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EXHIBIT 28 (a)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number __________
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
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(Full title of the plan)
Science Applications International Corporation
10260 Campus Point Drive, San Diego, California 92121
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(Name of issuer of the securities held pursuant to the
plan and the address of its principal executive office)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Science Applications International Corporation Stock Purchase Plan Committee has
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Date: February 27, 1998 BY: /s/ ANNE M. JENINGS
--------------------------------------
Anne M. Jenings
Science Applications International
Corporation
Employee Stock Purchase Plan Committee
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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Index To Financial Statements
Page
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Report of Independent Accountants F-2
Financial Statements:
Statement of Net Assets Available
for Benefits as of January 31, 1998 and 1997 F-3
Statement of Changes in Net Assets
Available for Benefits for the years ended
January 31, 1998, 1997, and 1996 F-4
Notes to Financial Statements F-5
Schedules:
None
All schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or the notes thereto.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Employee Stock Purchase Plan Committee and Participants of the Science
Applications International Corporation Employee Stock Purchase Plan:
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the net assets available for benefits
of the Science Applications International Corporation Employee Stock Purchase
Plan at January 31, 1998 and 1997, and the changes in net assets available for
benefits for each of the three years in the period ended January 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Plan's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Diego, California
February 27, 1998
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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Statement of Net Assets Available for Benefits
=========== ===========
01/31/98 1/31/97
=========== ===========
ASSETS:
Investments at fair value:
SAIC Class A Common Stock $10,059,000 $ 6,093,000
(Cost $8,933,000 and $5,367,000 respectively)
Receivables:
Participant contributions withheld 978,000 32,000
Employer contributions receivable 109,000 2,000
----------- -----------
Net Assets Available for Benefits $11,146,000 $ 6,127,000
=========== ===========
See accompanying notes to financial statements.
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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Statement of Changes in Net Assets Available for Benefits
Year Ended
============ ============ ============
01/31/98 1/31/97 1/31/96
============ ============ ============
Unrealized appreciation of
investments in SAIC Common Stock $ 1,126,000 $ 726,000 $ 164,000
Realized appreciation of shares distributed 155,000 71,000 116,000
Participant contributions 11,090,000 6,980,000 5,263,000
Employer contributions 1,236,000 370,000 279,000
Benefits paid (8,588,000) (5,949,000) (5,855,000)
============ ============ ============
Decrease/Increase in net assets 5,019,000 2,198,000 (33,000)
Net assets at beginning of year 6,127,000 3,929,000 3,962,000
============ ============ ============
Net Assets at End of Year $ 11,146,000 $ 6,127,000 $ 3,929,000
============ ============ ============
See accompanying notes to financial statements.
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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
NOTE A - PLAN DESCRIPTION
The Science Applications International Corporation Employee Stock Purchase
Plan (the "Plan") is a three year plan the purpose of which is to secure for
Science Applications International Corporation (the "Company") and its
stockholders the benefits inherent in the ownership of capital stock of the
Company by employees of the Company and its subsidiaries. The Plan is intended
to provide to all eligible employees of the Company and designated subsidiaries
an opportunity to purchase shares of Class A Common Stock through payroll
deductions. It is intended that the Plan shall qualify under Section 423(b) of
the Internal Revenue Code. The 1995 Employee Stock Purchase Plan became
effective on July 14, 1995. The Plan is a successor plan to the 1993 Employee
Stock Purchase Plan which terminated on July 31, 1995. All shares purchased
under the 1993 Plan were distributed to participants or repurchased by the
Company. The plans are substantially similar except for the number of shares
reserved for issuance. The financial statements reflect the net assets available
for benefits and changes in net assets available for benefits of the 1995 Plan
as well as the 1993 Plan. Each participant is furnished with a copy of the
complete Plan before electing to participate in the Plan.
Science Applications International Corporation is the Trustee under the
Plan. No trustee fees have ever been paid by the Plan. No bonds of any nature
are furnished to the Plan by the Trustee, its officers or employees. The Plan is
administered by the Employee Stock Purchase Plan Committee (the "Committee")
whose members are appointed by the Company's Board of Directors to serve at the
discretion of the Board. The members of the Committee do not act in the capacity
of trustees. The members of the Committee receive no compensation from the Plan
for services rendered in connection therewith. The members of the committee as
of January 31, 1998 are A. Jenings, W. Reed, and W.A. Roper. The Plan is not
subject to the Employee Retirement Income Security Act of 1974, as amended.
At predetermined purchase dates during the year, the Trustee purchases for
the account of each participant the whole number of shares of the Company's
Class A Common Stock (the "Common Stock") which may be acquired from funds
available in the participant's Stock Purchase Account, together with the
Company's contribution as described below. The authority to control and manage
the operation and administration of the Plan is vested in the Committee.
Generally, all employees of the Company and its affiliates who have adopted the
Plan are eligible to participate in the Plan. Employees may contribute to the
Plan by authorizing payroll deductions in amounts equal to 3% or more, up to a
maximum of 10%, of their base compensation. These contributions are allocated to
the Stock Purchase Accounts of the respective participants. No interest is paid
on amounts in the participants' Stock Purchase Accounts.
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There is no general public market for the Common Stock. However, the
Company has established and maintains a limited secondary market for the Common
Stock through its wholly-owned subsidiary, Bull, Inc. This limited market
permits stockholders to sell stock to employees, consultants, and directors of
the Company who have been approved by the Board of Directors or the Operating
Committee of the Board of Directors as being entitled to purchase an equity
interest in the Company. All purchases of SAIC's Common Stock are made either in
the limited secondary market or from the Company.
The purchase price to be paid for shares of Common Stock is the prevailing
fair market value (Note B). In 1996, the Company paid or accrued 5% of the
purchase price and the remaining 95% was paid out of participant contributions.
In April 1997 the Board of Directors authorized an increase in company
contributions to 10% of the purchase price. The remaining 90% is paid out of the
participant contributions. A participant is not entitled to purchase an amount
of Common Stock having a fair market value, as measured on its purchase date, in
excess of 10% or $25,000 in any calendar year pursuant to the Plan and any other
employee stock purchase plans which may be adopted by the Company.
A participant's interest in his account is 100% vested at all times.
Shares of Common Stock acquired under the Plan will be distributed to the
participant prior to any record date established by the Company for any vote of
its stockholders. Until distribution occurs, the shares are held by the Company,
acting as Trustee, on behalf of the participants. Each participant is furnished
with a statement of accounting at the time of any distribution.
All shares of Common Stock purchased pursuant to the Plan are subject to
the Company's right of repurchase upon the participant's termination of
employment or affiliation with the Company. The repurchase price is the
prevailing Formula Price at that time. Such shares are also subject to the
Company's right of first refusal in the event that the participant desires to
sell such shares other than in the limited market.
Participants may withdraw the money held in their Stock Purchase Accounts
at any time prior to the acquisition of shares of Common Stock therewith,
although upon doing so the participant will no longer be eligible to re-enroll
until the beginning of the next applicable plan year.
The 1995 Employee Stock Purchase Plan will terminate on July 31, 1998.
From Plan inception through January 31, 1998, 872,847 shares of Common Stock
were purchased by the 1995 Employee Stock Purchase Plan.
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NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The accompanying financial statements are prepared on the accrual basis of
accounting.
Investment valuation and income, gains, and losses
The fair value of Common Stock is determined using the fair market value
pursuant to a stock price formula and valuation process which includes an
appraisal prepared by an independent appraisal firm. Periodic determinations of
fair market value of the Common Stock are made by the Board of Directors, with
the assistance of the independent appraisal firm. The Board of Directors
reserves the right to alter the formula. Realized gains and losses on Common
Stock are the difference between the fair market value when distributed and the
original cost of the shares of Common Stock purchased during the year or the
fair market value of shares held at the beginning of the year. Unrealized
appreciation or depreciation is computed as the fair market value of the Common
Stock held at the end of the year less the fair market value of the Common Stock
held at the beginning of the year or acquisition cost of Common Stock acquired
during the year. As of January 31, 1998 and 1997, the fair market value per
share was $39.13 and $25.96, respectively, for Class A Common Stock. The number
of shares held by the Plan was 257,053 and 234,693 on January 31, 1998 and 1997,
respectively.
Benefits distributable
Investments in Common Stock are distributed from the Plan prior to any
record date established by the Company for any vote of its stockholders.
Benefits distributable at January 31, 1998 and 1997 were $10,059,000 and
$6,093,000, respectively.
Administrative expenses of the Plan
All expenses incurred in the administration of the Plan are paid out of
the Plan assets unless the Company elects to pay such costs. During Plan years
ended January 31, 1998, 1997, and 1996, the Company paid all administrative
expenses of the Plan.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Contributions
Participant contributions are accrued when the participant earns the
compensation from which the contribution is made. Employer contributions are
accrued when the corresponding participant's contributions are accrued.
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NOTE C - TAX STATUS AND FEDERAL INCOME TAX CONSEQUENCES TO PARTICIPANTS
The Plan is not subject to federal income taxes and is intended to qualify
under Section 423(b) of the Internal Revenue Code.
No taxable income will be recognized by a participant in the Plan until
the taxable year of sale or certain other dispositions of the shares of Common
Stock acquired under the Plan.
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