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1
US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/x/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1995
-----------------
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 0-16284
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National TechTeam, Inc.
-------------------------------
(Name of issuer in its charter)
Delaware 38-2774613
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22000 Garrison Avenue, Dearborn, MI 48124
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (313) 277-2277
Securities registered under Section 12(b) of the Securities Exchange Act: None
----
Securities registered under Section 12(g) of the Securities Exchange Act: Common Stock, $.01 par value
-----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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.
/x/ Yes / / No
Indicate by check mark if the 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. / /
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1996 was approximately $54,000,000.
Revenues for issuer's most recent fiscal year ended December 31, 1995 were
$41,787,462.
The number of outstanding shares of the issuer's common stock as of March 15,
1996 was 11,224,655.
DOCUMENTS INCORPORATED BY REFERENCE
National TechTeam, Inc.'s definitive Proxy Statement to be filed no later than
120 days after the end of the year covered by this report is incorporated by
reference into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT
National TechTeam, Inc., a Delaware Corporation ("TechTeam" or "Company"), was
formed as a result of the 1987 merger of MegaVest Industries, Inc., a publicly
traded corporation, and Computer Trade Development Corporation, a privately
held company in the high technology industry. Computer Trade Development was
founded in 1979 by Dr. William F. Coyro Jr. for the purpose of selling
microcomputer equipment and providing microcomputer training and support
services. Previous to the merger, MegaVest Industries, Inc. was a "blind-pool"
company that was organized in 1986 solely for the purpose of investing in
business opportunities, including acquisitions. Immediately after the merger
the name of the company was changed to National TechTeam, Inc.
TechTeam has now evolved into a computer services company that provides call
center services, corporate support services, systems integration, and training
for major companies on an international scale. Headquartered in Dearborn,
Michigan, TechTeam also supports customers through facilities located in
Lansing, Southfield, and Troy, Michigan; Chicago, Illinois; San Francisco,
California; Dallas, Texas; Indianapolis, Indiana; Seattle, Washington and
Chelmsford, England.
DEPARTMENTS AND SERVICES
TechTeam is organized into functional departments along the service lines
offered. These service lines are described in detail in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
National TechTeam provides integrated solutions in computer support and
services, network services, computer training, consulting, and contract
computer services. The Company has also formed strategic relationships with
the major computer hardware and software manufacturers such as IBM,
Hewlett-Packard, Novell, Sun, Netscape, Computer Associates, and Oracle, in
order to sell, train, and support their products in corporate environments.
TechTeam believes it is well positioned, with its integrated suite of services,
to take advantage of one of the largest growing segments in the computer
industry.
TechTeam continues to believe that the largest growth segment in the computer
industry during the next decade will be in providing services to corporations
to increase efficiency and manage computer technology more productively. The
need for computer support and services has grown exponentially with the
dramatic rise in computing power and the number of computer users. TechTeam
believes that demand will continue to rise through the 1990's as networks
proliferate and applications become even more sophisticated.
CUSTOMERS
TechTeam has developed a strong customer base. The Company's business activity
has continued its positive upward trend with a number of significant
announcements throughout 1995. In February, the Company announced a major
systems integration contract with the Prosecuting Attorney's Association of
Michigan to automate all 82 of their offices throughout Michigan. In July,
TechTeam announced a significant new contract with AAA Michigan for a
comprehensive computer help desk support center, and that it would provide
office automation and end-user computer training for all north American
locations of NBD Bank. In August, the Company announced a contract to provide
technical support for the Visio product line. Also in 1995, TechTeam signed
the largest new contract in the Company's history, with revenues conservatively
estimated in excess of $10 million during the first year of the contract.
The Company has maintained its well balanced customer profile including, Ford
Motor Company and two finance-related subsidiaries, Chrysler Corporation,
Hewlett-Packard Corporation, Micrografx, Motorola, and AT&T to name a few.
TechTeam continues to concentrate its marketing efforts toward best-in-class
companies in their respective industries. Providing value added solutions,
while improving productivity in hardware and software applications, computer
training, consulting, contract computer services, and the management of
computer technologies, is the Company's primary focus.
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3
COMPETITION
The marketplace for computer support and services is intensely competitive.
The dramatic rise in the number of computer users, rapid technological
advancements, and a surge in outsourcing has increased the demand for these
services. TechTeam has concentrated on providing integrated solutions in call
center services, corporate support services, systems integration, and training.
TechTeam believes that there are many companies providing at least one service
which competes directly with one or more of TechTeam's services. Many of these
competitors are substantially larger than TechTeam and have greater financial,
technical, and marketing resources. However, the Company believes there are
several factors that contribute to its ability to compete effectively in the
markets it serves. These include the breadth and quality of its integrated
solutions, experience and success with best-in-class companies, diversification
of its customer base, and its unique customer focused computer service
offerings.
EMPLOYEES
As of March 15, 1996 TechTeam had a total of 1,056 employees of which 135 are
part-time. TechTeam believes its relationship with its employees is excellent.
ITEM 2. PROPERTIES
The following table sets forth the primary real properties which TechTeam
leases and occupies:
Approximate
Lease Term Beginning Square
Location Function & Expiring Footage
-------- -------- ----------- -------
Dearborn, MI World Headquarters 11/16/87 - 04/01/97 15,290
Dearborn, MI North American Training Center 10/01/88 - 04/01/97 19,468
Southfield, MI World Call Center Headquarters 11/01/93 - 06/30/98 30,817
Chicago, IL Chicago Regional Office 09/01/93 - 08/31/96 5,334
Dallas, TX Dallas Regional Office 10/01/95 - 09/30/00 32,666
Troy, MI Training Center 01/01/96 - 12/31/98 2,345
Indianapolis, IN Training Center 01/01/96 - 12/31/00 1,881
Seattle, WA Call Center 04/01/96 - 03/31/97 3,175
TechTeam believes that the facilities it occupies are well maintained and in
good operating condition. The offices include general office space and 17
computer training classrooms equipped with microcomputers, workstations, UNIX
and NT servers and X-terminals. Because some TechTeam services are performed
at customer sites, the cost of maintaining multiple offices is minimized. In
addition to the properties listed in the above table, TechTeam employs
personnel and performs ongoing business in California and the United Kingdom.
ITEM 3. LEGAL PROCEEDINGS
TechTeam is not aware of any legal proceedings against it.
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 1995.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED STOCKHOLDER MATTERS
National TechTeam's common stock trades on The Nasdaq Stock Market under the
symbol "TEAM". The following table reflects the high and low prices for each
quarter for the two year period ended December 31, 1995.
YEAR ENDED DECEMBER 31
1995 1994
---- ----
QUARTER LOW HIGH LOW HIGH
First $ 3.38 $ 5.25 $ 4.63 $ 9.63
Second 4.00 6.50 5.75 8.25
Third 5.25 7.25 5.13 7.50
Fourth 5.00 6.00 4.63 7.63
National TechTeam has not paid cash dividends and anticipates that dividends
will not be paid in the foreseeable future and that all retained earnings will
be used to develop and expand TechTeam's business.
TechTeam had 1,079 shareholders of record as of March 15, 1996.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of TechTeam should be read in conjunction
with the consolidated financial statements and related notes appearing in Item
8 of this report. In the opinion of management, the financial data presented
below contains all adjustments necessary for fair presentation.
FOR THE YEAR: 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Revenues $41,787,462 $30,224,428 $20,443,947 $10,902,266 $7,905,485
Income before tax provisions 4,077,303 3,371,924 2,769,098 1,031,301 141,428
Net income 2,399,067 1,971,049 1,672,413 766,301 56,939
Earnings per share 0.21 0.18 0.18 0.09 0.01
Weighted average number of
shares outstanding 11,360,768 10,981,183 9,306,255 8,421,756 7,618,221
AT YEAR END:
Current assets $16,191,444 $12,889,697 $6,173,176 $3,084,774 $2,023,040
Current liabilities 3,838,529 1,173,196 2,005,995 2,036,810 1,477,581
Total assets 22,285,523 17,148,682 10,299,647 4,130,459 2,650,229
Long-term liabilities 555,028 146,460 214,100 104,362 39,587
Total shareholders' equity 17,891,966 15,829,026 8,079,552 1,989,287 1,133,061
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to revenues of
certain items in the Company's Consolidated Statements of Operations:
Year Ended December 31
1995 1994 1993
---- ---- ----
REVENUES:
Call center services 36.2% 23.7% 11.4%
Corporate support services 35.3 42.5 49.3
Systems integration 18.9 18.5 12.9
Training programs 9.6 15.3 26.4
----- ----- -----
TOTAL REVENUES 100.0% 100.0% 100.0%
===== ===== =====
GROSS MARGIN (Revenues less directly related expenses):
Call center services 30.7% 32.2% 23.3%
Corporate support services 29.6 27.4 22.9
Systems integration 0.2 5.4 5.0
Training programs 10.8 21.6 30.4
----- ---- ----
TOTAL GROSS MARGIN 22.6 23.6 22.6
SELLING, GENERAL AND ADMINISTRATIVE AND INTEREST (12.9) (12.9) (9.1)
GAIN ON SALES OF INVESTMENT - 0.5 -
----- ---- ----
NET MARGIN (INCOME BEFORE TAX PROVISIONS) 9.7% 11.2% 13.5%
===== ==== ====
COMPARATIVE PERFORMANCE 1995 VERSUS 1994
National TechTeam established new records for revenues and earnings in 1995.
TechTeam earned net income of $2,399,067, or $.21 per share, for 1995 as
compared to a net income of $1,971,049, or $.18 per share, for 1994. The
Company's total revenues increased by $11,563,024 in 1995 to $41,787,462, a
38.3% increase over 1994 revenues.
Call center services - Revenues from call center operations increased by
$7,950,297 in 1995. This was a 110.8% increase over call center revenues in
1994. The Company had 18 contracts in place at December 31, 1995 compared to
the seven contracts at December 31, 1994. The margin on this line of service
decreased between 1994 and 1995 as start-up costs related to new contracts were
incurred, mitigated to some extent by amounts billed at the commencement of
certain new contracts; see Notes to the Consolidated Financial Statements, Note
A - Summary of Significant Accounting Policies, Revenue recognition. This
service line consists of international 800 and 900 telephone support for
computer hardware, computer software and other products and services.
Corporate support services - There was a $1,895,098 (14.8%) increase in
revenues generated from providing computer support and contract staffing
services. The margin on this line of service increased between 1994 and 1995
because of increased utilization of staff resources. The increase in corporate
support services revenues resulted from continued customer demand for
TechTeam's computer services personnel at Ford and other major accounts.
Corporate support services includes a variety of technical services, including
consulting, programming services, and the placement of computer personnel at
customer sites to support end-user applications via on-site help desks and
telephone hotline services. Contracts for these services are generally
negotiated on an hourly rate basis or are priced on a project basis.
Systems integration - There was a $2,313,190 (41.3%) increase in revenues in
this service line between 1994 and 1995. The increased revenues reflect a
growing demand for TechTeam's systems integration, database design and
applications development
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6
COMPARATIVE PERFORMANCE 1995 VERSUS 1994 - CONTINUED
services. The margin on this line of service decreased between 1994 and 1995
as the Company incurred losses in excess of $100,000 related to settlement of a
lawsuit and experienced substantial margin pressure on the sale of the
Company's computer hardware and software products.
Training programs - Revenues for 1995 decreased $595,561 (12.9%) as compared to
1994, due to a reduced scope of training services for a major customer. The
Company's experience is that enrollments are somewhat cyclical in nature. The
margin on this line of service decreased between 1994 and 1995 as the Company
incurred substantial start-up costs for a major new contract and charged to
expense all remaining assets of TechTeam's Ford training operations in the
United Kingdom. Training programs consist of instructor led training for word
processing, spreadsheets, graphics, data bases, desktop publishing, operating
systems, and systems administration for JAVA, NT, Windows, OS/2 and UNIX and
mainframe operating systems.
Selling, general and administrative and interest - These expenses, as a percent
of revenues, were 12.9% in 1995 and 1994.
Tax provisions - TechTeam recognized $1,268,236 of Federal income tax in 1995,
resulting in an effective tax rate of 34.6% for 1995 compared to 35.7% for
1994. The Michigan Single Business Tax in 1995 was $410,000, with an effective
tax rate of 10.1% compared to 9.1% for 1994.
COMPARATIVE PERFORMANCE 1994 VERSUS 1993 (See 1995 versus 1994 for general
information on each service line.)
1994 was TechTeam's previous record year in terms of both revenues and
earnings. TechTeam earned net income of $1,971,049, or $.18 per share, for
1994 as compared to a net income of $1,672,413, or $.18 per share, for 1993.
TechTeam's total revenues increased by $9,780,491 in 1994 to $30,224,438, a
47.8% increase over 1993 revenues.
Call center services - This service line commenced in the second quarter of
1993, and the Company had seven contracts in place at December 31, 1994
compared to the four contracts at December 31, 1993. The margin on this line
of service increased between 1993 and 1994 as the product offerings matured and
start-up costs were reduced.
Corporate support services - There was a $2,751,788 (27.3%) increase in
revenues generated from providing computer support and contract staffing
services. The margin on this line of service increased between 1993 and 1994
because of increased utilization of staff resources. The increase in corporate
support services revenues resulted from continued customer demand for
TechTeam's computer services personnel at Ford and other major accounts.
Systems integration - There was a $2,954,178 (111.6%) increase in revenues in
this service line between 1993 and 1994. The increase was primarily
attributable to $1,710,299 additional revenue generated by National TechTeam of
Illinois, Inc. (formerly Micro Systems Group, Inc.) in 1994 versus 1993; this
company was acquired by the Company on September 30, 1993. The increased
revenues also reflect a growing demand for TechTeam's systems integration,
database design and applications development services.
Training programs - Revenues for 1994 decreased $773,141 (14.4%) as compared to
1993, due to a reduced scope of training services for a major customer. The
Company's experience is that enrollments are somewhat cyclical in nature. The
margin on this line of service decreased between 1993 and 1994 because of
reduced utilization of TechTeam's training capacity.
Selling, general and administrative and interest - These expenses, as a percent
of revenues, were 12.9% in 1994 compared with 9.1% in 1993. These costs
increased in response to increased business activity and to support the
Company's expansion in Europe.
Gain on sales of investment - In 1994 TechTeam sold a portion of its investment
in Action Trac.
Tax provisions - TechTeam recognized $1,095,000 of Federal income tax in 1994,
resulting in an effective tax rate of 35.7% for 1994 compared to 34.7% for
1993. The Michigan Single Business Tax in 1994 was $305,875, with an effective
tax rate of 9.1% compared to 7.5% for 1993.
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IMPACT OF BUSINESS WITH MAJOR CUSTOMERS
Percentage
Increase/(Decrease) Percentage of
Amount From Prior Year Total Revenues
------ --------------- --------------
Ford Motor Company ("Ford")
1995 $15,584,964 9.8% 37.3%
1994 14,195,853 3.6 47.0
1993 13,703,312 54.0 67.0
Hewlett-Packard Company ("Hewlett-Packard")
1995* $ 7,269,445 - 17.4%
Chrysler Corporation ("Chrysler")
1995 $ 4,162,419 26.3% 10.0%
1994 3,294,788 160.2 10.9
1993 1,266,320 72.9 6.2
Corel Corporation ("Corel")
1995 $ 2,737,601 (25.8%) 6.6%
1994 3,687,298 789.4 12.2
1993* 414,604 - 2.0
Novell, Inc. ("Novell")
1995 $ 522,973 (76.7%) 1.3%
1994 2,260,203 31.6 7.5
1993* 1,717,417 - 8.4
*First year of business relationship
Services provided to Ford and Chrysler consist of contract computer end-user
support including on-site help desks and hotline telephone support, programming
services, documentation services, and classroom training programs. National
TechTeam provides these services to virtually all Ford divisions and two
finance-related Ford subsidiaries. Services provided to Hewlett-Packard, Corel
and Novell consist of help desk telephone support provided from TechTeam call
center sites.
While the large concentration of business with Ford contributes significantly
to earnings, management is aware of, and has acted upon, the need to diversify
its customer base from both a customer and industry perspective. TechTeam's
services are not specific to any single industry and can be beneficial to most
large corporations. TechTeam's computer support services and training programs
cover most of the popular software applications and can be customized to
improve the productivity of microcomputer users in most companies. Continuing
efforts to increase sales outside of Ford have produced positive results, as
total revenues from non-Ford customers were $26,202,498 in 1995, compared to
$16,028,585 in 1994 and $6,740,635 in 1993; this represents a 288.7% increase
over the two year period.
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8
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for capital is dependent upon factors common to most
businesses, such as the rate of business growth and whether sufficient capital
can be generated internally from profits, or must be raised externally to meets
its objectives. Indicators of the Company's growing financial strength are
summarized below:
December 31
1995 1994 1993
---- ---- ----
Working capital $12,352,915 $11,716,501 $4,167,181
Current ratio 4.2 11.0 3.1
Debt as a percentage of total capitalization 2.9% .1% 6.6%
Shareholders' equity $17,891,966 $15,829,026 $8,079,552
The Company's working capital was $12,352,915 at December 31, 1995 an increase
of 5.4% from December 31, 1994. This increase was due primarily to 1995
operating results (reflected primarily in higher accounts receivable balances
due to increased sales).
TechTeam has a line-of-credit agreement with NBD Bank which provides for
short-terms borrowings of up to $3,500,000; the credit is unsecured. The
line-of-credit is at the prime rate. There were no borrowings under the credit
agreement at December 31, 1995. The Company expects to borrow under this
arrangement to finance anticipated increases in accounts receivable balances.
TechTeam invested $680,000 in new computer equipment for its training
classrooms in 1993, which was financed through existing working capital and
through two year bank term notes and $1,057,000 in telecommunications hardware
and software in 1995 which was financed through a five year bank term note.
Management believes sufficient cash resources exist to support its current
long-term growth strategies either through currently available cash, cash
generated from future operations, or the ability for the Company to obtain
additional financing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE NUMBER(S)
--------------
The following consolidated financial statements of National TechTeam, Inc. and subsidiaries are included in Item 8:
Report of independent auditors. 10
Consolidated Statements of Operations - Years Ended December 31, 1995, 1994 and 1993. 11
Consolidated Statements of Financial Position - December 31, 1995 and 1994. 12 - 13
Consolidated Statements of Shareholders' Equity - Years Ended December 31, 1995, 1994 and 1993. 14
Consolidated Statements of Cash Flows - Years Ended December 31, 1995, 1994 and 1993. 15
Notes to the Consolidated Financial Statements 16 - 23
The following financial statement schedules of National TechTeam, Inc. and
Subsidiaries are included pursuant to the requirements of Item 14(d): None.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been omitted.
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This Page Intentionally Left Blank
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10
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Board of Directors
National TechTeam, Inc.
We have audited the accompanying consolidated statements of financial position
of National TechTeam, Inc. and subsidiaries as of December 31, 1995 and 1994 and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on those financial statements
based on our audits.
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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of National
TechTeam, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
February 23, 1996
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NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31
1995 1994 1993
------------ ------------ ------------
REVENUES -- NOTE B
Call center services $ 15,123,294 $ 7,172,997 $ 2,325,331
Corporate support services 14,732,050 12,836,952 10,085,164
Systems integration 7,914,414 5,601,224 2,647,046
Training programs 4,017,704 4,613,265 5,386,406
------------ ------------ ------------
41,787,462 30,224,438 20,443,947
------------ ------------ ------------
COSTS AND EXPENSES
Call center services 10,485,945 4,862,186 1,783,700
Corporate support services 10,368,907 9,321,694 7,775,458
Systems integration 7,899,636 5,298,511 2,515,394
Training programs 3,582,528 3,616,524 3,746,700
Selling, general and administrative 5,349,034 3,872,159 1,786,900
Interest 24,109 33,911 66,697
------------ ------------ ------------
37,710,159 27,004,985 17,674,849
------------ ------------ ------------
REVENUES LESS COSTS AND EXPENSES 4,077,303 3,219,453 2,769,098
GAIN ON SALES OF INVESTMENT - 152,471 -
------------ ------------ ------------
INCOME BEFORE TAX PROVISIONS 4,077,303 3,371,924 2,769,098
TAX PROVISIONS -- NOTE F 1,678,236 1,400,875 1,096,685
------------ ------------ ------------
NET INCOME $ 2,399,067 $ 1,971,049 $ 1,672,413
============ ============ ============
PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE $0.21 $0.18 $0.18
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING
Primary 11,360,768 10,981,183 9,306,255
Fully diluted 11,360,768 11,079,136 9,522,940
See accompanying notes.
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12
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,
ASSETS 1995 1994
------------ -------------
CURRENT ASSETS
Cash and cash equivalents $ 1,717,543 $ 412,559
Temporary investments - 3,500,000
Accounts receivable -- Note B 13,269,272 7,751,801
Note receivable - current portion 53,333 -
Inventories 769,545 499,748
Refundable income tax - 384,258
Other 381,751 341,331
------------ -------------
Total current assets 16,191,444 12,889,697
------------ -------------
PROPERTY AND EQUIPMENT -- NOTE D
Office furniture and equipment 6,622,953 4,017,641
Transportation equipment 154,395 138,572
Leasehold improvements 681,223 345,701
------------ -------------
7,458,571 4,501,914
Less - Accumulated depreciation and amortization 2,898,257 1,861,876
------------ -------------
4,560,314 2,640,038
------------ -------------
OTHER ASSETS
Goodwill (less accumulated amortization of $354,512 at
December 31, 1995 and $193,306 at December 31, 1994)
-- Note H 1,252,585 1,413,791
Note receivable - long-term 102,222 -
Other 178,958 205,156
------------ -------------
1,533,765 1,618,947
------------ -------------
TOTAL ASSETS $ 22,285,523 $ 17,148,682
============ =============
See accompanying notes.
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13
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
----------- ------------
CURRENT LIABILITIES
Current portion of long-term debt $ 96,884 $ 140,100
Accounts payable 893,965 287,403
Accrued payroll, related taxes and withholdings 2,037,446 494,181
Deferred income tax -- Note F 89,839 65,850
Federal income tax payable 160,116 -
Deferred revenue and unapplied receipts 431,967 47,540
Other 128,312 138,122
----------- ------------
Total current liabilities 3,838,529 1,173,196
----------- ------------
LONG-TERM LIABILITIES
Deferred income tax -- Note F 116,066 146,460
Long-term debt, less current portion -- Note D 438,962 -
----------- ------------
555,028 146,460
----------- ------------
SHAREHOLDERS' EQUITY -- NOTES E, G, J AND K
Preferred stock, par value $.01
Authorized -- 5,000,000 shares
None issued
Common stock, par value $.01
Authorized -- 45,000,000 shares
Issued:
11,407,666 shares at December 31, 1995 114,077
10,989,166 shares at December 31, 1994 109,892
Additional paid-in capital 12,601,925 12,035,229
Retained earnings 6,082,972 3,683,905
----------- ------------
Total 18,798,974 15,829,026
Less - Treasury stock (200,000 shares at
December 31, 1995) 907,008 -
----------- ------------
Total shareholders' equity 17,891,966 15,829,026
----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,285,523 $ 17,148,682
=========== ============
See accompanying notes.
13
14
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
Additional
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common Paid-In Retained Treasury
Stock Capital Earnings Stock
--------- ------------ ----------- ----------
Balance at January 1, 1993 $ 72,288 $ 1,876,556 $ 40,443 $ -
Proceeds from issuance of 475,150
shares of common stock -- Note G 4,752 320,726 - -
Proceeds from issuance of 1,291,750
shares under stock option plans -- Note J 12,917 1,977,783 - -
Shares issued to acquire
Micro Systems Group, Inc. -- Note H 6,241 2,072,025 - -
Tax benefit from exercise of employee stock options and other - 23,408 - -
Net income for 1993 - - 1,672,413 -
--------- ------------ ----------- ----------
Balance at December 31, 1993 96,198 6,270,498 1,712,856 -
Proceeds from issuance of 1,060,731
shares of common stock -- Note G 10,607 5,010,227 - -
Proceeds from issuance of 308,625
shares under stock option plans -- Note J 3,087 574,123 - -
Tax benefit from exercise of employee stock options and other - 180,381 - -
Net income for 1994 - - 1,971,049 -
--------- ------------ ----------- ----------
Balance at December 31, 1994 109,892 12,035,229 3,683,905 -
Proceeds from issuance of 418,500
shares under stock option plans -- Note J 4,185 256,475 - -
Tax benefit from exercise of employee stock options and other - 310,221 - -
Purchase of common stock -- Note K - - - (907,008)
Net income for 1995 - - 2,399,067 -
--------- ------------ ----------- ----------
Balance at December 31, 1995 $ 114,077 $ 12,601,925 $ 6,082,972 $ (907,008)
========= ============ =========== ==========
See accompanying notes.
14
15
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
1995 1994 1993
----------- ------------- -----------
OPERATING ACTIVITIES
Net income $ 2,399,067 $ 1,971,049 $ 1,672,413
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,594,250 1,037,279 572,927
Provision for uncollectible accounts receivable 123,143 30,308 15,549
Provision for deferred income tax (89,631) 138,310 128,000
(Gain) on sales of investment - (152,471) -
(Gain)/loss on sales of equipment and other 55,209 (3,878) (27,180)
Changes in current assets and liabilities:
Accounts receivable (5,640,614) (2,725,807) (2,240,166)
Inventories (269,797) (130,574) 14,582
Other current assets (40,420) (168,268) (15,956)
Accounts payable 606,562 (173,373) 156,174
Accrued payroll, related taxes and withholdings 1,543,265 128,159 309,144
Federal income tax 544,374 (892,231) 399,795
Deferred revenue and unapplied receipts 384,427 (99,091) 65,239
Other current liabilities (9,810) (182,233) (214,133)
Net cash provided by (used in) operating activities ----------- ------------- -----------
1,200,025 (1,222,821) 836,388
----------- ------------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment (3,187,027) (864,798) (2,145,003)
Development of training manuals (117,970) (116,722) (82,132)
Purchases of temporary investments (100,000) (12,388,000) -
Proceeds from sales of temporary investments 3,600,000 8,888,000 -
Proceeds from sales of investment - 160,000 -
Issuance of note receivable (160,000) - -
Proceeds from sales of property and equipment
and other assets 22,630 23,227 53,256
Net cash of Micro Systems Group, Inc. at acquisition date - - 3,005
Other assets - net (12,293) 13,082 (18,902)
----------- ------------- -----------
Net cash provided by (used in) investing activities 45,340 (4,285,211) (2,189,776)
----------- ------------- -----------
FINANCING ACTIVITIES
Proceeds from long-term borrowings 565,998 - 680,000
Proceeds from issuance of common stock 570,881 5,778,425 2,339,586
Purchase of Company common stock (907,008) - -
Payments on short-term borrowings - - (1,126,830)
Payments on long-term borrowings (170,252) (432,471) (372,514)
----------- ------------- -----------
Net cash provided by financing activities 59,619 5,345,954 1,520,242
----------- ------------- -----------
Increase (decrease) in cash and cash equivalents 1,304,984 (162,078) 166,854
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 412,559 574,637 407,783
----------- ------------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,717,543 $ 412,559 $ 574,637
=========== ============= ===========
See accompanying notes.
15
16
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The consolidated financial statements include the
accounts of National TechTeam, Inc. and its wholly-owned subsidiaries TechTeam
Europe, Ltd. and National TechTeam of Illinois, Inc., formerly Micro Systems
Group, Inc. ("MSG"). Collectively, these companies are referred to as the
"Company" or "TechTeam." Intercompany accounts and transactions have been
eliminated as appropriate.
Cash and cash equivalents: Cash includes both interest bearing and non-interest
bearing deposits which are available on demand. Cash equivalents include all
liquid investments with a maturity of three months or less when purchased,
including money market funds held at banks.
Temporary investments: The December 31, 1994, temporary investments consisted
of tax free municipal obligations, stated at cost, which equals market value.
Repayment of the principal amount of these investments was guaranteed by
letters of credit issued by a bank. The Company classified the debt securities
held at December 31, 1994, as temporary investments as they were available for
sale.
Inventories: Inventories are stated at the lower of cost (determined by the
first-in, first-out method) or market and consist principally of computer
equipment and software.
Property and equipment: Property and equipment are stated at cost. Property and
equipment are depreciated on the straight-line method over their estimated
useful lives, ranging from 3 to 10 years. Leasehold improvements are amortized
on a straight-line basis over the lesser of the lease term or the estimated
useful lives of the improvements.
Goodwill: Represents the excess cost over the fair value of net assets acquired
in the acquisition of MSG and is amortized on a straight-line basis over 10
years. The carrying value of goodwill will be reviewed if the facts and
circumstances suggest that it may be impaired.
Revenue recognition: Revenues from call center services, corporate support
services, systems integration, and training are recognized as services are
performed. Revenues from product sales are recognized when title is transferred
to the customer. Under the terms of certain call center service contracts,
customers are required to pay certain amounts at the commencement of the
contract. Amounts billed under this provision of such contracts aggregated
$1,655,700 in 1995 and $19,600 in 1994; all such amounts were recognized as
revenues when billed.
Deferred revenue: TechTeam receives advance payments from customers under
certain lease and maintenance agreements. These payments are recognized as
revenues when earned. All deferred revenue recorded at December 31 is expected
to be earned in the subsequent year.
Deferred income taxes: Deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Stock options: TechTeam accounts for employee stock options under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related Interpretations.
Earnings per share: Earnings per share is computed using the weighted average
number of common shares and common share equivalents outstanding during each
year presented. Common share equivalents consist of stock options and warrants
and are calculated using the treasury stock method.
16
17
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of estimates: Preparation of financial statements in conformity with
generally accepted accounting principles requires Management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from the estimates and
assumptions made.
NOTE B - DESCRIPTION OF THE BUSINESS
The Company provides call center services, corporate support services, systems
integration, and training for major companies on an international scale.
Revenues and accounts receivable from major customers are summarized as
follows:
Revenues Accounts Receivable
for the Year at Year End
------------- -----------
Ford Motor Company ("Ford")
1995 $15,584,964 $4,863,948
1994 14,195,853 2,487,263
1993 13,703,312 2,192,175
Hewlett-Packard Company ("Hewlett-Packard")
1995* $ 7,269,445 $2,923,934
Chrysler Corporation ("Chrysler")
1995 $ 4,162,419 $1,221,121
1994 3,294,788 1,457,273
1993 1,266,320 356,075
Corel Corporation ("Corel")
1995 $ 2,737,601 $ 268,550
1994 3,687,298 537,972
1993* 414,604 414,604
Novell, Inc. ("Novell")
1995 $ 522,973 $ 193,682
1994 2,260,203 508,736
1993 1,717,417 436,385
*First year of business relationship
Allowances for potentially uncollectible accounts receivable at December 31,
1995 and 1994 were $200,000 and $76,857, respectively. The Company generally
does not require collateral from its customers. Credit losses experienced have
been consistent with Management's expectations.
17
18
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - LEASES
The Company leases its corporate offices, other office facilities and certain
office equipment under noncancelable operating leases expiring over the next
five years. These leases are renewable with various options and terms. Total
rental expense was $1,344,574 in 1995, $1,000,992 in 1994 and $595,366 in 1993.
Minimum future payments under noncancelable operating leases with initial terms
of one year or more at December 31, 1995 were:
Year Operating Leases
---- ----------------
1996 $1,556,786
1997 1,042,704
1998 660,992
1999 406,446
2000 288,455
---------
Total minimum lease payments $3,955,383
=========
NOTE D - FINANCING ARRANGEMENTS AND LONG-TERM DEBT
TechTeam has an agreement with NBD Bank which provides for short-term
borrowings of up to $3,500,000; the credit is unsecured. Borrowings are at the
prime rate. There were no borrowings under the agreement at December 31, 1995.
The following amounts relate to short-term borrowings:
Maximum Amount Average Amount Average Cost of
Year Borrowed Borrowed Borrowings
---- -------- -------- ----------
1995 $ -0- $ -0- 0.0%
1994 1,220,000 201,666 5.3%
1993 1,199,830 666,719 5.8%
Long-term debt consists of the
following:
December 31
1995 1994
---- ----
Total amounts due under term notes $535,846 $140,100
Less-current portion 96,884 140,100
------- -------
$438,962 $ -
======= =======
Term notes consist of notes payable with interest of 8.9% held by NBD Bank
with maturities as follows: 1996 - $96,884; 1997 -$105,868; 1998 - $115,684;
1999 - $126,410; and 2000 - $91,000. These notes require monthly payments of
principal and interest and are collateralized by specific telecommunications
hardware and software used for call center operations.
Interest paid was $24,109 in 1995, $33,911 in 1994, and $75,300 in 1993.
18
19
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - EMPLOYEE RETIREMENT PLAN
The Company has a 401(k) Retirement Savings Plan which covers substantially all
employees. Under the provisions of the Plan, the Company will match employee
contributions in amounts up to 3% of gross compensation; contributions were
$247,181 in 1995, $163,087 in 1994 and $88,392 in 1993. The Company's policy
is to fund employee contributions and the Company's matching contributions each
pay period. Contributions are deposited with the trustee, NBD Bank, and then
invested in six funds at the direction of the participants. Effective in 1996,
the Company's matching contributions are credited only to the National TechTeam
Stock Fund for the benefit of each participant.
NOTE F - TAX PROVISIONS
Tax provisions are as follows:
Year Ended December 31
1995 1994 1993
---- ---- ----
Federal income tax:
Currently payable $1,357,867 $ 956,690 $ 760,000
Deferred (credit) (89,631) 138,310 128,000
---------- ---------- ----------
Total 1,268,236 1,095,000 888,000
Michigan single business tax 410,000 305,875 208,685
---------- ---------- ----------
$1,678,236 $1,400,875 $1,096,685
========= ========= =========
Tax payments $ 905,000 $2,022,000 $ 535,500
========== ========= ==========
A reconciliation of the Federal income tax provision and the amount computed by
applying the Federal statutory income tax rate to earnings before Federal
income tax follows:
Year Ended December 31
1995 1994 1993
---- ----- -----
Income tax at Federal statutory rate of 34% $ 1,246,883 $1,042,457 $ 870,540
Goodwill, intangibles and other permanent differences 21,353 52,543 17,460
---------- --------- -------
$ 1,268,236 $1,095,000 $ 888,000
========== ========= =======
19
20
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - TAX PROVISIONS (Continued)
The principal components of the deferred Federal income tax provision/(credit)
are as follows:
Year Ended December 31
1995 1994 1993
---- ---- ----
Prepaid expenses $ (2,143) $ 80,056 $ 418
Accelerated tax depreciation 28,909 10,672 39,858
Inventory valuation - - 33,320
Allowance for uncollectible accounts receivable (41,868) (10,305) (5,287)
Conversion of MSG to accrual basis of tax accounting (76,078) 76,078 -
Other ( 1,549) (18,191) 59,691
-------- -------- --------
$(89,631) $138,310 $128,000
======== ======== ========
The principal components of deferred Federal income tax balances, and the
classification thereof in the Consolidated Statement of Financial Position, are
as follows:
December 31
1995 1994
---- ----
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
Allowance for uncollectible
accounts receivable $68,000 $ - $26,132 $ -
Sale of other assets 15,226 - 15,823 -
Prepaid expenses - 89,839 - 91,982
Accelerated tax depreciation - 116,066 - 87,157
Conversion of MSG to accrual
basis of tax accounting - - - 76,078
Other - - 952 -
------- -------- ------- --------
$83,226 $205,905 $42,907 $255,217
======= ======== ======= ========
Included in income before tax provisions are losses from foreign operations of
$320,641 in 1995, $520,753 in 1994 and $83,683 in 1993.
20
21
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - STOCK TRANSACTIONS
A summary of stock transactions other than those discussed in Notes H and J for
the three years ended December 31, 1995 is as follows:
Shares Proceeds
------- -------
1993
----
Warrants issued in 1990 and 1991 and exercised in 1993 475,150 $ 325,478
======= ==========
1994
----
Warrants issued in 1990 and 1991 and exercised in 1994 41,667 $ 45,834
Private placement of common shares at
$5.00 per share 618,000 3,090,000
$4.70 per share 401,064 1,885,000
--------- ----------
1,060,731 $5,020,834
========= ==========
1995
----
None
NOTE H - ACQUISITION
TechTeam acquired all of the outstanding shares of MSG in September 1993. The
transaction was structured as a stock-for-stock exchange and 624,104 shares
(valued at $2,078,266) of TechTeam's restricted common stock were issued. The
purchase method of accounting was used to record the acquisition and $1,607,097
was recorded as goodwill. The following pro-forma financial information
includes the operations of MSG and an adjustment for amortization of goodwill.
Year Ended December 31
1993
-----
Revenues $22,366,778
Costs and expenses 19,917,557
Income before tax provisions 2,449,221
Net income 1,562,813
Earnings per share $.17
NOTE I - RELATED PARTY TRANSACTIONS
TechTeam paid legal fees of $119,876 in 1995, $73,591 in 1994 and $117,128 in
1993 to law firms whose members included directors, officers or shareholders of
TechTeam. In addition, TechTeam paid $39,587 in 1995, $42,444 in 1994 and
$47,275 in 1993 for employee travel expenses to a travel agency which is
50%-owned by a TechTeam director.
21
22
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - STOCK OPTIONS
EMPLOYEES DIRECTORS
--------- ---------
Total Shares Shares Price Shares Price
------------ ------ ----- ------ -----
Outstanding
January 1, 1993 2,275,000 617,000 .59-2.32 185,000 0.59
Granted 190,000 140,000 2.88-4.82 50,000 4.82
Exercised (1,291,750) (188,750) .59-2.00 -
Cancelled (220,000) (5,000) 1.20 -
------------- ----------- ----------
Outstanding
December 31, 1993 953,250 563,250 .59-4.82 235,000 .59-4.82
Granted 335,500 235,500 5.00-6.38 100,000 7.00
Exercised (308,625) (153,625) .59-2.88 -
Cancelled (22,500) (22,500) 3.81-6.38 -
------------- ----------- ----------
Outstanding
December 31, 1994 957,625 622,625 .59-6.38 335,000 .59-7.00
Granted 338,000 338,000 (1) 4.50-5.3125 - -
Exercised (418,500) (233,500) .59-2.88 (185,000) 0.59
Cancelled (208,000) (208,000) (1) 4.50-6.38 - -
------------- ----------- ----------
Outstanding
December 31, 1995 669,125 (2) 519,125 1.20-6.38 150,000 4.82-7.00
============= =========== ============ ========== ==========
OTHERS
------
Shares Price
------ -----
Outstanding
January 1, 1993 1,473,000 .52-3.00
Granted -
Exercised (1,103,000) .52-2.78
Cancelled (215,000) .57-2.32
-------------
Outstanding
December 31, 1993 155,000 .59-3.00
Granted -
Exercised (155,000) .59-3.00
Cancelled -
-------------
Outstanding
December 31, 1994 - -
Granted - -
Exercised - -
Cancelled - -
-------------
Outstanding
December 31, 1995 - -
============= ==========
(1) In February 1995, the Company cancelled 183,000 options at prices ranging
from $5.00 to $6.38 and regranted them at $4.50.
(2) Of the 669,125 options outstanding at December 31, 1995
a) 131,125 are currently exercisable through the fourth quarter 1998;
b) 200,000 are currently exercisable through the fourth quarter 1999; and
c) 338,000 will be exercisable in the first quarter 1996 through the fourth
quarter 2001.
Exercise prices for all options granted by TechTeam equaled or exceeded fair
market value at date of grant and, therefore, no compensation expense related
to these options was recorded.
22
23
NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - STOCK BUY-BACK PROGRAM
In February, 1995, the Board of Directors of the Company authorized a stock
buy-back program. The program provided for the open market purchase of up to
$4,000,000 of the Company's common stock. The repurchase program terminated
July 31, 1995 with 200,000 shares repurchased at a total cost of $907,008.
NOTE L - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly consolidated results of operations are summarized as follows:
Quarter Ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1995
- ----
Revenues $8,460,857 $9,610,262 $10,562,202 $13,154,141
Income before tax provisions 908,662 1,264,894 676,675 1,227,072
Net income 539,227 775,109 346,540 738,191
Earnings per share .05 .07 .03 .07
1994
- ----
Revenues $6,827,299 $7,640,227 $ 8,050,161 $ 7,706,751
Income before tax provisions 462,465 1,199,772 1,099,303 610,384
Net income 273,599 720,606 621,538 355,306
Earnings per share .03 .07 .06 .03
1993
- ----
Revenues $3,817,267 $4,507,827 $ 5,419,685 $ 6,699,168
Income before tax provisions 548,132 733,387 889,866 597,713
Net income 331,157 449,387 544,498 347,371
Earnings per share .04 .05 .06 .03
Quarterly earnings per share may not add to annual earnings per share because
of rounding and new shares issued during the year.
23
24
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
There were no changes in accountants, disagreements, or other events requiring
reporting under this Item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required is set forth under the caption "Election of Directors and
Management Information" in the Proxy Statement relating to the 1996 Annual
Meeting of Shareholders to be held on May 15, 1996, which is incorporated
herein by reference.
Information required pertaining to compliance with Section 16(a) of the
Securities and Exchange Act of 1934 is set forth under the caption "Election of
Directors and Management Information - Information Regarding Beneficial
Ownership of Principal Shareholders, Directors and Executive Officers" in the
Proxy Statement relating to the 1996 Annual Meeting of Shareholders to be held
on May 15, 1996, which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required is set forth under the caption "Executive Compensation" in
the Proxy Statement relating to the 1996 Annual Meeting of Shareholders to be
held on May 15, 1996, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required is set forth under the caption "Election of Directors and
Management Information - Information Regarding Beneficial Ownership of
Principal Shareholders, Directors and Executive Officers" in the Proxy
Statement relating to the 1996 Annual Meeting of Shareholders to be held on May
15, 1996, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required is set forth under the caption "Executive Compensation -
Certain Relationships and Related Transactions" in the Proxy Statement relating
to the 1996 Annual Meeting of Shareholders to be held on May 15, 1996, which is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Certain documents filed as part of the Form 10-K
See Item 8. Financial Statements and Supplementary Data and (d)
below.
(b) Reports on Form 8-K
Reports on Form 8-K filed by the Company during the last quarter of
the year ended December 31, 1995: None
(c) Exhibits required by Item 601 of Regulation S-K
The response to this portion of Item 14 is submitted as a separate
section of this Report under the caption, Index of Exhibits
(d) Financial statements schedules required by Regulation S-X
The response to this portion of Item 14 is submitted as a separate
section of this Report under the caption, Item 8. Financial
Statements and Supplementary Data.
24
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NATIONAL TECHTEAM, INC.
Date: March 22, 1996 By:/s/ Lawrence A. Mills Lawrence A. Mills
-------------- ------------------------- Senior Vice President,
Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities indicated
on March 22, 1996.
/s/William F. Coyro Jr. Director, Chairman of the Board,
- ---------------------------- Chief Executive Officer
William F. Coyro Jr.
/s/Valerie J. Niemiec Director
- ----------------------------
Valerie J. Niemiec
/s/Wallace D. Riley Director
- ----------------------------
Wallace D. Riley
/s/Charles H. Roeske Director
- ----------------------------
Charles H. Roeske
/s/Richard G. Somerlott Director
- ----------------------------
Richard G. Somerlott
/s/LeRoy H. Wulfmeier III Director
- ----------------------------
LeRoy H. Wulfmeier III
/s/Karen J. Matheny Controller
- ----------------------------
Karen J. Matheny (Chief Accounting Officer)
25
26
INDEX OF EXHIBITS
EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
- ------- ------- ------
3.1 Certificate of Incorporation of the Company filed with the Delaware
Secretary of State on September 14, 1987. *(1)
3.2 Certificate of Amendment dated November 27, 1987 to the Company's
Certificate of Incorporation to change the par value from $ .001 to
$.01 per share. 3.2*(3)
3.3 Restated Bylaws of the Company. A*(4)
4.1 1990 Nonqualified Stock Option Plan. 4.14*(5)
4.2 Form of Stock Option Agreement used for grant of options to employees
under the 1990 Nonqualified Stock Option Plan. 4.2*(8)
4.3 Form of Stock Option Agreement utilized for option grants to
non-employee directors and certain consultants. 4.16*(5)
10.1 Lease for office space in Dearborn, Michigan, between the Company and
Salisbury Properties Limited Partnership. *(2)
10.2 Lease Amendment for office space in Dearborn, Michigan, between the
Company and Salisbury Properties Limited Partnership dated January
29, 1992. 10.17*(6)
10.3 Lease for office space in Dearborn, Michigan, between the Company and
Dearborn Atrium Associates Limited Partnership dated August 17, 1988. 10.3*(3)
10.4 Lease Amendment for office space in Dearborn, Michigan, between the
Company and Dearborn Atrium Associates Limited Partnership dated
January 19, 1992. 10.18*(6)
10.5 Lease Amendment for office space in Dearborn, Michigan known as Suite
295 between the Company and Dearborn Atrium Associates Limited
Partnership dated April 19, 1993. 10.5*(8)
10.6 Lease Amendment for office space in Dearborn, Michigan known as Suite
145 between the Company and Dearborn Atrium Associates Limited
Partnership dated May 5, 1993. 10.6*(8)
10.7 Purchase Order dated August 4, 1988 by and between the Company as
Vendor and Ford Motor Company as Vendee for End User Computer
Training Classes and User Assistance Services. *(3)
10.8 Purchase Order dated January 1, 1992 by and between the Company as
Vendor and Ford Motor Company as Vendee for Agency Programmer
Services. 10.21*(7)
- -----------
All exhibits listed above that include a * indicate exhibits
that are incorporated by reference. See the footnotes following the list of
exhibits to locate those exhibits. All other exhibits are filed as part of this
Annual Report at the page number shown.
26
27
EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
- ------ ------- ------
10.9 Lease Agreement for office space in Southfield, Michigan known as
Suite 171, 17197 N. Laurel Park Drive between the Company and Eleven
Inkster Associates dated September 29, 1993. 10.18*(9)
10.10 Lease Amendment for office space in Southfield, Michigan known as
Suite 171, 17197 N. Laurel Park Drive between the Company and Eleven
Inkster Associates dated December 7, 1993. 10.19*(9)
10.11 Purchase Order dated November 6, 1986 by and between the Company as
Vendor and Ford Motor Company as Vendee for Support Services,
together with currently effective Amendment dated August 23, 1994. 10.16*(10)
10.12 Sublease Agreement affecting office space leased in Dearborn,
Michigan from Dearborn Atrium Associates Limited Partnership known as
Suites 185 and 195 between the Company and Ford Motor Company dated
December 21, 1994. 10.18*(10)
10.13 Lease Amendment for office space in Southfield, Michigan known as
Suite 171, 17197 N. Laurel Park Drive between the Company and Eleven
Inkster Associates dated January 23, 1995. 10.20*(10)
10.14 Supplier Contract dated July 1, 1994 by and between the Company as
Vendor and Geometric Results Incorporated (doing business as
"PeopleNet") as Vendee for Personnel Services, together with
currently effective Amendment dated February 6, 1995. 10.21*(10)
10.15 Purchase Order dated March 23, 1995 by and between the Company as
Vendor and Ford Motor Company as Vendee for Support for Ford 2000,
together with currently effective amendment dated February 23, 1996.
10.16 Agreement dated June 21, 1995 between the Company and Hewlett-Packard
Company for Technical Support Assistance.
10.17 Lease for office space in Dallas, Texas known as Lyndon Plaza between
the Company and Dallas Lyndon Corporation dated August 17, 1995.
10.18 Credit Authorization Agreement in the principal amount of $3,500,000
between the Company and NBD Bank dated August 28, 1995.
10.19 Installment Business Loan Note in the principal amount of $565,998
and related Continuing Security Agreement between the Company and NBD
Bank dated August 28, 1995.
10.20 Agreement dated September 15, 1995 between the Company and NBD Bank
for End User Computer Training.
10.21 Lease for office space in Troy, Michigan known as Troy Officenter B
between the Company and WRC Properties, Inc. dated November 16, 1995.
- ---------
All exhibits listed above that include a * indicate exhibits
that are incorporated by reference. See the footnotes following the list of
exhibits to locate those exhibits. All other exhibits are filed as part of this
Annual Report at the page number shown.
27
28
EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
- ------ ------- ------
10.22 Office Space Lease for office space in Indianapolis, Indiana known as
Market Square Center Building between the Company and MET Life
International Real Estate Partners Limited Partnership dated November
27, 1995.
10.23 Currently effective Purchase Order Amendment dated January 6, 1996 by
and between the Company as Vendor and Ford Motor Company as Vendee
for End User Computer Training Classes and User Assistance Services.
10.24 Installment Business Loan Note in the principal amount of $480,212
and related Continuing Security Agreement between the Company and NBD
Bank dated January 17, 1996.
10.25 Lease for office space in Seattle, Washington between the Company and
Sixth & Pike Associates, L.P. dated February 14, 1996.
10.26 Currently effective Purchase Order Amendment dated February 21, 1996
by and between the Company as Vendor and Ford Motor Company as Vendee
for Programming Services.
11 Statement re: Computation of per share earnings. 29
*(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1987.
*(2) Incorporated by reference to the Company's Current Report on Form 8-K
dated December 5, 1987.
*(3) Incorporated by reference to the Company's Registration Statement on Form
S-4 (Registration No. 33-26689).
*(4) Incorporated by reference to the Company's 1991 Proxy Statement dated May
24, 1991. The number set forth herein is the exhibit number this Exhibit
was given in that report.
*(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1990. The number set forth herein is the
exhibit number this Exhibit was given in that report.
*(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991. The number set forth herein is the
exhibit number this Exhibit was given in that report.
*(7) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1992. The number set forth herein is the
exhibit number this Exhibit was given in that report.
*(8) Incorporated by reference to the Company's Registration Statement on
Form S-2 (Registration No. 33-67904). The number set forth herein is the
exhibit number this Exhibit was given in that report.
*(9) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1993. The number set forth herein is
the exhibit number this Exhibit was given in that report.
*(10) Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1994. The number set forth
herein is the exhibit number this Exhibit was given in that
report.
28