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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year 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
Commission file number 1-7348
DYNAMICS RESEARCH CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts 04-2211809
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
60 FRONTAGE ROAD
ANDOVER, MASSACHUSETTS 01810-5498
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 475-9090
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ----------------
NONE NOT APPLICABLE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 Par Value
(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. [ ]
As of March 10, 2000, the aggregate market value of Common Stock held by
nonaffiliates of the Registrant was $49,486,770 and the number of shares of
Common Stock, $.10 par value, of the Registrant outstanding was 7,528,724.
Documents Incorporated By Reference
Portions of the 1999 Annual Report to Shareholders are incorporated by reference
in Parts I and II. Portions of the Registrant's Proxy Statement for the 2000
Annual Meeting of Shareholders are incorporated by reference in Part III.
The Exhibit Index is on pages 23 and 24.
DYNAMICS RESEARCH CORPORATION
Form 10-K
For the Fiscal Year Ended December 31, 1999
Part I Page
Item 1. Business 4
2. Properties 10
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 11
4A. Executive Officers of the Registrant 11
Part II
5. Market for Registrant's Common Equity and
Related Stockholder Matters 12
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 14
Part III
10. Directors and Executive Officers of the Registrant 14
11. Executive Compensation 15
12. Security Ownership of Certain Beneficial Owners
and Management 15
13. Certain Relationships and Related Transactions 15
Part IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 15
PART I
Item 1. Business
Dynamics Research Corporation (referred to as DRC or the company) was
incorporated in 1955 under the laws of the Commonwealth of Massachusetts. The
company is an innovative solutions provider, partnering with customers to apply
proven processes and technologies. The company delivers engineering, logistics
and information technology services and precision manufactured products that
enhance the performance and cost effectiveness of its customers' mission
critical systems. The company's Systems and Services segment represented 86% of
revenue from continuing operations for the year ended December 31, 1999.
Precision manufactured products, which includes the Encoder and Metrigraphics
business segments, represented 14% of 1999 revenue from continuing operations.
Systems and Services Segment
The company provides systems analysis, integration and software design and
development services. The Segment's information technology offerings also
include installation, systems operation, and maintenance. Systems built by the
company are used for aircraft maintenance and parts tracking, supply chain
management, training requirements, and for managing state government health and
human services commitments.
The company's major Department of Defense (referred to as DoD) information
systems programs are often referred to as logistics information systems. These
systems manage data related to inventory requirements and control, maintenance
and repair, warranty analysis, supply, and distribution of numerous products and
parts.
For more than thirty years, the company has provided services to the U.S.
Navy Strategic Systems Program office in three areas. First, the company
develops and maintains performance, reliability, and logistics databases for the
inertial guidance instruments housed in missile guidance systems and submarine
inertial guidance systems. These databases track detailed information on
thousands of component parts comprising the systems. In connection with these
databases, the company has successfully integrated customer workflow and
database activity information with Internet technology. Second, the company
provides independent analysis and monitoring of submarine-based, inertial
guidance systems and electronic modules. The company designs, constructs,
installs and supports test equipment used in the U.S. Navy Trident program.
Third, the company is involved in the design of a closed-loop system used in the
field of parameter control in semiconductor manufacture. This process is being
developed together with other companies under the auspices of the U.S. Navy in
the San Diego, California, Space and Naval Warfare Systems Center. The company
performs computer-aided, semiconductor circuit analysis for its Navy customer as
well as commercial companies.
The DRC-developed Weapon Systems Management Information System (WSMIS)
assesses the "health" and capability of the U.S. Air Force weapon systems to
meet wartime objectives. The company has served as the overall functional
integrator of WSMIS and the developer of most
WSMIS modules. The company currently provides WSMIS operational and software
development support. As a decision-support tool for assessing the impacts of
logistics status on potential wartime capabilities, WSMIS computes inventory
requirements, purchasing needs, and logistics capability assessments for
complex, high-priced aircraft spare parts necessary to meet aircraft
availability requirements.
A major component of the company's DoD business consists of a wide variety
of engineering, technical assistance and management support services performed
under various indefinite order, indefinite quantity contracts. Work performed
under these contracts is generally done on a time and materials basis utilizing
a wide range of the company's technical and management skills to plan, analyze,
design, test, support, train, maintain, and dispose of a variety of complex
systems. Systems include radar, missile, aircraft, information, logistics and
munitions.
The company provides support at all stages of a system's life cycle. In
response to emerging requirements, the company helps its Federal Government
customers define, develop, and initiate new programs. The company also helps
customers obtain program approval, conduct strategic planning, and evaluate
proposals from private contractors. After prime contract awards, the company
helps monitor contractor activities, evaluate progress, and measure performance
against program requirements. Products and services include computer-based
training, systems integration, and business process improvement/reengineering.
Under a variety of contracts, the company supports the U.S. Air Force at bases
such as Hanscom Air Force Base, Scott Air Force Base, Langley Air Force Base,
Maxwell Air Force Base, Gunter Annex, Peterson Air Force Base, and Eglin Air
Force Base.
The company provides engineering services in excess of $35 million per year
to the Electronics Systems Center (ESC). Under the Information Technology
Support Program (ITSP), the company provides acquisition management, systems
engineering, systems integration, test and evaluation, and computer based
training to ESC's System Program Offices and Product Acquisition Directorates.
In 1995, the U.S. Air Force awarded the company a five-year contract for
Technology Task-Order Engineering Services (TTOES). Originally valued at up to
$23.7 million, in 1997 the contract ceiling was increased to $31.2 million. The
company has provided engineering, logistics, and software support on programs
such as the B-1B, the B-2, the B-52, the KC-135, and the E-3A aircraft repair,
maintenance, and upgrade programs. From its origin at the Oklahoma City Air
Logistics Center (ALC), DRC has expanded its TTOES task orders to include work
at other ALC's located at Warner Robins, GA; Ogden, UT; and San Antonio, TX.
Additional tasking has centered on providing support to Air Force reengineering
and business process improvement initiatives at these ALC's. Recently, the
company was awarded a prime contract for the Design Engineering Support Program
at Ogden ALC.
The company has designed, developed, installed and, since August 1999, has
operated a logistics and supply chain information management system to support
the U.S. Air Force's landing gear maintenance, repair and overhaul (MRO)
operations at Hill Air Force Base in Ogden,
Utah. Recently, the company was awarded additional MRO workload for Gas Turbine
Engines, Hydraulics and Armament Systems at Ogden.
Since 1993, the company has provided the US Army Aviation and Missile
Command with specialized studies and analyses in aviation/missile system
development, acquisition and sustainment. Since 1996, the company has been a
prime contractor on a five-year, $33 million contract under a U.S. Army program
known as Programmatic and Technical Support. The company supports a broad range
of helicopter and missile systems in varying life cycle stages. Additionally,
the company supports other U.S. Army activities with acquisition logistics,
systems engineering and other related program management services at the
Tank-Automotive Command and Communications-Electronics Command from its office
in Huntsville, Alabama.
Combining its expertise in weapon system acquisition processes with its
expertise in systems analysis, design, training and simulation and human
factors, the company performs human-systems integration and force analysis.
Since 1987, the company has provided force analysis support to the Army Research
Laboratory. These activities are focused on developing tools that support
analyzing soldier and system effectiveness, identifying and assessing force
improvement options (doctrine, training, leader development, organization and
material), and ensuring soldier considerations are addressed in force
improvements. Also, under contract from the U.S. Army Research Laboratory, the
company provides analysis, system development and support in several functional
areas which include assessment of manpower, personnel and training issues;
analysis of soldier systems performance; and integration of methods and
databases for use by system designers.
DRC is the developer of the Training System Requirements Analysis (TSRA)
Tools, which are a set of computer programs designed to help instructional
designers perform the initial phases of the Instructional Systems Development
(ISD) process. The TSRA Tools have been developed with the Naval Air Warfare
Center Training Systems Division and are widely used throughout the DoD by
government and contractor organizations. The market for DRC's TSRA Tools has
expanded beyond the military to include the Federal Aviation Administration and
National Mine Health and Safety Academy.
As a subcontractor to Lockheed Martin, the company is supporting the U.S.
Army's Warfighter Simulation 2000, a simulation system supporting the training
of commanders and staff under a wide variety of battlefield scenarios. The
company's services include providing military subject matter experts, software
and human factors engineering, database development for equipment and knowledge
acquisition, as well as manpower staffing reduction analysis.
The company is also a subcontractor to Lockheed Martin for the Close Combat
Tactical Trainer (CCTT) program. CCTT simulates Army tank and mechanized
infantry units from vehicle crews to the battalion level. CCTT uses distributed,
interactive simulation technology to provide a "virtual" training environment.
DRC conducts all manpower and personnel integration activities associated with
the CCTT. DRC is playing a similar role as a subcontractor to Lockheed Martin on
the United Kingdom Combined Arms Tactical Trainer, the UK's version of the CCTT.
The company is a subcontractor to Raytheon on the U.S. Air Force National
Air and Space Model. The company develops conceptual models and collects data on
mission space objects and processes.
In 1996, the company began working on a U.S. Army, four-year contract to
implement, apply, and manage DRC-developed teamwork training designed to improve
teamwork and reduce errors in emergency medicine. The program, called MedTeams,
has been instituted in a dozen military and civilian hospitals in the United
States.
In March 1998, DRC was awarded a contract under the Air Force Aeronautical
Systems Center Advisory and Assistance Services (A&AS) Omnibus program. The
purpose of this contract is to provide support for engineering, manufacturing,
configuration/data management, acquisition management and test and evaluation
required in the acquisition, development, production and sustainment of various
equipment and weapons systems. The contract provides DRC the opportunity to
compete against other companies for tasks under the A&AS Omnibus program over
three years.
In recent years, the company has expanded beyond the DoD marketplace and won
various state and Federal agency contracts. The company provides systems design,
development, implementation and support services to Health and Human Services
Departments in four states-Ohio, New Hampshire, Arkansas and Colorado. The
company implemented a distributed computer-based Statewide Automated Child
Welfare Information System (SACWIS) for the State of New Hampshire. This system
manages child welfare cases handled by the State's Department of Health and
Human Services. Under ongoing contracts DRC provides additional functional and
technical enhancements to the SACWIS system as well as other information
technology services. The company is also developing a SACWIS for the State of
Arkansas.
In December 1997, the company received a three-year contract from the State
of Colorado Department of Human Services to serve as a prime contractor for its
Children, Youth and Families project. The contract was a result of a competitive
procurement for the design, development and implementation of a child welfare
and youth corrections system consisting of software, training and a state-wide
computer network infrastructure.
In addition, the company installed, under a prime contract, the Ohio
state-wide computer network infrastructure for the Support Enforcement, Tracking
Systems and Ohio Works First Programs.
The company continues to provide the U.S. Department of Treasury with
information technology services for the Internal Revenue Service and other
Treasury departments. During 1998 and 1999 the company's work for the IRS
focused on year 2000 procedures. In 2000, the company will be focusing on full
life cycle development of the Compliance Research Information Service.
Precision Manufactured Products
The company's precision manufacturing business consists of two business
segments, Encoder and Metrigraphics.
The Encoder Division designs, manufactures, and markets a line of optical
encoders that convert analog motion and position information into digital
signals used in a wide variety of industrial products and systems which include:
machine tools, robotics, engine fuel-control systems, packaging equipment and
factory automation equipment. Optical encoders are essential elements of today's
electronically-controlled systems and equipment.
The Metrigraphics Division's expertise centers on photolithography, thin
film deposition of metals and dielectrics and electro forming. Metrigraphics'
superior ability to design and manufacture components and maintain critical
tolerances is an important driver for a wide range of high-technology
applications. The company currently applies these technologies in four distinct
applications: 1) computer printer nozzle plates and hard drive test devices; 2)
medical applications for micro flex circuits used in angioplasty and for
bloodtesting; 3) electrical test devices for application in flexible interposers
and 3-D microstructures; and 4) devices used in the manufacture of fiber optic
system components requiring precision alignment and 3-D micro structures.
Metrigraphics' highest volume application is currently for nozzles used in
inkjet printer cartridges. In addition to its electroform parts for printers and
medical instruments, Metrigraphics manufactures precision glass parts for
computer peripherals, factory automation equipment, electronic instrumentation
and semiconductor equipment.
Telecommunications Fraud Control Systems
In 1996, the company was licensed to enhance, market and maintain a
telecommunications fraud control system developed by Pacific Bell Telephone
Company. The company made significant investments in this and related systems
and software technologies to broaden the types of telephone fraud detected and
to position the product for sale to competitive local exchange carriers and
others. The company's customers included the regional Bell operating telephone
companies. In December 1998, the company adopted a plan to exit this business
during 1999. The business was sold in June 1999.
Software Development Technology
In 1998, the company exited its Visual Magic business which developed
object-oriented software for Internet applications. The company sold an
exclusive license to the software and other assets in exchange for an equity
interest in the acquiring company, Empresa, Inc. In 1999, Empresa ceased
operations, and the company wrote off its investment of $1.4 million.
Sales and Marketing
Contracts with defense, state and other government agency customers are
obtained by marketing and technical personnel employed by the company. The
company's other products are sold by sales personnel employed by the company and
outside sales representatives.
Government Contracts
During 1999, the company's revenues from contracts with the DoD, either as
prime contractor or subcontractor, accounted for approximately 66% of the
company's total revenues. The company's contracts with the Government are
generally subject to termination at the convenience of the Government. However,
the company would be reimbursed for its allowable costs to the time of
termination and would be paid a proportionate amount of the stipulated profit
attributable to the work actually performed. Although Government contracts may
extend for several years, they are generally funded on an annual basis and are
subject to reduction or cancellation in the event of changes in Government
requirements or budgetary concerns. If the U.S. Government curtails expenditures
for research, development and consulting activities, such curtailment might have
an adverse impact on the company's revenues and earnings.
The company's revenues from contracts with four different states accounted
for 16% of 1999 revenues. Revenues under various contracts with the State of
Ohio accounted for approximately 7% of 1999 revenues. The company's state
contracts are generally either fixed-price or time and material. In certain
instances, funding for these contracts is subject to annual state legislative
approval.
The company's government contracts fall into one of three categories: (1)
fixed-price, (2) time and materials, and (3) cost plus fixed-fee. Under a
fixed-price contract, the government pays an agreed upon price for the company's
services or products, and the company bears the risk that increased or
unexpected costs may reduce its profits or cause it to incur a loss. Conversely,
to the extent the company incurs actual costs below anticipated costs on these
contracts, the company could realize greater profits. Under a time and materials
contract, the government pays the company a fixed hourly rate intended to cover
salary costs and related indirect expenses plus a profit margin. Under a cost
plus fixed-fee contract, the government reimburses the company for its allowable
direct expenses and allowable and allocable indirect costs and pays a negotiated
fee.
Backlog
At December 31, 1999, the company's backlog of unfilled orders was
approximately $106.7 million compared with $105.4 million at December 31, 1998.
The company expects that substantially all of its backlog at December 31, 1999
will be filled during the year ending December 31, 2000. The company has a
number of multi-year contracts with agencies of the U.S. and state governments
on which actual funding generally occurs on an annual basis. The company's
business does not have seasonal characteristics but a portion of its funded
backlog is based on annual purchase contracts, and the amount of funded backlog
as of any date can be affected by the timing of order receipts and deliveries
thereunder.
Competition
The company competes with both domestic and foreign firms, including larger
diversified companies and smaller specialized firms. The U.S. Government's own
in-house capabilities are also, in effect, competitors because various agencies
perform certain types of services which might otherwise be performed by the
company. The principal competitive factors for systems and services are price,
performance, technical competence and reliability. In the commercial businesses,
the company competes with other manufacturers of encoders, electroform vendors
and suppliers of precision measurement scales. The principal competitive factors
affecting the precision components manufacturing businesses are price, product
quality and custom engineering to meet customers' system requirements.
Research and Development
The company expended approximately $1.5 million (inclusive of overhead and
other indirect costs) on new product and service development during the year
ended December 31, 1999, as compared to expenditures of $2.7 million during 1998
and $1.2 million during 1997.
Raw Materials
Raw materials and components are purchased from a large number of
independent sources and are generally available in sufficient quantities to meet
current requirements.
Environmental Matters
Compliance with federal, state and local provisions relating to the
protection of the environment has not had and is not expected to have a material
effect upon the capital expenditures, earnings or competitive position of the
company.
Employees
At December 31, 1999, the company had 1,613 employees.
Proprietary Information
Patents, trademarks and copyrights are not materially important to the
business of the company. The U.S. Government has certain proprietary rights in
processes and data developed by the company in its performance of government
contracts.
Item 2. Properties
The company leases offices and other facilities, totaling approximately
479,000 square feet, which are utilized for its federal and state government
services, manufacturing and warehousing
operations as well as its marketing and engineering offices. The company has
manufacturing and office space in Wilmington, Massachusetts under three leases
totaling 113,000 square feet, expiring in 2000, with options to the year 2005.
The remaining leased facilities consist of offices in 26 locations across the
United States. The company owns a 135,000 square foot facility in Andover,
Massachusetts that is utilized for its DoD service operations and corporate
administrative offices.
The company's total rental cost for 1999 was $3.7 million.
The company believes its properties are adequate for its present needs.
Item 3. Legal Proceedings
The company is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
Item 4A. Executive Officers of the Registrant
The following is a list of the names and ages of the executive officers of
the company indicating all positions and offices held by each person and each
person's principal occupations or employment during the past five years. The
executive officers were elected by the Board of Directors and will hold office
until the next annual election of officers and their successors are elected and
qualified, or until their earlier resignation or removal by the Board of
Directors. There are no family relationships between any executive officers and
directors.
Position Age
-------- ---
John S. Anderegg, Jr. Chairman and Director 76
James P. Regan President, Chief Executive Offficer 59
and Director
John L. Wilkinson Vice President, Human Resources 60
David Keleher Vice President of Finance, 50
Chief Financial Officer
Chester Ju Vice President, Encoder Division 50
and Metrigraphics Division
Alan R. Cormier Vice President and General Counsel 49
Messrs. Anderegg, Wilkinson and Ju has served in his respective position
for at least five years.
Mr. Regan joined the company in 1999 as President, Chief Executive Officer
and Director. Prior to that he was President and Chief Executive Officer of
CVSI, Inc. from 1997 to October 1999 and served as Senior Vice President of
Litton PRC from 1993 to 1996.
Mr. Keleher joined DRC as Vice President of Finance and Chief Financial
Officer in January 2000. Prior to that he was employed by Raytheon Corporation
as Group Controller in 1999 and Assistant Corporate Controller in 1998. Prior to
that he served as corporate controller of Act Manufacturing, Inc. in 1997 and as
Manager, Corporate Accounting and Reporting at Digital Equipment Corporation
from 1991 to 1997.
Mr. Cormier joined the company as Vice President and General Counsel in
January 2000. Prior to that he was Associate General Counsel at Wang
Laboratories Inc. from 1995 to 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock of the company is traded on the NASDAQ National Market
under the symbol DRCO.
The high and low prices for the quarters in 1998 and 1999 are listed below.
1999 1998
High Low High Low
First quarter $ 7.19 $ 2.88 $ 10.02 $ 9.72
Second quarter 6.63 4.25 11.47 11.18
Third quarter 6.25 3.50 9.43 9.06
Fourth quarter 9.50 3.94 6.00 5.52
The number of holders of record of the company's common stock are described
in the company's Annual Report to Shareholders for 1999 under the caption
"Number of Shareholders," and such information is incorporated herein by
reference.
In September 1984, the Board of Directors indicated its intention not to
declare cash dividends to preserve cash for the future growth and development of
the company. The company did not declare any cash dividends between 1984 and
1999 and does not anticipate doing so for the foreseeable future.
Item 6. Selected Financial Data
The section entitled, "Five Year Summary of Selected Financial Data" in the
company's Annual Report to Shareholders for 1999 is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the company's Annual Report to
Shareholders for 1999 is incorporated herein by reference.
The company has made and may make statements from time to time which
constitute or contain forward-looking information as that term is defined within
the meaning of the Federal securities laws. These statements may be identified
by such forward-looking words or other forward-looking terminology.
Forward-looking statements are not guarantees of future performance and actual
results may differ materially from those in the forward-looking statements as
the results of risks and uncertainties including those identified in Exhibit 99.
The company assumes no obligation to update any forward-looking information.
Item 8. Financial Statements and Supplementary Data
The following financial statements are filed as part of this Annual Report:
Report of Independent Public Accountants
Consolidated Balance Sheets at December 31, 1999 and December 31, 1998
Consolidated Statements of Operations for the three years ended
December 31, 1999
Consolidated Statements of Stockholder's Equity for the three years
ended December 31, 1999
Consolidated Statements of Cash Flows for the three years ended
December 31, 1999
Notes to Consolidated Financial Statements
(The consolidated financial statements and related notes listed above are
incorporated by reference to the company's Annual Report to Shareholders for the
year 1999.)
Report of Independent Public Accountants on Schedule to Consolidated
Financial Statements
Schedule II - Valuation and Qualifying Accounts for the three years
ended December 31, 1999
The foregoing report of independent public accountants and schedule II are
included as part of Item 14 of this Annual Report on Form 10-K and are set forth
on page 16 and 22 filed herewith.
All other financial statements and schedules have been omitted because the
information required to be submitted has been included in the financial
statements and related notes or they are either not applicable or not required
under the rules of Regulation S-X.
Quarterly financial data presented on page 8, and Management's Discussion
and Analysis of Financial Condition and Results of Operations presented on pages
9-12, of the company's Annual Report to Shareholders for the year 1999, are also
incorporated herein by reference. With the exception of the portions listed in
the above index, the Annual Report referred to above is not to be deemed filed
as part of the financial statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to Directors of the Registrant in the section
entitled "Election of Directors" in the company's definitive proxy Statement for
the 2000 Annual Meeting of Stockholders, which will be filed with the Securities
and Exchange Commission within 120 days after the close of the fiscal year ended
December 31, 1999, is incorporated herein by reference.
Information relating to the Executive Officers of the company is included in
Item 4A of Part I of this Form 10K.
Item 11. Executive Compensation
Information called for by this item is incorporated by reference from the
section entitled "Compensation and Related Matters" in the company's definitive
Proxy Statement for the 2000 Annual Meeting of Stockholders, which will be filed
with the Securities and Exchange Commission within 120 days after the close of
the fiscal year ended December 31, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information called for by this item is incorporated by reference from the
sections entitled "Common Stock Ownership of Certain Beneficial Owners and
Management" in the company's definitive Proxy Statement for the 1999 Annual
Meeting of Stockholders, which will be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended December 31,
1999.
Item 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2) Financial Statements and Schedules - See Item 8.
(b) (3) Exhibits. The exhibits that are filed with this Form 10-K, or that
are incorporated herein by reference, are set forth in the Exhibit
Index, which appears in Part IV of this report on pages 23 and 24.
(c) Reports on Form 8-K.
The company filed a report on Form 8-K on October 7, 1999 to report the
signing of the Second Amended and Restated Revolving Credit Agreement dated as
of September 30, 1999.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
TO CONSOLIDATED FINANCIAL STATEMENTS
To Dynamics Research Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Dynamics Research
Corporation's annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 11, 2000. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the accompanying index is the responsibility of
the company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
February 11, 2000
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.
Date: March 27, 2000
DYNAMICS RESEARCH CORPORATION
by: /s/ James P. Regan
------------------
James P. Regan, President
(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 indicated on the 27th of March, 2000.
/s/ James P. Regan
- -----------------------------
James P. Regan President, Chief Executive
Officer and Director
/s/ David Keleher
- -----------------------------
David Keleher Vice President of Finance,
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ John S. Anderegg, Jr.
- -----------------------------
John S. Anderegg, Jr. Chairman and Director
/s/ Francis J. Aguilar
- -----------------------------
Dr. Francis J. Aguilar Director
/s/ Martin V. Joyce, Jr.
- -----------------------------
Martin V. Joyce, Jr. Director
/s/ Kenneth F. Kames
- -----------------------------
Kenneth F. Kames Director
/s/ James P. Mullins
- -----------------------------
Gen. James P. Mullins Director
SCHEDULE II
DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(in thousands of dollars)
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES RETURNS
Balance, December 28, 1996 $ 340
Additions charged to expense 86
Write-off of uncollectible accounts, net (209)
-------
Balance, December 31, 1997 $ 217
Additions charged to expense 149
Write-off of uncollectible accounts, net (50)
-------
Balance, December 31, 1998 $ 316
Additions charged to expense 491
Write-off of uncollectible accounts, net (17)
-------
Balance, December 31, 1999 $ 790
=======
ACCRUAL OF LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS
Balance, December 31, 1997 $ --
Additions charged to discontinued operations expense 4,148
-------
Balance, December 31, 1998 $ 4,148
Results from discontinued operations charged against accrual (1,510)
Gain on disposal of discontinued operations (2,197)
Balance, December 31, 1999 $ 441
=======
PROVISION FOR RESTRUCTURING COSTS
Balance, December 31, 1997 $ --
Balance, December 31, 1998 --
Additions charged to restructuring expense 1,157
-------
Balance, December 31, 1999 $ 1,157
=======
EXHIBIT INDEX
3.0 Certificate of Incorporation and By-Laws.
3.1 Restated Articles of Organization dated May 22, 1987.
(Incorporated by reference to the Registrant's Form 10-Q for the
quarter ended 6/13/87)
3.2 By-Laws dated May 22, 1987. (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended 6/13/87)
4.0 Instruments defining the rights of security holders, including
indentures.
4.1 Common stock certificate.
4.2 Certificate of Vote of Directors Establishing Series B Preferred
Stock (Incorporated by reference to the Registrant's Form 8-K on
June 25, 1998).
4.3 Amendment to Certificate of Vote Establishing Series B Preferred
Stock.
4.4 Rights Agreement dated as of February 17, 1998 between the
Company and American Stock Transfer & Trust Company, as Rights
Agent. (Incorporated by reference to the Registrant's Form 8-K
on June 25, 1998)
10.0 Material Contracts
10.1 Amended 1983 Stock Option Plan. (Incorporated by reference to
the Registrant's Form 10-K for the year ended 12/27/87)
10.2 Form of Dynamics Research Corporation Indemnification Agreement
for Directors. (Incorporated by reference to the Registrant's
Form 10-K for the year ended 12/28/91)
10.3 Form of Dynamics Research Corporation Severance Agreement for
Mr. Anderegg. (Incorporated by reference to the Registrant's
Form 10-K for the year ended 12/28/91)
10.4 Dynamics Research Corporation Deferred Compensation Plan for
Non-Employee Directors. (Incorporated by reference to the
Registrant's Form 10-K for the year ended 12/28/91)
10.5 Form of Consulting Agreement between Dynamics Research
Corporation and Albert Rand. (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended 3/31/97)
10.6 Form of Supplemental Retirement Pension Agreement between
Dynamics Research Corporation and Albert Rand. (Incorporated by
reference to the Registrant's Form 10-Q for the quarter ended
3/31/97)
10.7 Amended 1993 Equity Incentive Plan
10.8 Amended 1995 Stock Option Plan for Non-Employee Directors
10.9 Loan and Security Agreement dated as of February 10, 2000 by and
among Dynamics Research Corporation, and its subsidiaries and
Brown Brothers Harriman & Co. and Family Bank FSB. (Incorporated
by reference to the Registrant's Form 8-K dated March 24, 2000.)
10.10 Mortgage Security Agreement and Assignment dated as of February
10, 2000 by and among Dynamics Research Corporation and Brown
Brothers Harriman & Co. and Family Bank FSB. (Incorporated by
reference to the Registrant's Form 8-K dated March 24, 2000.)
10.11 Form of Employment Agreement between Dynamics Research
Corporation and James P. Regan.
10.12 Form of Change of Control Agreement between Dynamics Research
Corporation and James P. Regan.
13.0 Annual Report to security holders, Form 10-Q or quarterly reports to
security holders.
13.1 The Company's Annual Report to Shareholders for the year ended
December 31, 1999 filed herewith with the exception of the
information incorporated by reference in parts I, II and IV of
this Form 10-K is not deemed to be filed as part of this report.
23.0 Consents of experts and counsel
23.1 Consent of Independent Accountants (Arthur Andersen LLP) dated
March 29, 2000 filed herewith.
99.0 Important Factors Regarding Forward-Looking Statements.
All documents incorporated by reference may be found at Commission file
number 1-7348.