.19 - 9.50 Granted 178,400 8.75 Exercised (35,983) 4.19 - 5.75 Expired (12,300) 4.19 - 9.50 ------- -------------- Outstanding Balance at June 30, 1994 428,267 4.19 - 8.75 Granted 144,900 11.50 - 14.13 Exercised (29,600) 4.19 - 8.75 Expired (6,000) 8.75 - 14.13 ------- -------------- Outstanding Balance at June 30, 1995 537,567 $ 4.19 - $14.13 ======= ==============
Proceeds from the exercise of options are credited to the capital accounts in the year the options are exercised. The Company received 14,077, 41,676, and 8,006 shares in payment for the exercise of 31,200, 61,200, and 10,500 shares under option during the years ended June 30, 1995, 1994, and 1993, respectively. 7. EMPLOYEE INCENTIVE PLANS The Company has incentive compensation plans for officers and certain key employees. The incentive compensation plans' formulas are reviewed and approved annually by the Board of Directors. Operations were charged $2,546,600, $2,496,600, and $2,000,300 to fund the incentive compensation plans for the years ended June 30, 1995, 1994, and 1993, respectively. Under the terms of the incentive compensation plans, officers may elect to defer payment of all or a portion of the amount awarded under the plan until retirement or termination of employment with the Company. The deferred amounts earn interest, compounded quarterly at the greater of the current 13- week Treasury bill rate effective the beginning of each quarter, or 7%. The Company has defined contribution retirement plans for eligible employees. Contributions to the plans are discretionary as determined by the Board of Directors. Operations were charged $1,974,500, $2,083,300, and $1,196,400 to fund the plans in 1995, 1994, and 1993, respectively. Under terms of the plans, contributions for the benefit of certain long-term employees are made to a non- qualified supplemental deferred retirement account. 8. PROVISION FOR INCOME TAXES The impact of adopting SFAS 109 on the Company's earnings and financial position was not material. The fiscal year 1993 financial statements have not been restated to apply the provisions of SFAS 109. 1995 1994 1993 ---- ---- ---- Federal income taxes: Current $4,210,500 $4,178,000 $3,178,400 Deferred 408,600 (150,600) (341,300) --------- --------- --------- Total federal income taxes 4,619,100 4,027,400 2,837,100 --------- --------- --------- State income taxes: Current 467,800 768,100 492,000 Deferred 45,400 (17,700) (52,800) --------- --------- --------- Total state income taxes 513,200 750,400 439,200 --------- --------- --------- Total income taxes provided $5,132,300 $4,777,800 $3,276,300 ========= ========= ========= The difference between the tax provision and the amount computed by applying the federal statutory income tax rate to income before income taxes is as follows:
1995 1994 1993 ---- ---- ---- Income tax computed at federal statutory rate $4,610,300 $4,274,900 $2,986,500 Add: State income tax, net of federal tax benefit 522,000 502,900 289,800 --------- --------- --------- Total income taxes $5,132,300 $4,777,800 $3,276,300 --------- --------- --------- Effective tax rate 38.9% 38.2% 37.3% ========= ========= =========
Deferred tax assets and liabilities on the balance sheets reflect the net tax effect of temporary differences between carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. The Company believes a valuation allowance is not required. The components of the Company's deferred tax assets and liabilities at June 30, 1995 and 1994 are as follows: Deferred Tax Assets (Liabilities) --------------------------------- 1995 1994 ---- ---- Deferred compensation $1,613,300 $1,297,400 Depreciation and amortization (1,958,700) (1,492,200) Annuity interest (381,200) (362,500) Accrued vacation benefits 674,200 710,100 Other (90,500) 158,100 --------- --------- Total deferred taxes, net $ (142,900) $ 310,900 ========= ========= 9. BUSINESS SEGMENT INFORMATION The Company operates in two business segments: professional services and data processing support services. Professional services encompass consulting, systems development, and programming. Data processing support services include a variety of activities primarily concerned with the processing of data for customers who require computer-based support services and equipment and software sales. Services range from the complete processing and preparation of reports from data supplied by customers, including related programming support, to individual specialized services such as data entry. Financial information by business segment for the years ended June 30 is summarized as follows:
1995 1994 1993 ---- ---- ---- Revenues: Professional services $175,851,500 $179,519,200 $162,671,500 Data processing support services 54,879,000 34,683,800 25,075,900 Intersegment (10,063,500) (8,279,700) (6,788,900) ----------- ----------- ----------- Total Revenues $220,667,000 $205,923,300 $180,958,500 Income from operations: Professional services $ 11,381,500 $ 10,332,700 $ 8,225,800 Data processing support services 1,381,700 1,884,100 486,900 ----------- ----------- ----------- 12,763,200 12,216,800 8,712,700 Interest and other income, net 420,000 290,400 71,000 ----------- ----------- ----------- Income Before Income Taxes $ 13,183,200 $ 12,507,200 $ 8,783,700 =========== =========== =========== Identifiable assets: Professional services $ 42,293,200 $ 34,959,900 $ 45,548,000 Data processing support services 27,809,700 18,894,400 10,539,700 Corporate assets 14,820,100 23,441,600 12,101,600 ----------- ----------- ----------- Total Assets $ 84,923,000 $ 77,295,900 $ 68,189,300 =========== =========== =========== Depreciation and amortization expense: Professional services $ 86,000 $ 27,000 $ 83,200 Data processing support services $ 2,165,800 $ 1,405,400 $ 2,300,600 Corporate assets $ 685,700 $ 657,000 $ 597,500 Capital expenditures: Professional services $ 3,472,800 $ 120,800 $ 129,200 Data processing support services $ 2,882,800 $ 5,393,200 $ 1 ,603,200 Corporate assets $ 627,200 $ 587,400 $ 194,400
For the years ended June 30, 1995, 1994, and 1993, substantially all professional services revenues and 89%, 81%, and 54%, respectively, of data processing support services revenues were derived from federal government agencies. Professional services revenues from two government agencies under various contracts were $89,117,600 and $46,160,400 in 1995. Data processing support services revenues from one government agency were $25,642,500 in 1995. Professional services revenues from individual government agencies under various contracts were $82,837,900, and $48,491,600 in 1994 and $48,674,300, $72,467,400, and $19,489,000 in 1993. No other customers account for 10% or more of total revenues. Intersegment revenues represent primarily unit price costs billed for general corporate purposes. 10. COMMITMENTS AND CONTINGENCIES The Company leases office and warehouse space and equipment under agreements that provide for minimum aggregate rentals through 1998 as follows: Fiscal Year Minimum Aggregate Rentals ---------- ------------------------- 1996 $1,088,900 1997 342,900 1998 48,900 In addition, the office space leases provide for escalation and pass-through of increases in operating expenses and renewal options. Government contracts are subject to review and audit by various governmental authorities in the normal course of the Company's business. Cost audits have been completed through fiscal 1991. In management's opinion, any such reviews and the results of cost audits for subsequent fiscal years will not have a material effect on the Company's financial position. The Company is a party to various legal proceedings arising in the normal course of business. Management believes that the outcome of these proceedings will not have a material adverse effect on the Company. 11. SUBSEQUENT EVENTS In July 1995, the Company's Argentine subsidiary, as subcontractor, received notification of cancellation of a contract with an Argentine government-owned bank to provide systems integration support for the automation of a lottery game. The Company has incurred and capitalized costs of approximately $4.3 million at June 30, 1995 included in land, building, and equipment on the balance sheet. In addition to the incurred and capitalized costs at June 30, 1995, the Company has total irrevocable commitments of approximately $6.7 million in connection with the contract. Approximately $1.8 million of the $6.7 million are letters of credit which have been issued for equipment purchases and would reduce the availability of the Company's lines of credit. The prime contractor and the Company have joined efforts to protest vigorously the cancellation of the contract. No determination as to the resolution of the contract or recovery of the costs can be made at this time. 12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Income Before Net Net Income Revenues Income Taxes Income Per Share -------- ------------- ------ ---------- 1994 - 1995 September 30 $54,230,900 $2,762,100 $1,674,600 $.28 December 31 51,968,400 2,362,400 1,426,600 .24 March 31 57,774,600 3,621,700 2,235,900 .38 June 30 56,693,100 4,437,000 2,713,800 .46 1993 - 1994 September 30 $51,388,200 $2,884,500 $1,810,200 $.31 December 31 48,938,500 2,529,000 1,584,100 .27 March 31 53,531,900 3,426,500 2,117,000 .35 June 30 52,064,700 3,667,200 2,218,100 .38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS Information called for by this Item is set forth under the captions "Item 1: Election of Directors," "Executive Officers," and "Other Matters" in the Company's definitive proxy statement filed pursuant to Regulation 14A, which information is hereby incorporated by reference and made a part hereof. ITEM 11. EXECUTIVE COMPENSATION Information called for by this Item is set forth under the captions "Compensation of Directors," "Summary Compensation Table," "Options Grants in Last Fiscal Year," "Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values," and "Five-Year Stockholder Return Comparison" in the Company's definitive proxy statement filed pursuant to Regulation 14A, which information is hereby incorporated by reference and made a part hereof. ITEM 12. SECURITY OWNERSHIP OF MANAGEMENT Information called for by this Item is set forth under the captions "Information With Respect to Certain Stockholders" and "Securities Ownership of Directors and Executive Officers" in the Company's definitive proxy statement filed pursuant to Regulation 14A, which information is hereby incorporated by reference and made a part hereof. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K (a) Index to Consolidated Financial Statements and Schedules Data submitted herewith under Item 8: Consolidated Statements of Operations for the years ended June 30, 1995, 1994 and 1993 Consolidated Balance Sheets as of June 30, 1995 and 1994 Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1994 and 1993 Consolidated Statements of Changes in Stockholders' Equity for the years ended June 30, 1995, 1994 and 1993 Notes to Consolidated Financial Statements for the years ended June 30, 1995, 1994 and 1993 Report of Independent Auditors Report of Independent Accountants (b) Reports on Form 8-K None. (c) Exhibits 3.1 Restated Articles of Incorporation of the Company, as amended, included as an exhibit to the Company's Form 10-Q Quarterly Report for the three months ended December 31, 1988 filed February 14, 1989 are incorporated herein by reference. 3.2 By-laws of the Company, as amended, included as an exhibit to the Company's Form 10-K Annual Report for the fiscal year ended June 30, 1988 filed September 14, 1988 are incorporated herein by reference. 10.1 Certificate of Limited Partnership and Limited Partnership Agreement - M/GA Fields Roads Limited Partnership included as an exhibit on Form 8 to Form 10-K filed March 1, 1989 are incorporated herein by reference. 10.2 1982 Incentive Stock Option Plan, as amended and restated, which appears as Exhibit A to the Prospectus in Registration Statement No. 33-27300 is incorporated herein by reference. 10.3 1991 Long-Term Incentive Plan, as amended and restated as of July 12, 1994, included as an exhibit to the Company's Form 10-K Annual Report for the fiscal year ended June 30, 1994, filed September 28, 1994, is incorporated herein by reference. 10.4 Incentive Compensation Plan, restated as of July 1, 1994, included as an exhibit to the Company's Form 10-K Annual Report for the fiscal year ended June 30, 1994, filed September 28, 1994, is incorporated herein by reference. 10.5 U.S. Department of Education Contract No. PM94017001 (portions of which are subject to an Order for Confidential Treatment pursuant to Rule 24b-2) included as an exhibit to the Form 10-Q/A filed August 24, 1994 is incorporated herein by reference. *11 Statement re: Computation of Per Share Earnings. *13 1995 Definitive Proxy Materials of the Company (portions of which are incorporated herein by reference). *21 Significant Subsidiaries of the Company. *23.1 Consent of Ernst & Young LLP, Independent Auditors. *23.2 Consent of Deloitte & Touche LLP, Independent Accountants. *27 Financial Data Schedule. ___________________ * = Filed herewith. 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, in Rockville, Maryland on September 28, 1995. Computer Data Systems, Inc. By /s/ Gordon S. Glenn _____________________ Gordon S. Glenn President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date - --------- ----- ---- /s/ Gordon S. Glenn __________________________ President and Chief Executive September 28, 1995 Gordon S. Glenn Officer; Director (Principal Executive Officer) /s/ Wyatt D. Tinsley __________________________ Executive Vice President; September 28, 1995 Wyatt D. Tinsley Director (Principal Financial and Accounting Officer) /s/ Clifford M. Kendall __________________________ Chairman of the Board of September 28, 1995 Clifford M. Kendall Directors; Director /s/ Raymond B. Hoxeng __________________________ Director September 28, 1995 Raymond B. Hoxeng /s/ Hilliard W. Paige __________________________ Director September 28, 1995 Hilliard W. Paige /s/ Elmer B. Staats __________________________ Director September 28, 1995 Elmer B. Staats /s/ Paul R. Ignatius __________________________ Director September 28, 1995 Paul R. Ignatius /s/ James A. Parker __________________________ Director September 28, 1995 James A. Parker
EXHIBIT INDEX Page Number ----------- 11 Statement re: Computation of Per Share Earnings. 13 1995 Definitive Proxy Materials of the Company (portions of which are incorporated by reference). 21 Significant Subsidiaries of the Company. 23.1 Consent of Ernst & Young LLP, Independent Auditors. 23.2 Consent of Deloitte & Touche LLP, Independent Accountants. 27 Financial Data Schedule. EX-11 2 Exhibit 11 ----------
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS YEARS ENDED JUNE 30 1995 1994 1993 ---- ---- ---- Average shares outstanding 5,735,892 5,641,740 5,519,564 Dilutive effect of stock options computed by use of treasury stock method 166,527 274,758 163,882 --------- --------- --------- Average common and common equivalent shares outstanding 5,902,419 5,916,498 5,683,446 ========= ========= ========= Computation of Earnings Per Share = Net Income divided by Average common and common equivalent shares $8,050,900 $7,729,400 $5,507,400 outstanding 5,902,419 5,916,498 5,683,446 --------- --------- --------- Earnings Per Share $ 1.36 $ 1.31 $ .97 ========= ========= =========
EX-13 3 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant(X) Filed by a Party other than the Registrant( ) Check the appropriate box: ( ) Preliminary Proxy Statement (X) Definitive Proxy Statement ( ) Definitive Additional Materials ( ) Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12 Computer Data Systems, Inc. ------------------------------------------------ (Name of Registrant as Specified In Its Charter) Payment of Filing Fee (Check the appropriate box): (X) $125 per Exchange Act Rules 0-11(c)(1)(ii),14a-6(i), or 14a-6(j)(2). ( ) $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). ( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: 4) Proposed maximum aggregate value of transaction: ( ) Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: NOTICE OF ANNUAL MEETING OF STOCKHOLDERS, OCTOBER 24, 1995 The Annual Meeting of Stockholders of Computer Data Systems, Inc. ("CDSI") will be held at the Company's headquarters located at One Curie Court, Rockville, Maryland, on October 24, 1995 at 10:00 a.m., for the following purposes: 1. To elect a Board of Directors comprised of eight persons to serve until the next Annual Meeting and until their successors are duly elected and qualified; 2. To consider approval of the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending June 30, 1996; and 3. To transact such other business as may properly come before the meeting or any adjournment thereof. Only holders of shares of Common Stock of record on the books of the Company at the close of business on September 1, 1995 will be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof. You are cordially invited to be present at the Annual Meeting. IF YOU CANNOT ATTEND, PLEASE EXECUTE AND MAIL PROMPTLY THE ENCLOSED FORM OF PROXY, USING THE ENCLOSED RETURN ENVELOPE. By Order of the Board of Directors, Donald E. Ziegler Secretary One Curie Court Rockville, Maryland 20850 September 18, 1995 COMPUTER DATA SYSTEMS, INC. ONE CURIE COURT ROCKVILLE, MARYLAND 20850 PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS OCTOBER 24, 1995 INFORMATION CONCERNING SOLICITATION AND VOTING General - ------- The following information is submitted concerning the enclosed form of proxy and the matters to be acted upon under authority thereof at the Annual Meeting of Stockholders of the Company to be held on the 24th day of October 1995, commencing at 10:00 a.m., or at any adjournment thereof, pursuant to the accompanying notice of said meeting. The Annual Meeting will be held at the Company's headquarters located at One Curie Court, Rockville, Maryland 20850. The Company intends to mail this proxy statement and accompanying proxy to all stockholders entitled to vote at the Annual Meeting on or about September 18, 1995. Solicitation and Revocability of Proxies - ---------------------------------------- The proxy is solicited on behalf of the Board of Directors of the Company. It may be revoked by the stockholder at any time prior to the exercise thereof by filing with the Secretary of the Company a written revocation or a duly executed proxy bearing a later date. The proxy shall be suspended if the stockholder shall be present at the meeting and elect to vote in person. Attendance at the meeting will not, by itself, revoke a proxy. Shares represented by proxies received will be voted. Where the stockholder has specified his choice with respect to the proposal to be acted upon, the shares will be voted in accordance with the specification so made, and in the absence thereof will be voted by the proxy holders as directed by management. The cost of solicitation of proxies will be borne by the Company. In addition to solicitation by mail, certain directors, officers and regular employees of the Company may solicit proxies by facsimile, telephone or personal interview for which they will receive no additional compensation. In addition, arrangements will be made with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation material for the meeting to beneficial owners, and the Company will reimburse them for their reasonable expenses in so doing. Voting Rights and Outstanding Shares - ------------------------------------ Only stockholders of record on the books of the Company at the close of business on September 1, 1995, will be entitled to notice of and to vote at the Annual Meeting. As of that date, there were 5,737,842 shares of Common Stock issued and outstanding and entitled to vote. Each share of Common Stock is entitled to one vote for each matter submitted to the stockholders for approval. A majority of the outstanding shares entitled to vote must be present in person or represented by proxy at the Annual Meeting to constitute a quorum. Shares represented by properly executed proxies with respect to which a vote is withheld, an abstention is indicated, or a broker does not vote ("broker nonvotes") will be treated as shares that are present and entitled to vote for purposes of determining a quorum, but those shares will not be treated as having been voted for purposes of determining the approval of any matter submitted to the stockholders for a vote. Unless otherwise noted in this proxy statement, all matters to come before the meeting identified in the accompanying notice require the affirmative vote of a majority of those shares, present in person or by proxy and voting at the Annual Meeting, to be adopted, assuming that a quorum is present. INFORMATION WITH RESPECT TO CERTAIN STOCKHOLDERS The stockholders named in the following table are those known to the Company to be the beneficial owners of 5% or more of the Company's Common Stock. Unless otherwise indicated, the information is as of July 24, 1995. For purposes of this table, and as used elsewhere in this Proxy Statement, the term "beneficial owner" means any person who, directly or indirectly, has or shares the power to vote, or to direct the voting of a security or the power to dispose, or to direct the disposition of, a security. Except as otherwise indicated, the Company believes that each individual owner listed below exercises sole voting and dispositive power over their shares. PERCENTAGE OF AMOUNT OF BENEFICIAL OUTSTANDING NAME AND ADDRESS OWNERSHIP (SHARES) COMMON STOCK - ---------------- -------------------- ------------- FMR Corporation 539,200 (1) 9.39% 82 Devonshire Street Boston, Massachusetts 02109 Calvin S. Koonce 445,106 (2) 7.76% 6229 Executive Boulevard Rockville, Maryland 20852 Clifford M. Kendall 353,934 (3) 6.16% One Curie Court Rockville, Maryland 20850 Dimensional Fund Advisors, Inc. 288,100 (4) 5.02% 1229 Ocean Avenue, Suite 650 Santa Monica, California 90401 __________________________________ (1) As reported on Schedule 13G, dated February 13, 1995. Includes sole dispositive power over 539,200 shares. FMR Corp. beneficially owns the shares through its wholly-owned subsidiary, Fidelity Management and Research Company ("Fidelity"), an investment adviser to several investment companies registered under the Investment Company Act of 1940 that own shares of CDSI (the "Fidelity Funds"). The Board of Trustees of the Fidelity Funds has the authority to vote or direct the voting of the shares under written guidelines established by the Board of Trustees of the Fidelity Funds. FMR Corp. through control of Fidelity, and each of the Fidelity Funds has sole power to dispose of shares held by the Funds. Mr. Edward C. Johnson, Chairman of FMR Corp., reported in the statement on Schedule 13G sole dispositive power with respect to the shares owned by FMR Corp. (2) As reported on Schedule 13D, dated April 27, 1992. Number of shares adjusted to reflect the August 1993, 2-for-1 stock split effected in the form of a dividend. (3) Includes 125,744 shares held by Mr. Kendall's spouse and 12,300 shares subject to acquisition by the exercise of options exercisable within 60 days. (4) As reported on Schedule 13G, dated January 30, 1995. Includes sole voting and dispositive power over 179,400 and 288,100 shares, respectively. ITEM 1: ELECTION OF DIRECTORS Nominees for Election - --------------------- Eight directors, comprising the entire membership of the Board of Directors of the Company, are to be elected at the Annual Meeting. If elected, the directors will serve until the next Annual Meeting and until their successors are duly elected and qualified. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the eight nominees shown below. Although it is not contemplated that any nominee will decline or be unable to serve as a director, in either such event, the proxies will be voted by the proxy holders for such other person as may be designated by the present Board of Directors. Each nominee for election is currently serving as a member of the Board and has previously been elected by the stockholders. The names of the nominees and certain information about them are set forth below. Except as indicated, the principal occupation for the past five years of each nominee is as listed below.
PRINCIPAL NAME OCCUPATION ADDITIONAL INFORMATION ---- ---------- ---------------------- DR. RAYMOND B. HOXENG Retired Prior to his retirement in 1982, Director since 1968 Tampa, FL Dr. Hoxeng was involved in university Age 76 and hospital administration. His earlier career was distinguished by accomplishments in industrial engineering and research. CLIFFORD M. KENDALL Chairman of From 1970 to 1991, Mr. Kendall Director since 1970 the Board served as Chief Executive Officer Age 64 of the Company of the Company. Member-Executive Committee HILLIARD W. PAIGE Retired Mr. Paige is a former President of Director since 1974 Washington, DC General Dynamics Corporation. Age 75 Mr. Paige serves as a Director of The Member- Executive, Atlantic Council of the United States, Audit/Compensation Committees Washington, D.C. ELMER B. STAATS Retired Mr. Staats is a former Comptroller Director since 1981 Washington, DC General of the United States. Mr. Age 81 Staats serves as Chairman of the Member-Executive, Financial Accounting Standards Audit/Compensation Committees Advisory Board, Washington, D.C. GORDON S. GLENN President and Mr. Glenn has served as President Director since 1988 Chief Executive and Chief Executive Officer since Age 47 Officer July 1991. From 1988 to 1991, Mr. Glenn served as President and Chief Operating Officer of the Company. WYATT D. TINSLEY Executive Mr. Tinsley serves as the Company's Director since 1988 Vice President Chief Financial Officer. Age 52 PAUL R. IGNATIUS Retired From 1987 to December 1993, Mr. Director since 1991 Washington, DC Ignatius served as the Chairman of Age 74 the Board, Logistics Management Member-Executive, Institute, Bethesda, MD. Audit/Compensation Committees JAMES A. PARKER President, Mr. Parker serves as President of Director since 1991 Jay Parker & the Lincoln Institute for Research Age 58 Associates, & Education, Inc., a non-profit Member-Executive, Washington, DC public policy organization in Audit/Compensation Committees (International Washington, D.C. Consulting Firm)
Meetings and Committees of the Board - ------------------------------------ The Company has standing Executive and Audit/Compensation Committees of the Board of Directors. The Board of Directors does not have a Nominating Committee. The Board of Directors of the Company held four meetings during the fiscal year ended June 30, 1995. All directors attended at least 75% of the aggregate number of meetings of the Board of Directors and Committees on which they served. Overall attendance at such meetings was 97%. The Executive Committee has the power and authority of the Board of Directors and meets several times during the year in months when the Board of Directors does not meet. Messrs. Kendall, Paige, Staats, Ignatius and Parker serve on the Executive Committee. In the fiscal year ended June 30, 1995, the Executive Committee met four times. The Audit/Compensation Committee makes recommendations regarding the engagement of the Company's independent auditors, reviews the arrangement and scope of the audit, considers comments made by the independent auditors with respect to the adequacy of the Company's internal accounting controls, and reviews non-audit services provided by the firm. In addition, this committee reviews and approves (or recommends to the full Board) the annual salary, bonus and other benefits of senior management of the Company; reviews and makes recommendations to the Board relating to executive compensation and plans; and establishes, and periodically reviews, the Company's policy with respect to management perquisites. The Audit/Compensation Committee also presently serves as the committee of disinterested persons who administer the Company's 1991 Long-Term Incentive Plan. Messrs. Paige, Staats, Ignatius and Parker serve on the Audit/Compensation Committee. During the fiscal year ended June 30, 1995, the Audit/Compensation Committee met four times. Compensation of Directors - ------------------------- Directors who are employees receive no additional compensation for serving as directors. In the fiscal year ended June 30, 1995, non-employee directors received the following amounts for each meeting of the Board of Directors they attended: Dr. Hoxeng received $1,600 per meeting and Messrs. Paige, Staats, Ignatius, and Parker each received $1,000. Messrs. Paige, Staats, Ignatius, and Parker also received a retainer of $12,000 each in the fiscal year ended June 30, 1995, for services rendered as members of the Executive and Audit/Compensation Committees of the Board of Directors. In July 1995, the compensation for non-employee directors was adjusted. The fees paid to Dr. Hoxeng for attendance at Board meetings was increased to $2,000 per meeting. The monthly retainer paid to Messrs. Paige, Staats, Ignatius, and Parker for serving on the Executive and Audit/Compensation Committees was increased to $1,200 per month. Pursuant to the Company's 1991 Long-Term Incentive Plan (the "Plan"), non- employee directors of the Company also are granted stock options upon being named a director and thereafter on an annual basis. In the fiscal year ended June 30, 1995, each non-employee director was granted options to purchase 1,500 shares. The options become exercisable one year after the date of grant and expire five years from the date of grant. EXECUTIVE COMPENSATION Executive Officers - ------------------ CLIFFORD M. KENDALL, age 64, has been with CDSI since its founding in 1968 and is currently the Chairman of the Board of Directors. From 1970 to 1991, Mr. Kendall served as Chief Executive Officer of the Company. GORDON S. GLENN, age 47, has been the President and Chief Executive Officer of the Company since July 1991. From 1988 to 1991, Mr. Glenn served as President and Chief Operating Officer of the Company. Mr. Glenn joined CDSI in 1971. WYATT D. TINSLEY, age 52, is currently Executive Vice President and the Company's Chief Financial Officer. Mr. Tinsley joined CDSI in 1969. WILLIAM L. GRAY, age 49, is currently Executive Vice President of the Company's Systems Engineering Group. Mr. Gray joined CDSI in 1982. MARY ANN MAYHEW, age 43, is currently Executive Vice President of the Company's Business Development Group. Ms. Mayhew joined CDSI in 1980. THOMAS A. GREEN, age 49, is currently Executive Vice President of the Company's Enterprise Systems Group. Mr. Green joined CDSI in 1976. EDWARD D. JOHNSON, age 41, is currently Senior Vice President of the Company's Professional Services Group. Mr. Johnson joined CDSI in 1981. GORDEN E. DARNELL, age 57, is currently Senior Vice President of the Company's Technology Systems Division. Mr. Darnell joined CDSI in 1982. DONALD E. ZIEGLER, age 46, is currently Treasurer and Secretary of the Company. Mr. Ziegler joined CDSI in 1982. Report of the Audit/Compensation Committee on Executive Compensation - -------------------------------------------------------------------- The Audit/Compensation Committee of the Board of Directors, which is composed of outside directors of the Company, is responsible for developing and recommending to the Board of Directors the Company's general compensation policies. The Committee approves the compensation plans for the Company's executive officers, including the Chief Executive Officer (CEO), and determines the compensation to be paid to the executive officers. The Audit/Compensation Committee also is responsible for the granting of stock options to the executive officers and the administration thereof. The Audit/Compensation Committee has furnished the following report for fiscal year 1995: Compensation Philosophy. The following general principles have been adopted by the Committee and represent the guidelines upon which compensation decisions are based. Executive compensation is designed to: Provide a competitive total compensation package that enables the Company to attract and retain key executives who demonstrate outstanding performance, technical expertise, business responsibility, personal integrity, and professionalism. Encourage cooperation and coordination among executives to meet the Company's long-term business objectives and strategy. Provide variable compensation that is directly linked with the financial performance of the Company and the achievement of increased stockholder value. Executive Officer Compensation. The Company's executive compensation program consists of three main components: (i) annual base salary, (ii) annual incentive cash bonus, and (iii) equity participation. The executive officers, including the CEO, are eligible for the same benefits, including group health and life insurance and participation in the Company's Employee Retirement Plan, as are available generally to the Company's professional staff. The Company also provides whole life "split dollar" insurance policies on the lives of the executive officers. The Company is the beneficiary of the amount of its premiums paid with the remaining amounts payable to the officers' estates. The executives may elect, under certain circumstances, to convert the policy to an annuity based on the cash value less premiums paid. No other material perquisites are provided by the Company to any of its executive officers. The compensation policies that are administered by the Committee are further explained below: Base Salary - Base salaries are competitive, but not excessive, assuring the Company the ability to attract and retain qualified officers yet maintain a relatively low cost structure for officer salaries. Base pay levels are reviewed annually and established through comparisons with other professional services firms of similar size and complexity. Annual Incentive - Executive officers participate as a team in an incentive compensation program with awards based on the attainment of predetermined financial targets set annually by the Committee. For fiscal 1995, the targets were based on achieving certain Company pre-tax levels of income. The objective is to reward executives for meeting the predetermined targets and provide opportunities for above average earnings by attaining superior financial results for the Company and the stockholders. Equity Participation - Non-qualifying stock option awards are granted annually based on performance and serve as an incentive to enhance stockholder value. Options are issued to executive officers, (as well as other line officers and key employees) who have substantial responsibility for the management and growth of the Company. Options granted are evidenced by an agreement setting forth the number of shares awarded, and such other terms and conditions as determined by the Committee. Options vest and become exercisable in annual installments of 25 percent of the shares covered by each grant commencing on the first anniversary of the grant date and expire in five years from the grant date. In setting the size of grants for the CEO and other executives, the Committee considers their position, individual performance, stock options presently held, and the total number of shares available for the issuance under the Company's stock option plans. Compensation of the CEO. Gordon S. Glenn has been President and CEO since 1991. He served as President and Chief Operating Officer between 1988 and 1991. The amount of Mr. Glenn's annual salary is established by the Audit/Compensation Committee using the same criteria as discussed above for the executive officers. Mr. Glenn's annual salary for fiscal year 1995 was $208,231, which represents an increase of approximately 4% percent over his salary for the previous year. Mr. Glenn's annual incentive compensation payments are determined by the Committee based entirely on targets for the Company's pre-tax income. Mr. Glenn's cash award for fiscal year 1995 (shown in the Bonus column of the Summary Compensation Table) was determined based on the Company's exceeding the targets for 1995 pre-tax profits. Mr. Glenn was also awarded stock options intended to align his future rewards with the interests of the stockholders. The Audit/Compensation Committee Hilliard W. Paige Paul R. Ignatius Elmer B. Staats James A. Parker SUMMARY COMPENSATION TABLE The following table reports the compensation paid or accrued during the three fiscal years ended June 30, 1995, for each of the five most highly compensated CDSI executive officers.
LONG-TERM ANNUAL COMPENSATION COMPENSATION ------------------- ------------ YEAR OTHER SECURITIES NAME AND ENDED ANNUAL UNDERLYING ALL OTHER PRINCIPAL POSITION 6/30 SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION(1) - ------------------ ----- ------ ----- ------------ ----------- --------------- CLIFFORD M. KENDALL 1995 $148,000 $148,000 ----- 6,000 $17,242 Chairman of the Board 1994 $148,000 $148,000 ----- 8,000 $15,329 1993 $148,000 $148,000 ----- 8,000 $11,101 GORDON S. GLENN 1995 $208,231 $205,000 ----- 30,000 $11,368 President and 1994 $199,615 $195,000 $40,298(2) 40,000 $13,031 Chief Executive Officer 1993 $192,515 $185,000 ----- 40,000 $ 7,419 WYATT D. TINSLEY 1995 $131,846 $130,000 ----- 6,000 $10,739 Executive 1994 $126,769 $124,000 ----- 8,000 $ 9,749 Vice President 1993 $122,930 $117,000 ----- 8,000 $ 6,456 JUDITH M. KAHN 1995 $126,846 $125,000 ----- 6,000 $10,058 Executive 1994 $121,769 $119,000 ----- 8,000 $ 9,106 Vice President(3) 1993 $117,095 $112,000 ----- 8,000 $ 5,997 WILLIAM L. GRAY 1995 $125,308 $123,000 ----- 6,000 $ 9,824 Executive 1994 $119,769 $117,000 ----- 8,000 $ 9,027 Vice President 1993 $115,840 $110,000 ----- 8,000 $ 5,992
_________________________ (1) Amounts represent: (a) Company contributions to qualified and non- qualified employee retirement plans and (b) Split Dollar Life Insurance. The values for the two component amounts for each named executive officer are as follows for the fiscal year ended June 30, 1995: Mr. Kendall, (a) $10,130 and (b) $7,112; Mr. Glenn, (a) $10,224 and (b) $1,144; Mr. Tinsley, (a) $9,376 and (b) $1,363; Ms. Kahn, (a) $9,143 and (b) $915; and Mr. Gray (a) $9,071 and (b) $753. (2) Amount includes the $35,000 initiation fee paid by the Company on behalf of Mr. Glenn for membership in a local country club. (3) Ms. Kahn resigned from her position with the Company effective July 1, 1995.
OPTION GRANTS IN LAST FISCAL YEAR POTENTIAL REALIZABLE VALUE AT PERCENT OF ASSUMED ANNUAL RATES OF TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION FOR OPTIONS GRANTED TO OR BASE OPTION TERM(4) GRANTED EMPLOYEE IN PRICE EXPIRATION NAME (#) FISCAL YEAR(1) ($/SHR)(2) DATE(3) 5%($) 10%($) - ---- ------- -------------- ---------- ---------- --------- --------- Clifford M. Kendall 6,000 4.2% $14.125 07/19/99 $ 23,415 $ 51,741 Gordon S. Glenn 30,000 20.9% $14.125 07/19/99 $117,074 $258,704 Wyatt D. Tinsley 6,000 4.2% $14.125 07/19/99 $ 23,415 $ 51,741 Judith M. Kahn(5) 6,000 4.2% $14.125 07/01/95 N/A N/A William L. Gray 6,000 4.2% $14.125 07/19/99 $ 23,415 $ 51,741
______________________________ (1) Stock options exercisable into 143,400 shares of the Company's Common Stock were granted to all employees and non-employee directors of the Company as a group during the fiscal year ended June 30, 1995. (2) The exercise price is the closing market price on the date of grant. (3) Options vest and become exercisable in annual installments of 25% of shares covered by each grant commencing on the first anniversary of the grant date, and expire in five years from the grant date. (4) The dollar amounts under the potential realizable values columns use the 5% and 10% rates of appreciation permitted by the SEC, and are not intended to forecast actual future appreciation in the stock price. Actual gains, if any, on stock option exercises are dependent on the future performance of the Company's Common Stock. There can be no assurance the amounts reflected in this table will be achieved. The assumed rates are compounded annually to the full five-year term of the options. (5) Ms. Kahn resigned from her position with the Company effective July 1, 1995. The options granted on July 19, 1994 expired upon her resignation from the Company pursuant to the terms of Stock Option Agreement governing the grant.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES NUMBER OF VALUE OF UNEXERCISED OPTIONS EXERCISED IN FY 1995 UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS ---------------------------- AT 6/30/95 AT 6/30/95 (2) SHARES ---------- ---------- ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE ---- ----------- -------------- ------------------ ------------------- Clifford M. Kendall 10,300 $ 51,044 2,000 / 18,100 $ 4,500 $ 48,806 Gordon S. Glenn 18,000 $108,000 60,000 / 90,000 $331,875 $240,625 Wyatt D. Tinsley -0- -0- 12,300 / 18,100 $ 68,419 $ 48,806 Judith M. Kahn(3) 6,100 $ 34,056 2,000 / 18,100 $ 4,500 $ 48,806 William L. Gray 9,000 $ 59,625 12,300 / 18,100 $ 68,419 $ 48,806
______________________________ (1) Value is calculated based on the difference between the option price and the closing market price of the Common Stock on the date of the exercise multiplied by the number of shares to which the exercise relates. (2) The closing price for the Company's Common Stock as reported by the Nasdaq Stock Market on June 30, 1995 was $11.00. Value is calculated on the basis of the difference between the option exercise price and $11.00, multiplied by the number of shares of Common Stock underlying the option. (3) Ms. Kahn resigned from her position with the Company effective July 1, 1995. Options shown as unexercisable as of June 30, 1995 expired by their terms upon her resignation. SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information regarding beneficial ownership of the Company's Common Stock as of July 28, 1995 by: (i) each director of the Company, (ii) each executive officer named in the table above labeled Summary Compensation Table, and (iii) all directors and executive officers of the Company as a group. This table is based on information provided by the Company's directors and executive officers. Unless otherwise indicated in the footnotes below, and subject to community property laws where applicable, each of the named persons exercises sole voting and dispositive power over his or her shares. NAME OF AMOUNT OF PERCENTAGE BENEFICIAL BENEFICIAL OF OUTSTANDING OWNER OWNERSHIP COMMON STOCK - ------------------ ------------ -------------- Gordon S. Glenn 150,317 (1) 2.58% William L. Gray 38,800 (2) * Raymond B. Hoxeng 49,500 (3) * Paul R. Ignatius 13,500 (4) * Judith M. Kahn 12,388 (5) * Clifford M. Kendall 353,934 (6) 6.16% Hilliard W. Paige 18,500 (7) * James A. Parker 15,078 (8) * Elmer B. Staats 30,000 (9) * Wyatt D. Tinsley 30,592 (10) * All directors & executive officers as a group (15 persons) 827,843 (11) 13.86% ____________________________ * Less than one percent (1) Includes 97,500 shares subject to acquisition by the exercise of options exercisable within 60 days. (2) Includes 9,244 shares held by Mr. Gray's spouse and 19,900 shares subject to acquisition by the exercise of options exercisable within 60 days. (3) Includes 1,500 shares subject to acquisition by the exercise of options exercisable within 60 days. Shares are held in two revocable trusts, one in Dr. Hoxeng's name (26,000 shares) and one in the name of Dr. Hoxeng's spouse (22,000 shares). Dr. Hoxeng and his spouse are co-trustees of both trusts. (4) Includes 10,168 shares subject to acquisition by the exercise of options exercisable within 60 days. (5) Ms. Kahn resigned from her position with the Company effective July 1, 1995. Includes 2,000 shares subject to acquisition by the exercise of options exercisable within 60 days. (6) Includes 123,994 shares held by Mr. Kendall's spouse and 9,600 shares subject to acquisition by the exercise of options exercisable within 60 days. (7) Includes 3,500 shares subject to acquisition by the exercise of options exercisable within 60 days. (8) Includes 7,951 shares subject to acquisition by the exercise of options exercisable within 60 days. (9) Includes 7,500 shares subject to acquisition by the exercise of options exercisable within 60 days. (10) Includes 19,900 shares subject to acquisition by the exercise of options exercisable within 60 days. (11) Includes 233,419 shares subject to acquisition by the exercise of options exercisable within 60 days. FIVE-YEAR STOCKHOLDER RETURN COMPARISON Set forth below is a [chart] comparing the cumulative stockholder return on the Company's Common Stock, on an indexed basis, against the cumulative total returns of the Nasdaq Stock Market - U.S. Index and the S&P Computer Software and Services Index for the period of the Company's last five fiscal years (June 30, 1990 = 100): COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG COMPUTER DATA SYSTEMS, INC., THE NASDAQ STOCK MARKET-US INDEX AND THE S & P COMPUTER SOFTWARE & SERVICES INDEX 6/90 6/91 6/92 6/93 6/94 6/95 ---- ---- ---- ---- ---- ---- Computer Data Systems, Inc. 100 68 90 164 243 196 Nasdaq Stock Market - U.S. 100 106 127 160 162 215 S&P Comptr Softwr & Svcs 100 87 98 145 164 255 * $100 INVESTED ON 06/30/90 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30. [The above data appears as a line graph in the version of this document distributed to stockholders.] ITEM 2: APPROVAL OF INDEPENDENT AUDITORS At the Annual Meeting, the stockholders will be asked to approve the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending June 30, 1996. The Audit/Compensation Committee has recommended that the appointment of Ernst & Young LLP be approved by the stockholders. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and such representatives are expected to be available to respond to appropriate questions. Approval of the selection of the independent auditors will require the affirmative vote of holders of shares of Common Stock representing a majority of the number of votes present in person or represented by proxy at the Annual Meeting, provided a quorum is present. THE BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS VOTE FOR APPROVAL OF THE INDEPENDENT AUDITORS STOCKHOLDER PROPOSALS In order for a stockholder proposal to be considered for the 1996 Annual Meeting of Stockholders, it must be received by the Company at its offices no later than May 21, 1996. All such stockholder proposals should be mailed to the Company's headquarters and addressed to the attention of Donald E. Ziegler, Secretary. To be eligible for inclusion in next year's proxy material, such proposals must conform to the requirements set forth in Regulation 14A under the Securities Exchange Act of 1934, as amended. In order to be considered at an Annual Meeting, a stockholder proposal must be presented by the proponents or their representatives in attendance at the meeting. OTHER MATTERS The Board of Directors does not know of any other matters to be presented at the Annual Meeting or action to be taken thereat except those set forth in this Proxy Statement. If, however, any other business properly comes before the Annual Meeting, the persons named in the proxy accompanying this Proxy Statement will have the discretionary authority to vote upon such business, as well as matters incident to the conduct of the Annual Meeting. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers to file reports of ownership and changes of ownership with the SEC and the Nasdaq Stock Market. The Company believes that during the period from July 1, 1994 through June 30, 1995, its directors and executive officers complied with all applicable Section 16(a) filing requirements. UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS, THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, REQUIRED TO BE FILED WITH THE SEC FOR THE COMPANY'S MOST RECENT FISCAL YEAR. ADDRESS REQUESTS TO DONALD E. ZIEGLER, SECRETARY, COMPUTER DATA SYSTEMS, INC., ONE CURIE COURT, ROCKVILLE, MARYLAND 20850. APPENDIX - Proxy Card PROXY 1995 [CDSI LOGO] The undersigned hereby appoints Clifford M. Kendall, Gordon S. Glenn, and Wyatt D. Tinsley, and each of them, as Proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of Common Stock of Computer Data Systems, Inc., held of record by the undersigned on September 1, 1995, at the Annual Meeting of Stockholders to be held October 24, 1995, or any adjournment thereof. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL LISTED NOMINEES AND FOR PROPOSAL #2. 1. Election of Directors: Raymond B. Hoxeng, Clifford M. Kendall, Hilliard W. Paige, Elmer B. Staats, Gordon S. Glenn, Wyatt D. Tinsley, Paul R. Ignatius, James A. Parker --- FOR --- WITHHOLD AUTHORITY all nominees for all nominees FOR, EXCEPT AUTHORITY TO VOTE WITHHELD FOR THE FOLLOWING NOMINEE(S) ONLY: ____________________________________________ 2. Approval of the appointment of Ernst & Young LLP as the Company's independent auditors. --- FOR --- AGAINST --- ABSTAIN PLEASE SIGN YOUR NAME(S) ON THE REVERSE SIDE. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF PROPERLY EXECUTED, IT WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES AND FOR PROPOSAL # 2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. Please sign your name exactly as it appears below. If shares are held jointly, all holders must sign. When signing in a fiduciary or representative capacity (attorney, executor, administrator, trustee, guardian, officer of corporation, etc.), please give full title as such. The signer hereby revokes all proxies heretofore given by the signer to vote at such meeting or any adjournment thereof. Dated:......................, 1995 ....................................... Signature ....................................... Signature if held jointly PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. EX-21 4 Exhibit 21 ---------- SIGNIFICANT SUBSIDIARIES OF THE COMPANY Active subsidiaries of Computer Data Systems, Inc. and their subsidiaries as of June 30, 1995, are listed below. The names of certain subsidiaries, which considered in the aggregate would not constitute a significant subsidiary, have been omitted. State or Name Country of Organization ---- ----------------------- CDSI International, Inc. Delaware CDSI Argentina, S.A. Argentina EX-23 5 Exhibit 23.1 ------------ Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-27300) pertaining to the Computer Data Systems, Inc. 1982 Incentive Stock Option Plan as Amended and Restated and in the Registration Statement (Form S-8 No. 33-47358) pertaining to the Computer Data Systems, Inc. 1991 Long Term Incentive Plan of our report dated July 26, 1995, with respect to the consolidated financial statements of Computer Data Systems, Inc. included in the Annual Report (Form 10-K) for the year ended June 30, 1995. /s/ Ernst & Young LLP Washington, D.C. September 26, 1995 EX-23 6 Exhibit 23.2 ------------ CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in Registration Statements No. 33- 27300 and 33-47358 of Computer Data Systems, Inc. on Form S-8 of our report dated July 29, 1993 appearing in this Annual Report on Form 10-K of Computer Data Systems, Inc. for the year ended June 30, 1995. /s/ Deloitte & Touche LLP Washington, D.C. September 26, 1993 EX-27 7
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CDSI'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO. 0000022989 COMPUTER DATA SYSTEMS, INC. YEAR JUN-30-1995 JUN-30-1995 1,237,000 0 52,236,900 0 0 56,030,200 26,452,900 2,937,500 84,923,000 30,016,400 0 573,800 0 0 49,487,800 84,923,000 0 220,667,000 0 204,966,300 0 0 0 13,183,200 5,132,300 8,050,900 0 0 0 8,050,900 1.36 1.36
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