- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ...... to ......
Registrant, State of Incorporation,
Address and Telephone Number
GRC INTERNATIONAL, INC.
(a Delaware Corporation)
1900 Gallows Road
Vienna, Virginia 22182
(703) 506-5000
Commission I.R.S. Employer
File No. Identification No.
- ---------- ------------------
1-7517 95-2131929
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock January 31, 2000
- --------------------- ----------------
$.10 par value 12,485,268 shares
================================================================================
1
CONTENTS
Forward-Looking Statements
In addition to historical information, this Form 10-Q Quarterly Report contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the section of this Form 10-Q captioned "Management's
Discussion and Analysis". The Company undertakes no obligation to publicly
revise these forward-looking statements, to reflect events or circumstances that
arise after the date hereof. Readers should carefully review the risk factors
described in the Company's Annual Report on Form 10-K and other documents the
Company files from time to time with the Securities and Exchange Commission,
including the Quarterly Reports on Form 10-Q filed by the Company subsequent to
this Form 10-Q and any Current Reports on Form 8-K filed by the Company.
Page
----
PART I - FINANCIAL INFORMATION
A. FINANCIAL STATEMENTS
Consolidated Condensed Statements of Income 3
Consolidated Condensed Balance Sheets 4
Consolidated Condensed Statements of Cash Flows 6
Notes to Consolidated Condensed Financial Statements 8
B. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
C. PART II - OTHER INFORMATION 16
Note: The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading.
It is suggested that these consolidated condensed financial statements be
read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's latest Annual Report on Form 10-K.
2
GRC INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except for per share data)
(unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues $ 50,693 $ 39,052 $ 96,514 $ 75,808
Cost of revenues 41,484 32,896 78,476 63,860
Indirect costs and other costs 6,185 3,926 10,841 7,601
-------- -------- -------- --------
Operating income 3,024 2,230 7,197 4,347
Interest expense, net (275) (340) (505) (692)
-------- -------- -------- --------
Income from continuing operations
before income taxes 2,749 1,890 6,692 3,655
Income tax (provision) benefit (1,105) 1,210 (2,690) 2,475
-------- -------- -------- --------
Income from continuing operations 1,644 3,100 4,002 6,130
Gain from discontinued operations
(net of tax) -- 140 -- 194
-------- -------- -------- --------
Net Income $ 1,644 $ 3,240 $ 4,002 $ 6,324
======== ======== ======== ========
Income per common and
common equivalent share:
Basic
Continuing operations $ 0.13 $ 0.31 $ 0.34 $ 0.60
Discontinued operations 0.00 0.01 0.00 0.02
-------- -------- -------- --------
Net income $ 0.13 $ 0.32 $ 0.34 $ 0.62
======== ======== ======== ========
Number of shares used in basic EPS
calculation 12,377 10,222 11,668 10,218
======== ======== ======== ========
Diluted
Continuing operations $ 0.13 $ 0.30 $ 0.33 $ 0.59
Discontinued operations 0.00 0.01 0.00 0.02
-------- -------- -------- --------
Net income $ 0.13 $ 0.31 $ 0.33 $ 0.61
======== ======== ======== ========
Number of shares used in diluted EPS
calculation 12,974 10,411 12,181 10,438
======== ======== ======== ========
The Company had no items of other comprehensive income
or loss. The accompanying notes are an integral part of
these statements.
3
GRC INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
December 31, June 30,
1999 1999
---- ----
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ --- $ 88
Accounts receivable, net 45,459 36,438
Unbilled reimbursable costs and fees 2,273 2,924
Other receivables 829 1,339
Prepaid expenses and other current assets 1,375 522
Deferred income taxes 7,292 6,871
-------- --------
Total current assets 57,228 48,182
-------- --------
PROPERTY AND EQUIPMENT,
at cost, net of accumulated depreciation
and amortization of $14,733 and $13,497 9,973 9,095
-------- --------
OTHER ASSETS:
Goodwill and other intangible assets, net 22,594 1,989
Deferred taxes 11,052 15,428
Deposits and other 1,545 1,387
-------- --------
Total other assets 35,191 18,804
-------- --------
TOTAL ASSETS $102,392 $ 76,081
======== ========
The accompanying notes are an integral part of these statements.
4
GRC INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
December 31, June 30,
1999 1999
------------ --------
(in thousands)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3 $ 9
Accounts payable 3,506 5,567
Accrued compensation and benefits 16,119 14,461
Accrued expenses and other current liabilities 3,601 3,063
--------- ---------
Total current liabilities 23,229 23,100
--------- ---------
LONG-TERM LIABILITIES:
Long-term debt 15,889 12,623
Other long-term liabilities 1,230 299
--------- ---------
Total long-term liabilities 17,119 12,922
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value -
Authorized - 30,000,000 shares
Issued - 12,742,607 shares
and 10,549,003 shares 1,274 1,055
Paid-in capital 101,038 83,277
Accumulated deficit (36,423) (40,428)
--------- ---------
65,889 43,904
Less: Treasury stock, at cost; 300,000 shares (3,845) (3,845)
--------- ---------
Total stockholders' equity 62,044 40,059
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 102,392 $ 76,081
========= =========
The accompanying notes are an integral part of these statements.
5
GRC INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
December 31,
------------
1999 1998
---- ----
(in thousands)
CASH FLOWS FROM CONTINUING OPERATIONS:
Income from continuing operations $ 4,002 $ 6,130
Reconciliation of income from continuing operations:
Depreciation and amortization 1,664 1,785
Deferred income tax (benefit) provision 2,493 (2,479)
Changes in assets and liabilities:
Accounts receivable and unbilled
reimbursable costs and fees (1,051) (219)
Prepaid expenses and other current assets (161) (1,618)
Accounts payable, accruals and
other current liabilities (2,713) (2,720)
Other 153 566
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,387 1,445
------- -------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Gain from discontinued operations -- 194
Reconciliation of income from discontinued operations:
Non-cash charges and changes in working capital (107) (74)
------- -------
NET CASH (USED IN) PROVIDED BY
DISCONTINUED OPERATIONS (107) 120
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (1,285) (999)
Purchase of business, net of cash acquired (7,165) --
Other (188) --
------- -------
NET CASH USED IN INVESTING ACTIVITIES (8,638) (999)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt and capital lease obligations -- (1,241)
Bank borrowings 3,266 --
Issuance of common stock 1,004 39
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,270 (1,202)
------- -------
NET DECREASE IN CASH & CASH EQUIVALENTS (88) (636)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 88 3,648
------- -------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ -- $ 3,012
======= =======
The accompanying notes are an integral part of these statements.
6
GRC INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
December 31,
----------------
1999 1998
---- ----
(in thousands)
Supplemental disclosures:
Cash paid for:
Interest $488 $822
Income taxes $276 $126
The accompanying notes are an integral part of these statements.
7
GRC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED DECEMBER 31, 1999
(unaudited)
(1) Basis of Presentation. The consolidated condensed financial statements
included herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. The results of operations presented herein are not
necessarily indicative of the results to be expected for a full year.
Although the Company believes that all material adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
the interim periods presented are included and that the disclosures are
adequate to make the information presented not misleading, these
consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1999.
(2) New Accounting Pronouncements. For the year ending June 30, 2001, the
Company will be required to adopt SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. Management does not believe adoption
of this Standard will have a material impact on its financial statements.
(3) Debt. The Company maintains a $35 million revolving credit agreement
effective August 27, 1999. The Company has both Prime and LIBOR (London
Interbank Offered Rate) based borrowing options under the Credit
Agreement. The interest accrued on LIBOR loans is based on a ratio of debt
to cash flow. The current premium is 1.10% above the applicable LIBOR
rate. The Company also pays a performance based commitment fee, which is
currently 0.30% of the line of credit.
Debt at December 31, 1999 and June 30, 1999 consisted of the following:
December 31, 1999 June 30, 1999
----------------- -------------
Revolving Credit Agreement $ 15,880 $ 7,873
Term Loans -- 4,750
Other 12 9
-------- --------
Total Debt 15,892 12,632
Less: Current Portion (3) (9)
-------- --------
Long Term Debt $ 15,889 $ 12,623
======== ========
8
(4) Acquisition of Management Consulting and Research, Inc. Effective
September 2, 1999, the Company acquired all of the outstanding stock of
Management Consulting and Research, Inc. (MCR). The net purchase price of
approximately $23 million was paid with 2 million shares of GRCI's common
stock valued at approximately $16 million, and the remainder of
approximately $7 million in net cash was financed through the new credit
agreement. The resulting $20.8 million in goodwill is to be amortized over
30 years. MCR provides professional services to the U.S. Government
primarily in the areas of budget analysis, cost estimating and program
management. MCR's revenues are approximately $30 million per year. The
acquisition was accounted for using the purchase method of accounting and
has been consolidated with GRC from the date of acquisition.
(5) Segment Information. The Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" during fiscal 1999.
SFAS No. 131 establishes standards for reporting information about
operating segments and related disclosures about products and services,
geographic areas and major customers.
All of the Company's business relates to information technology consulting
services. The chief operating decision-maker is provided information about
the revenues generated by operating segment and utilizes income before
interest and taxes as a measure of segment performance. The Company's
services are delivered to clients primarily in the United States, and the
Company's long-lived assets are located within the United States. Based on
SFAS No. 131 criteria, the Company has two reportable operating segments;
U.S. Federal Government and Commercial. Within the U.S. Federal Government
segment are sales to the Company's largest customer, the Department of
Defense ("DoD"). Revenues from the DoD represented 97% of total U.S.
Government revenues in the first half of both fiscal 2000 and fiscal 1999.
U.S. Federal
Government Commercial Corporate Total
---------- ---------- --------- -----
(in thousands)
Second Quarter Fiscal 2000
Revenues $ 49,858 $ 835 $ -- $ 50,693
Income before interest and taxes 4,968 (117) (1,827) 3,024
Depreciation and amortization 429 7 527 963
Assets 74,392 1,344 26,656 102,392
Capital expenditures 244 4 604 852
Second Quarter Fiscal 1999
Revenues $ 37,531 $ 1,521 $ -- $ 39,052
Income before interest and taxes 2,317 222 (309) 2,230
Depreciation and amortization 233 19 717 969
Assets 43,702 2,675 27,437 73,814
Capital expenditures 218 -- 409 627
9
U.S. Federal
Government Commercial Corporate Total
---------- ---------- --------- -----
(in thousands)
First Half Fiscal 2000
Revenues $ 93,889 $ 2,625 $ -- $ 96,514
Income before interest and taxes 9,381 131 (2,315) 7,197
Depreciation and amortization 796 15 853 1,664
Assets 74,392 1,344 26,656 102,392
Capital expenditures 584 6 695 1,285
First Half Fiscal 1999
Revenues $ 72,497 $ 3,311 $ -- $ 75,808
Income before interest and taxes 4,131 753 (537) 4,347
Depreciation and amortization 772 43 970 1,785
Assets 43,702 2,675 27,437 73,814
Capital expenditures 451 -- 548 999
(6) Subsequent Event - On February 14, 2000, the Company executed a
definitive merger agreement with AT&T Corp. under which AT&T will commence a
cash tender offer to acquire all of the outstanding shares of the Company for
$15.00 per share. The Company's Board has received a fairness opinion on AT&T's
offer. The Boards of Directors of both companies have unanimously approved
the merger agreement. The tender offer will commence within seven business days
and is expected to conclude within approximately two months.
The tender offer is subject to a majority of the Company's common stock
on a fully diluted basis being validly tendered and not withdrawn, the
expiration of the Hart-Scott-Rodino waiting period, and other customary
conditions. If a majority of the Company's shares are tendered in response to
the offer and the other conditions to the offer are satisfied or waived, a
subsiary of At&T will be merged into the Company, shares not purchased in the
offer will be converted into $15.00 per share in cash and AT&T will become the
sole stockholder of the Company.
10
GRC INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1999 and 1998
Acquisition of Management Consulting and Research, Inc.
Effective September 2, 1999, the Company acquired all of the outstanding stock
of Management Consulting and Research, Inc. (MCR). The net purchase price of
approximately $23 million was paid with 2 million shares of GRCI's common stock
valued at approximately $16 million, and the remainder of approximately $7
million in net cash was financed through the new credit agreement. The resulting
$20.8 million in goodwill is to be amortized over 30 years. The operating
results of MCR are included in the consolidated operating results since the date
of acquisition.
Results of Operations - Three Months Ended December 31, 1999 and 1998
Revenues
Revenues for the second quarter of fiscal 2000 increased 30% to $50.7 million,
from $39.1 million for the same quarter in fiscal 1999. The recently acquired
business of MCR added $7.9 million of revenue in the current quarter. Exclusive
of MCR revenue, the revenue increase in the second quarter of fiscal 2000 over
the year earlier period would have been 10%. Revenues from the Company's largest
contract, the GCSS program, reached $10.3 million in the most recent quarter, an
increase of $3.5 million over the same period in fiscal 1999. The remaining
revenue growth was derived from a broad base of other U.S. government contracts
and subcontracts.
The following table sets forth for the periods indicated the percentage that
certain items of income and expense bear to revenues.
Three Months Ended
------------------------------
12/31/99 12/31/98
-------- --------
Revenues 100.0% 100.0%
Cost of revenues 81.8% 84.2%
Indirect and other costs 12.2% 10.1%
----- -----
Operating income 6.0% 5.7%
===== =====
11
Cost of Revenues
Cost of revenues for the second quarter of fiscal 2000 increased 26% to $41.5
million, or 81.8% of revenues, from $32.9 million, or 84.2% of revenues, for the
same quarter in fiscal 1999. The cost of revenue increase of $8.6 million is
primarily a result of the increase in revenues. The decrease of cost of revenues
as a percentage of revenues is due to efficiencies achieved in labor
productivity, program management, and control of other operating costs.
Indirect Expenses and Operating Income
Indirect expenses consist of selling, general and administrative, research and
development, and other costs. Indirect expenses for the second quarter of fiscal
2000 increased $2.3 million to $6.2 million, from $3.9 million for the second
quarter of fiscal 1999. Indirect expenses as a percentage of revenue were 12.2%
for second quarter 2000, compared to 10.1% for second quarter 1999. Indirect
expenses in the quarter included $800 thousand of non-recurring costs relating
to settlement of a proxy dispute resolved within the quarter. Exclusive of these
proxy-related expenses, indirect expenses would have been $5.4 million, or 10.6%
of revenues.
Operating income for the second quarter of fiscal 2000 increased 36% to $3.0
million, or 6.0% of revenues, from $2.2 million, or 5.7% of revenues, for the
same quarter of fiscal 1999. Without the proxy-related expenses, operating
margins would have been 7.5% of revenues. The increase in operating margins is
related to the efficiencies achieved in the cost of revenues described above.
Net Interest Expense
Net interest expense for the second quarter of fiscal 2000 decreased 19% to $275
thousand, from $340 thousand for the second quarter of fiscal 1999. This
decrease of $65 thousand reflects a reduction in debt levels stemming from
positive operating cash flows in the past year, partially offset by the effect
of borrowings to complete the MCR acquisition.
Income Taxes
The net tax provision recognized in the second quarter of fiscal 2000 was 40.2%
of pretax income. In the second quarter of 1999, the Company recorded a tax
benefit of $1.2 million related to the recognition of the benefit of tax net
operating losses from prior years.
Results of Operations - Six Months Ended December 31, 1999 and 1998
Revenues
Revenues for the first half of fiscal 2000 increased 27% to $96.5 million, from
$75.8 million for the first half of fiscal 1999. The acquired business of MCR
added $10.4 million of revenue in the four months since its acquisition in
September. Revenues from the Company's largest contract, the GCSS program,
reached $19.4 million in the first half of fiscal 2000, an increase of $7.4
million over the first half of fiscal 1999. The remaining revenue growth was
derived from a broad base of other U.S. government contracts and subcontracts.
12
The following table sets forth for the periods indicated the percentage that
certain items of income and expense bear to revenues.
Six Months Ended
----------------
12/31/99 12/31/98
-------- --------
Revenues 100.0% 100.0%
Cost of revenues 81.3% 84.3%
Indirect and other costs 11.2% 10.0%
----- -----
Operating income 7.5% 5.7%
===== =====
Cost of Revenues
Cost of revenues for the first half of fiscal 2000 increased 23% to $78.5
million, or 81.3% of revenues, from $63.9 million, or 84.3% of revenues, for the
same period of fiscal 1999. The cost of revenue increase of $14.6 million is
primarily a result of the increase in revenues. The decrease in cost of revenues
as a percent of revenues is partially due to two non-recurring items of revenue
of approximately $920 thousand, with no associated costs. These items related to
favorable settlement of government cost audits ($700 thousand) and settlement of
an old claim for a contract overrun ($220 thousand). The remainder of the
decrease of cost of revenues as a percentage of revenues is due to efficiencies
achieved in labor productivity, program management, and control of other
operating costs.
Indirect Expenses and Operating Income
Indirect expenses consist of selling, general and administrative, research and
development, and other costs. Indirect expenses for the first half of fiscal
2000 increased $3.2 million to $10.8 million from $7.6 million for the first
half of fiscal 1999. Indirect expenses as a percentage of revenue were 11.2% for
first half of fiscal 2000, compared to 10.0% for first half of fiscal 1999.
Indirect expenses in the first half included $900 thousand of non-recurring
costs relating to settlement of a proxy dispute resolved within the quarter.
Exclusive of these proxy-related expenses, indirect expenses would have been
$10.0 million, or 10.4% of revenues.
Operating income for the first half of fiscal 2000 increased 66% to $7.2
million, or 7.5% of revenues, from $4.3 million, or 5.7% of revenues, for the
first half of fiscal 1999. The one-time revenue items of $920 thousand discussed
above are offset by the $900 thousand of proxy-related expenses in the first
half. The increase in operating margins related to the reduction in cost of
revenues due to operating efficiencies noted above.
Net Interest Expense
Net interest expense for the first half of fiscal 2000 decreased 27% to $505
thousand, from $692 thousand for the first half of fiscal 1999. This decrease of
$187 thousand reflects a reduction in debt levels stemming from positive
operating cash flows in the past year, partially offset by the effect of
borrowings to complete the MCR acquisition.
13
Income Taxes
The net tax provision recognized in the first half of fiscal 2000 was 40.2% of
pretax income. In the first half of fiscal 1999, the Company recorded a tax
benefit of $2.5 million related to the recognition of the benefit of tax net
operating losses from prior years.
Liquidity and Capital Resources
Net cash provided by operations amounted to $4.3 million during the first half
of fiscal 2000, compared to cash used in operations of $1.4 million for the
first half of fiscal 1999. The increased operating cash flow was the result of
higher earnings before income taxes. Also, no significant income taxes were paid
in either period because of the offset available from tax net operating loss
carryforwards. Cash flows used in investing activities during the first half of
fiscal 2000 were $8.6 million, compared to $1.0 million used in the first half
of fiscal 1999, due to $7.1 million of cash used in the purchase of MCR, Inc.
The net cash requirements in the first half of fiscal 2000 were met through
additional borrowings under the Company's bank line of credit.
The Company believes that its cash flow from operations, particularly with the
availability of tax operating loss carryforwards to offset future tax
liabilities, and its line of credit are sufficient to meet its financing needs.
Subsequent Event
On February 14, 2000, the Company executed a definitive merger agreement with
AT&T Corp. under which AT&T will commence a cash tender offer to acquire all of
the outstanding shares of the Company for $15.00 per share. The Company's Board
has received a fairness opinion on AT&T's offer. The Boards of Directors of both
companies have unanimously approved the merger agreement. The tender offer will
commence within seven business days and is expected to conclude within
approximately two months.
The tender offer is subject to a majority of the Company's common stock on a
fully diluted basis being validly tendered and not withdrawn, the expiration of
the Hart-Scott-Rodino waiting period, and other customary conditions. If a
majority of the Company's shares are tendered in response to the offer and the
other conditions to the offer are satisfied or waived, a subsiary of At&T will
be merged into the Company, shares not purchased in the offer will be converted
into $15.00 per share in cash and AT&T will become the sole stockholder of the
Company.
Forward Looking Statements
This filing may contain "forward-looking" statements which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Factors which
could cause a material difference in results include, but are not limited to,
the following: significant changes in economic conditions or in national
priorities which result in changes in demands by the U.S. Government for the
Company's services; changes in government laws and regulations; changes in the
procurement practices of the U.S. Government which could negatively effect the
Company's ability to compete, or its profitability; the risk of termination of
any individual contract or the inability of the Company to capture the value in
its backlog because of failure of a customer to continue funding of a project;
the ability of the Company to fully staff to meet its contract requirements at
salary levels sufficient to maintain profitability; the uncertainties discussed
more fully in the section entitled "Year 2000 Issue"; and the ability of the
Company to generate sufficient taxable income in the future to fully capture the
benefit of its tax net operating loss carryforwards that
14
are reflected in the Company's deferred tax assets.
15
Year 2000 Issue
The Company has experienced no substantial Y2K effects on its business,
financial condition, cash flows or results of operations. Further, it does not
expect any material effects in the future.
16
PART II - OTHER INFORMATION
Items 1, 2, 3, and 5 are inapplicable.
Item 4 - Results of Votes of Security Holders.
On November 15, 1999, the Annual Meeting of Shareholders was held.
As a result of the shareholder vote, Chairman Wright, Jr. was re-elected as a
director by 10,415,976 votes, and Richard N. Perle was elected as a director by
8,568,984 votes.
The shareholders ratified the selection of Deloitte & Touche, L.L.P. as
independent public accountants for the fiscal year ending June 30, 2000 as
follows:
For Against Abstain
--- ------- -------
9,505,181 30,654 22,770
The shareholders approved the shareholder proposal to terminate the Shareholder
Rights Plan as follows:
For Against Abstain
--- ------- -------
5,340,762 3,985,971 222,867
Item 6(a) Exhibits.
Exhibit No. Description
11 Statement of Computation of Earnings Per Share
27 Financial Data Schedule
Item 6(b) Reports on Form 8-K.
During the quarter ended December 31, 1999, the Company filed a Form 8-K on
January 18, 2000, relating to the election of Directors and the settlement of
two previously reported lawsuits.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRC INTERNATIONAL, INC.
By: /s/ James P. Allen
------------------
James P. Allen
Senior Vice President, Chief Financial
Officer and Treasurer
February 14, 2000
18