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BDM International Inc/DE – ‘10-Q’ for 6/30/97

As of: Friday, 7/25/97 · For: 6/30/97 · Accession #: 870763-97-17 · File #: 0-23966

  As Of                Filer                Filing    For·On·As Docs:Size

 7/25/97  BDM International Inc/DE          10-Q        6/30/97    3:39K

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     69K 
 2: EX-11       Statement re: Computation of Earnings Per Share        1      5K 
 3: EX-27       Financial Data Schedule (Pre-XBRL)                     1      6K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on Form 8-K Financial Statements Managements' Discussion and Analysis
1	1st Page - Filing Submission
2	Item 1. Financial Statements
9	Item 2. Managements' Discussion and Analysis
14	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 16 TOC ↑Top Previous Next ↓Bottom Just 1st
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 Form 10-Q

 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
EXCHANGE ACT OF 1934

For the quarter                                      Commission File          
ended:   June 30, 1997                               Number:  000-23966       

 BDM International, Inc.
(Exact name of registrant as specified in its charter)

Delaware                                    54-1561881      
(State or other jurisdiction of                      (I.R.S. Employer         
incorporation or organization)                       Identification No.)      

1501 BDM Way, McLean, Virginia                       22102-3204               
(Address of principal executive office)              (Zip Code)               

 Registrant's telephone number
 including area code: 703-848-5000

Not Applicable
(Former name, former address, and former fiscal year, if
changed since last report)

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                                     

As of the close of business on June 30, 1997,  the  registrant  had  outstanding
29,379,211 shares of Common Stock, par value $.01 per share.                    

10-Q 2nd Page of 16 TOC 1st Previous Next ↓Bottom Just 2nd
PART I

Item 1.  Financial Statements.                                                  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

BDM International, Inc.:                                                        

Consolidated Balance Sheets as of                                         
           June 30, 1997 (Unaudited) and December 31, 1996...................2

Consolidated Statements of Operations for the                             
           Three and Six Months Ended June 30, 1997 and 1996 (Unaudited) ....3

Condensed Consolidated Statements of Cash Flow for the                    
           Three and Six Months Ended June 30, 1997 and 1996 (Unaudited) ....4

  Notes to Consolidated Financial Statements (Unaudited) ....................5

10-Q 3rd Page of 16 TOC 1st Previous Next ↓Bottom Just 3rd
 BDM INTERNATIONAL, INC.
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)

                                                                [Download Table]


                                                   June 30,         December 31, 
                                                    1997               1996      
                                              -----------------  ----------------
                                                 (unaudited)                     
                                                                                 

ASSETS                                                                           

Current assets:                                                                  
Cash and cash equivalents                     $         40,052    $       79,376 
Accounts receivable, net                               272,889           234,105 
Prepaid expenses and other                               8,909             7,695 
                                              ----------------   --------------- 
  Total current assets                                 321,850           321,176 

Property and equipment, net                             58,261            48,519 
Intangible assets, net                                  67,831            35,881 
Deposits and other                                       6,012             9,586 
Equity in and advances to affiliates                     5,714             5,492 
                                              ----------------   --------------- 
  Total assets                                $        459,668    $      420,654 
                                              ================   =============== 

LIABILITIES AND STOCKHOLDERS' EQUITY                                             

Current liabilities:                                                             
Accounts payable and accrued expenses         $        151,711    $      164,399 
Debt currently payable                                   7,991             3,487 
Income taxes payable                                     2,114             5,230 
Deferred tax liability                                  12,295            11,155 
                                              ----------------   --------------- 
  Total current liabilities                            174,111           184,271 

Deferred tax liability                                   2,444             2,544 
Long term debt                                          58,362            22,813 
Severance and other                                     11,021            13,911 
Minority interest                                       31,560            29,860 
                                              ----------------   --------------- 
  Total liabilities                                    277,498           253,399 
                                              ----------------   --------------- 

Commitments and contingencies                                                    

Stockholders' equity:                                                            
Preferred stock, $.01 par value;                                                 
     500,000 shares authorized, none issued             -                    -   
Common  stock,  $.01 par value;  29,379,211                                      
     and  14,414,020  shares  issued and                                         
     outstanding at June 30, 1997 and                                            
     December 31, 1996, respectively                       293               144 
Additional paid in capital                             114,995           103,537 
Treasury stock                                            (526)              -   
Retained earnings                                       75,805            64,465 
Deferred compensation                                   (3,724)           (1,419)
Cumulative translation adjustment                       (4,673)              528 
                                              ----------------   --------------- 
  Total stockholders' equity                           182,170           167,255 
                                              ----------------   --------------- 
  Total liabilities and stockholders' equity  $        459,668    $      420,654 
                                              ================   =============== 


 The accompanying notes are an integral part of these consolidated
financial statements. 

10-Q 4th Page of 16 TOC 1st Previous Next ↓Bottom Just 4th
 BDM INTERNATIONAL, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
 (unaudited)

                                                                [Download Table]


                                       For the three months     For the six months  
                                           ended June 30,         ended June 30,    
                                       --------------------   --------------------- 
                                         1997        1996        1997        1996   
                                         ----        ----        ----        ----   
                                                                                    

Revenue                               $ 272,789   $ 251,854   $ 523,367   $ 476,961 
                                      ---------   ---------   ---------   --------- 

Cost of sales                           229,184     211,334     437,394     400,226 
Selling, general and administrative      27,635      23,328      51,920      43,769 
Depreciation, amortization and other      5,594       4,536       9,911       8,594 
                                      ---------   ---------   ---------   --------- 

      Operating profit                   10,376      12,656      24,142      24,372 

Interest (income) expense, net              222        (765)       (688)     (1,013)
Equity in earnings of affiliates           (455)       (465)       (927)       (916)
Minority interest                         2,748       2,258       5,919       5,179 
                                      ---------   ---------   ---------   --------- 

      Income before income taxes          7,861      11,628      19,838      21,122 

Provision for income taxes                3,396       4,973       8,498       9,060 
                                      ---------   ---------   ---------   --------- 

      Net income                      $   4,465   $   6,655   $  11,340   $  12,062 
                                      =========   =========   =========   ========= 

Earnings per common share and                                                       
   common share equivalent:                                                         
  Net income per share                $    0.15   $    0.22   $    0.37    $   0.42 
                                      =========   =========   =========    ======== 

  Weighted average common                                                           
    shares and common share                                                         
    equivalents outstanding              30,555      29,816      30,484      28,648 
                                      =========   =========   =========    ======== 


 The accompanying notes are an integral part of these consolidated
financial statements. 

10-Q 5th Page of 16 TOC 1st Previous Next ↓Bottom Just 5th
 BDM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 For the six months ended June 30, 1997 and 1996
 (unaudited, in thousands)

                                                                [Download Table]


                                                        For the six months ended  
                                                                June 30,          
                                                           1997            1996   
                                                       -----------    ----------- 
                                                                                  
Cash flow from operating activities:                                              

  Net cash (used in) provided by operating activities  $  (24,012)     $   11,084 
                                                       -----------     ---------- 

Cash flow from investing activities:                                              

  Additions to property and equipment                     (19,906)         (8,037)
  Purchase of business, net of cash acquired              (33,894)         (8,695)
  Distributions from unconsolidated affiliates                600             990 
  Investment in unconsolidated affiliates                       0          (1,358)
                                                        ---------     ----------- 

  Net cash used in investing activities                   (53,200)        (17,100)
                                                       ----------     ----------- 

Cash flow from financing activities:                                              

Net borrowings (repayments) of credit facility             44,975         (22,950)
  Repayment of acquisition debt                            (6,249)         (1,954)
  Proceeds from issuance of common stock                    5,782          25,448 
  Acquisition of treasury stock                              (526)            -   
                                                       ----------     ----------- 

  Net cash provided by (used in) financing activities      43,982          (1,456)
                                                       ----------     ----------- 

Effect of exchange rate changes on cash                                           
  and cash equivalents                                     (6,094)         (2,854)
                                                       ----------     ----------- 

Net decrease in cash and cash equivalents                 (39,324)        (10,326)

Cash and cash equivalents, beginning of period             79,376          69,143 
                                                       ----------     ----------- 

Cash and cash equivalents, end of period               $   40,052     $    58,817 
                                                       ==========     =========== 


 The accompanying notes are an integral part of these consolidated
financial statements. 

10-Q 6th Page of 16 TOC 1st Previous Next ↓Bottom Just 6th
 BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

(1)      General                                                                

         The accompanying  financial  statements of BDM International,  Inc. and
its  subsidiaries  (BDM or the  Company)  as of June 30,  1997  and for  interim
periods  ended June 30,  1997 and 1996,  are  unaudited  and have been  prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The balance  sheet data as of December 31, 1996,  was derived from the Company's
audited financial statements. Certain other information and disclosures included
in the  Company's  annual  financial  statements  prepared  in  accordance  with
generally accepted accounting principles have been condensed or omitted pursuant
to the above  referenced  rules and  regulations.  It is  suggested  that  these
financial  statements be read in  conjunction  with the  consolidated  financial
statements and the notes thereto  included in the Company's latest annual report
to the Securities and Exchange Commission on Form 10-K.                         

         The  accompanying   consolidated   financial   statements  reflect  all
adjustments  and  reclassifications  that,  in the  opinion of  management,  are
necessary for a fair  presentation.  All such adjustments and  reclassifications
have been deemed to be of a recurring nature except as described in this report.

(2)      Income Taxes                                                           

         The Company uses the estimated annual effective rate method for interim
income tax purposes.  The  difference  between the combined  statutory  federal,
state,  and foreign  income tax rate of 42% and the Company's  actual  effective
income  tax rate of 43% for the three and six  months  ended  June 30,  1997 and
1996, is primarily attributable to goodwill amortization which is not deductible
for federal income tax purposes, thus resulting in the higher effective tax rate
and the impact of the Company's  international  expansion  into  countries  with
higher income tax rates than the United States.                                 

(3)      Earnings Per Share                                                     

         Net  income  per common  share is net  income  divided by the  weighted
average number of common shares and common share equivalents  outstanding during
the period.  The Company's  common share  equivalents  consist entirely of stock
options.                                                                        

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards No. 128, "Earnings per Share" (FAS
128).  FAS 128  simplifies  the existing  earnings per share (EPS)  computations
under Accounting  Principles Board Opinion No. 15, "Earnings Per Share," revises
disclosure  requirements,  and  increases  the  comparability  of EPS data on an
international  basis. In simplifying the EPS  computations,  the presentation of
primary EPS is replaced with basic EPS, with the principal difference being that
common stock equivalents are not considered in computing basic EPS. In addition,
FAS 128  requires  dual  presentation  of  basic  and  diluted  EPS.  FAS 128 is
effective for financial  statements issued for periods ending after December 15,
1997. Had FAS 128 been effective for the second quarter of 1997, basic EPS would
have been $0.15 and $0.39 for the three and six months  ended June 30,  1997 and
$0.24 and $0.45 for the three and six months  ended June 30,  1996.  Diluted EPS
would have been $0.15 and $0.37 for the three and six months ended June 30, 1997
and $0.22 and $0.42 for the three and six months ended June 30, 1996.           

10-Q 7th Page of 16 TOC 1st Previous Next ↓Bottom Just 7th
 BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

(4)      Capital stock transactions                                             

         On February  21, 1997,  the  Company's  Board of  Directors  declared a
two-for-one  split of the  Company's  common  shares,  effected in the form of a
stock  dividend,  to shareholders of record as of the close of business on March
6, 1997.  Distribution of the additional shares took place on March 20, 1997. In
connection  with the  split,  the  Company's  Board of  Directors  approved  the
increase  in the number of shares of Common  Stock  authorized  for  issuance to
100,000,000  shares,  subject to approval of shareholders  which was received on
May 9,  1997.  The  shares  and per  share  data in the  consolidated  financial
statements have been restated to reflect this stock split.                      

(5)      Acquisitions                                                           

         On April 30, 1997,  the Company  acquired  Largotim  Holdings,  Ltd., a
worldwide  distributor and integrator of enterprise  resource  planning software
and solutions, for approximately $39 million. The transaction has been accounted
for as a purchase,  resulting  in goodwill  of  approximately  $21 million to be
amortized over fifteen years.  Included in the purchase price is the acquisition
of intangible assets of approximately $15 million,  which will be amortized over
periods  ranging  from four to fifteen  years.  The  transaction  also  provides
additional consideration to the sellers if certain profitability targets are met
by December 31, 1998.                                                           

         During 1996, the Company  completed several  acquisitions.  On February
20, 1996, the Company acquired three affiliated companies - CW Systems, Inc., IG
Systems,  Inc.  and Melco  Systems,  Inc.  - for  $18.5  million.  The  acquired
companies specialize in providing information technology systems and services to
large  commercial  organizations  in various  industries,  as well as to various
state  agencies.  On November 4, 1996,  the Company  purchased the operations of
RGTI Systems Software,  a company specializing in warehouse management solutions
for $18.4 million. Effective November 1, 1996, the Company aquired the assets of
two  related  companies,  Advances  Systems  Design,  Inc.  (ASD)  and  Software
Engineering,  Inc. (SEI) for $4.8 million.  These companies  provide services in
state and local government human services systems design and development.       

         These  acquisitions  were  accounted  for as purchases  with  aggregate
goodwill of  approximately  $25 million in 1996. The results of their operations
are  included  in the  consolidated  results  of the  Company  from the dates of
acquisition.                                                                    

(6)      Restructuring                                                          

         The Company announced a new alignment of its business operations during
the third  quarter of 1996.  This new  organization  consists of five  strategic
business units - Federal  Systems,  State and Local Systems,  Integrated  Supply
Chain Solutions, BDM Europe and Enterprise Management Services. In addition, the
new BDM  Technologies  will comprise  development  units focused on promising IT
areas.  This  organizational  realignment  resulted  in a pre-tax  restructuring
charge  of $5.8  million  to 1996  third  quarter  earnings,  which  included  a
write-down of $3.1 million of certain  assets of GCL,  severance  costs totaling
$1.8 million for approximately 40 employees across several subsidiaries, and the
accrual of  approximately  $0.9  million  for  certain  facility  expenses.  The
write-down  at GCL  affected  primarily  goodwill  and  fixed  assets,  and  was
determined  based on  analyses of future  cash flow  expected  from that area of
business  after  changes in  strategic  direction  resulting  from the  business
realignment.  During the fourth  quarter of 1996 and the first  quarter of 1997,
the Company made  payments of $452,000 and  $448,000,  respectively  against the
restructuring  reserve  related  primarily  to severance  and lease  costs.  The
Company made no payments  against the  restructuring  reserve  during the second
quarter  of 1997.  At June 30,  1997,  approximately  $591,000  remained  in the
reserve balance.                                                                

10-Q 8th Page of 16 TOC 1st Previous Next ↓Bottom Just 8th
 BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

(7)      Other Matters                                                          

         The Company has been  informed  that a civil "qui tam" lawsuit has been
filed  against  the  Company and has  received a copy of the  Complaint  in that
action.  The  matter is  currently  under  Court  seal.  The  Complaint  alleges
violation  under  the  Federal  False  Claims  Act in  connection  with  certain
mischarging under overseas  government  contracts  administered by the U. S. Air
Force, related to certain housing rented in connection with overseas operations,
alleged improper hiring of and payments to certain  employees,  alleged improper
payments to a subcontractor, and alleged improper purchases and payments made in
support of client activities. Aggregate revenue from these contracts in calendar
year 1996 was approximately  $41 million.  In connection with this case, BDM has
received a subpoena for  information  in a civil  investigation  underway by the
Office of Inspector  General of the Department of Defense and an Assistant U. S.
Attorney  for the  Eastern  District  of  Virginia  with  respect to the matters
alleged in the  Complaint.  BDM will  cooperate  fully with the  Government  and
expects to make extensive document production in response to the subpoena.      

         The  Company  is engaged  in  providing  services  and  products  under
contracts  with the U. S.  Government  and, to a lesser  degree,  under  foreign
government  contracts,  some of which are  administered by the U. S. Government.
All such contracts are subject to extensive  legal and regulatory  requirements,
and  the  above  mentioned  investigation  apparently  focuses  on  whether  the
Company's  overseas  operations in connection  with the subject  contracts  were
conducted  in  accordance  with  such  requirements.  The  lawsuit  and  related
investigation  could result in  administrative,  civil or criminal  liabilities,
including reimbursements, fines or penalties being imposed. Under the provisions
of the False  Claims Act, a civil  penalty of between  $5,000 and $10,000 can be
assessed for each claim, plus three times the amount of any damages sustained by
the Government.  The Complaint seeks such relief but does not specify the amount
of damages.  In addition  to damages,  a finding of civil or criminal  liability
could lead to suspension or debarment of the contractor if it is found to be not
currently  responsible,  which  would  make  some  or all  of  the  contractor's
operations  ineligible to be awarded U. S. Government  contracts for a period of
time.  Such civil or criminal  liability or suspension or debarment could have a
material  adverse  effect  on  the  Company.  Management  is  unable  to  make a
meaningful  estimate of the amounts or range of loss that could result from this
litigation, however, management does not anticipate that the ultimate resolution
of this  litigation  will have a material  effect on the Company's  consolidated
financial position.                                                             

10-Q 9th Page of 16 TOC 1st Previous Next ↓Bottom Just 9th
Item 2.  Managements' Discussion and Analysis                                   

OVERVIEW                                                                        

         As the Company announced prior to quarter end, several factors affected
the  results of the second  quarter of 1997,  resulting  in lower than  expected
revenue  and  profit.  These  factors  included a  delivery  delay on a hardware
contract,  the continued  unfavorable  impact of foreign  exchange rates,  and a
funding  issue on a large  state  government  contract.  Revenue  for the second
quarter of 1997 was $272.8  million,  an 8% increase over the second  quarter of
1996 (10% excluding exchange rates).  Revenue from services,  excluding hardware
sales,  increased 13% for the quarter (15% excluding exchange rates). Net income
was $4.5  million for the  quarter,  down from the prior year largely due to the
impact of the state  government  contract.  Earnings per share was $0.15 for the
second  quarter,  reflecting the net income  shortfall  described  above and the
two-for-one stock split announced in February of this year.                     

         For the six months ended June 30, 1997, revenue was $523.4 million,  up
10% over the comparable period in 1996 (12% excluding  exchange rates).  Revenue
from services  increased 12% for the first half of 1997 (14% excluding  exchange
rates).  Net income was $11.3  million and  earnings per share was $0.37 for the
six month period. Proposal backlog was approximately $1.4 billion as of June 30,
1997, up from $1.2 billion as of the end of the first quarter of 1997.  Contract
backlog as of June 30, 1997, was stable at $2.1 billion.                        

REVENUE                                                                         

                                                        [Enlarge/Download Table]


                                    Three  months  ended  June 30,         Six months  ended June 30,    
                                   (in  millions,except percentages)    (in millions,except percentages) 

                                      1997       %      1996       %     1997       %       1996       % 
                                      ----       -      ----       -     ----       -       ----       - 
                                                                                                         
Client Category                                                                                          
US Department of Defense           $  76.4     28%   $ 103.7      41%  $ 166.0     32%    $ 186.5     39%
International Defense                 75.9     28%      57.6      23%    148.9     28%      116.5     25%
Civil Government                      54.6     20%      55.5      22%     95.1     18%      101.0     21%
Commercial                            65.9     24%      35.1      14%    113.4     22%       73.0     15%
                                   -------    ----   -------     ----  -------    ----    -------    ----
     Total                         $ 272.8    100%   $ 251.9     100%  $ 523.4    100%    $ 477.0    100%
                                   =======    ====   =======     ====  =======    ====    =======    ====

Strategic Business Unit                                                                                  
Federal Systems                    $ 106.8     39%   $ 127.7      51%  $ 225.6     43%    $ 234.8     49%
Enterprise Management Services        70.8     26%      50.0      20%    127.4     24%       95.7     20%
BDM Europe                            43.4     16%      48.2      19%     86.8     17%      100.4     21%
Integrated Supply Chain Solutions     24.3      9%       4.7       2%     36.6      7%        8.7      2%
State and Local Systems               15.2      6%      12.2       4%     25.3      5%       23.0      5%
BDM Technologies                      12.3      4%       9.1       4%     21.7      4%       14.4      3%
                                    ------     ---   -------     ----  -------    ----     ------    ----

     Total                         $ 272.8    100%   $ 251.9     100%  $ 523.4    100%    $ 477.0    100%
                                   =======    ====   =======     ====  =======    ====    =======    ====

Services Provided                                                                                        
Information Technology             $ 140.0     51%   $ 102.7      41%  $ 262.4     50%    $ 207.3     43%
Technical Services                   110.1     41%     112.9      45%    218.0     42%      212.4     45%
Enterprise Management                 22.7      8%      36.3      14%     43.0      8%       57.3     12%
                                   -------    ----   -------     ----  -------    ----    -------    ----
     Total                         $ 272.8    100%   $ 251.9     100%  $ 523.4    100%    $ 477.0    100%
                                   =======    ====   =======     ====  =======    ====    =======    ====


10-Q 10th Page of 16 TOC 1st Previous Next ↓Bottom Just 10th
Revenue by Client Category                                                      

         US Department of Defense (DOD):  Revenue derived from the US Department
         of  Defense  (DOD)  decreased  26% and 11% for the three and six months
         ended June 30, 1997,  respectively,  compared  with the same periods in
         1996. The Company  experienced a delay in the delivery of a $15 million
         hardware  contract which contributed to the DOD revenue  shortfall,  as
         preannounced on June 9, 1997. In addition, there has been a decrease in
         revenue from indefinite-delivery/indefinite-quantity (ID/IQ) contracts,
         largely due to a drop in  subcontractor  revenue.  Task orders on these
         contracts  have  also  been  below  expectations  as  Federal  agencies
         determine how to allocate  information  technology budgets between Year
         2000  projects  and  other  critical  technology  requirements.   These
         reductions  were  partially  offset by  increases  in a number of other
         contracts,  including  systems and services for the National  Guard and
support for major military programs.                          

         International  Defense:  Revenue from  international  defense  business
         increased 32% and 28% for the three and six months ended June 30, 1997,
         over the comparable periods in the previous year, due to higher revenue
         from the Company's contracts in Saudi Arabia. This growth was offset by
         a  reduction  of revenue in Germany  due to the end of  "blanket  order
         agreements"  with the  German  Ministry  of Defense  (MOD),  which were
         available for a three-year  period following the acquisition of IABG in
         late 1993. Effective January 1, 1997, each task with the MOD requires a
         new  contract,  which  has  proven  to  be an  administratively  slower
         process.  Exchange rates, as a result of a stronger US dollar, also had
         an unfavorable  impact on the growth of the Company's  European defense
activities.                                                   

         Civil Government:  Revenue from civil government  contracts declined 2%
         and 6% for the  three  and six  month  periods  ended  June  30,  1997,
         compared to the same periods in 1996.  This decline  reflected  several
         factors  cited in earlier  disclosures,  including a decline in revenue
         from  environmental  restoration and waste management  programs for the
         Department of Energy as a result of continued budget reductions.  Lower
         pass-through  contracts  from the German  government and the decline of
         the German mark versus the US dollar  were also  contributing  factors.
         These  reductions  are partially  offset by work  performed for various
state governments on Year 2000 projects.                      

         Commercial:  The increase of 88% and 55% in commercial  revenue for the
         three and six months  ended June 30, 1997,  reflects the rapid  organic
         growth of BDM's  businesses,  as well as  acquisitions  during 1996 and
         1997 of enterprises serving commercial customers. The Company's organic
         growth is the result of Year 2000 projects with  commercial  customers,
         and  services in the  semiconductor  integration,  enterprise  resource
         planning and integration,  and business process transformation business
         areas.  The  international  commercial  business  was  impacted  by the
         aforementioned  decline in the German mark to US dollar.  Excluding the
         impact of the  currency  fluctuations,  commercial  revenue  would have
    nearly doubled (an increase of 95%) in the second quarter of 1997.

Revenue by Strategic Business Unit                            

         Federal Systems:  Revenue from Federal Systems decreased 16% and 4% for
         the three and six months  ended  June 30,  1997,  respectively,  due to
         lower  activity  on  ID/IQ  contracts  and  lower  hardware  sales,  as
         discussed above. In addition, the Company continues to experience lower
         revenue from programs with the Department of Energy.  These  reductions
         were partially offset by increases on a number of other contracts, many
 of which relate to information technology services and support.

         Integrated Supply Chain Solutions: Revenue from Integrated Supply Chain
         Solutions  quadrupled  in the second  quarter of 1997 over the previous
         year  period,  and tripled for the six month  period in 1997 over 1996.
         This growth reflects an increase in the Company's  organic  business in
         the second  quarter,  as well as  revenue  from the  Largotim  and RGTI
acquisitions.                                                 

         Enterprise  Management  Services:  The Enterprise  Management  Services
         business  unit  derives  revenue  from  technical  services  as well as
         enterprise  management  activities.  Revenue from Enterprise Management
         Services  grew 42% and 33% for the three and six months  ended June 30,
         1997,  respectively,  as a result of higher  revenue in most aspects of
         its  business,  including its work in Saudi Arabia and  additional  Job
         Corps Center revenue.  This growth was partially  offset by a reduction
         resulting  from the end of the  Company's  contract to provide  support
services at a US Air Force Base.                              

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         BDM  Europe:  Revenue  from BDM  Europe  declined  due to the impact of
         unfavorable  exchange  rates,  which  amounted to $5.3  million for the
         second quarter and $10.7 million for the six month ended June 30, 1997.
         BDM Europe  experienced  modest growth in local currency,  largely as a
         result of nearly 50% growth in the Company's  Dutch  subsidiary,  FACE,
         which  provides  systems  integration  services to European  commercial
         companies.  As mentioned  above,  the Company's  German  subsidiary has
         experienced  administrative  delays with a new contracting process with
         the  German  MOD that has  slowed the growth at BDM Europe to a certain
extent.                                                       

         State and Local  Systems:  Revenue  increased 25% and 10% for the three
         and six months ended June 30, 1997, compared to the same periods in the
         prior year. The increases  were primarily  driven by Year 2000 work for
         various state governments, as well as the impact of the ASD acquisition
         completed  at the end of 1996,  and were  offset by  declines  in other
         areas of state government business. In particular,  as was preannounced
         on June 9, 1997, the Company has experienced difficulties on one of its
         state  contracts.  The Company is in discussions with the customer with
         the  goal of  restructuring  the  approach  and the  contract.  Until a
         resolution  is reached,  the  Company  will not  recognize  revenue for
         services on this  contract.  This  decision  is based on the  Company's
         inability to reach an agreement with the customer on a detailed systems
         design in a timely manner and the customer's  inability to approve time
and materials task orders for certain phases of the contract. 

         BDM  Technologies:  Revenue  grew 35% for the  quarter  and 51% for the
         first six months  compared to last year.  This business unit  comprises
         several  developmental  units  including  the Year 2000  product  line,
         Internet/Intranet Technology, Network Security, and IT Services. Due to
         the  developmental  nature of this unit,  the quarterly  results may be
more variable than those of the strategic business units.     

Revenue by Services Provided                                  

                  Starting with the first quarter of 1997, the Company redefined
         its revenue by service  type in an effort to more  clearly  present the
         business activities of the Company.  The new categories are Information
Technology, Technical Services, and Enterprise Management.    

         Information  Technology : Includes all  activities  where the principal
         result  of  the  effort  (1)  pertains  to  the  requirements,  design,
         implementation, operation, or maintenance of an information system; (2)
         utilizes one or more information  technology  products as the principal
         means of  producing  results;  or (3)  relates  directly  to studies or
         analysis  wherein the dominant aspect is information  technology or the
         application of information  technology.  Revenue in this area increased
         36%  and 27%  for  the  three  and six  months  ended  June  30,  1997,
         respectively,  compared to the same periods in 1996.  This increase was
         driven  by  revenue  from Year  2000  work  with  commercial  and state
         customers and higher  information  technology revenue in the Integrated
         Supply Chain Solutions and BDM Technologies  business units, as well as
revenue from companies acquired in 1997 and 1996.             

         Technical Services : Includes a broad range of scientific, engineering,
         technical assistance,  and consulting services that are not encompassed
         in the  information  technology  category  described  above.  Technical
         Services  revenue was  relatively  flat for the second quarter of 1997.
         Growth in a number of contracts,  particularly the expansion of work in
         Saudi Arabia and technical  support for a variety of military  programs
         was offset by lower  hardware  revenue  for  defense  clients and lower
         services  revenue  from the German MOD (in part due to the weak  German
mark).                                                        

         Enterprise Management: Represents business in which the Company manages
         and operates  research and development  centers and other facilities on
         behalf of its customers.  An increase in the Company's Job Corps Center
         business  was offset by a decline  due to the  completion  of a support
         contract  at a US Air Force  Base.  In  addition,  the  program for the
         National  Institute  of Petroleum  Research  changed at the end of 1996
         when a portion of the management and operations  contract was converted
         to a separate contract to perform research and technical services. This
portion of revenue is now classified as Technical Services.   

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RESULTS OF OPERATIONS                                                           

The  following  table  sets  forth  selected  financial  data,  expressed  as  a
percentage of revenue:                                                          

                                                        [Enlarge/Download Table]


                                       Three Months Ended June 30,  Six Months Ended June 30,

                                           1997            1996         1997           1996  
                                           ----            ----         ----           ----  
                                                                                             

Revenue                                   100.0%         100.0%        100.0%          100.0%

Cost of sales                              84.0           83.9          83.6            83.9 
Selling, general, and administrative       10.1            9.3           9.9             9.2 
Depreciation, amortization, and other       2.1            1.8           1.9             1.8 
                                        -------        -------      --------       --------- 

     Operating profit                       3.8            5.0           4.6             5.1 

Interest expense (income), net              0.1           (0.3)         (0.1)           (0.2)
Equity in earnings of affiliates           (0.2)          (0.2)         (0.2)           (0.2)
Minority interest                           1.0            0.9           1.1             1.1 
                                        -------        -------      --------       --------- 

     Income before taxes                    2.9            4.6           3.8             4.4 

Provision for income taxes                  1.2            2.0           1.6             1.9 
                                        -------        -------      --------       --------- 

     Net income                             1.6%           2.6%          2.2%            2.5%
                                        ========       ========     =========      ==========


COST OF SALES                                                                   

         Cost  of  sales,  which  includes  salaries,  benefits,   subcontractor
expenses, materials and overhead costs, remained relatively flat as a percentage
of revenue in the three months ended June 30, 1997, compared to the three months
ended June 30, 1996. Cost of sales as a percentage of revenue decreased slightly
for the six months ended June 30, 1997, compared to the same period in 1996, due
to a lower level of hardware  pass-throughs.  These pass-throughs  represent the
procurement of computer hardware and other equipment on behalf of customers, and
often tend to yield lower profit margins than revenue from services.            

SELLING, GENERAL AND ADMINISTRATION                                             

         Selling, general, and administrative (SG&A) expense, which includes the
Company's  research and  development  costs (R&D),  increased as a percentage of
revenue for the three and six months ended June 30,  1997,  compared to the same
periods in the previous year. This increase was largely due to investments  made
for recruiting,  marketing,  and research and development,  primarily related to
software  development and  enhancements.  These  investments were focused on the
Company's Year 2000 efforts and integrated supply chain activities. The increase
also includes the SG&A of several commercial  companies acquired during 1997 and
1996, which have higher SG&A consistent with typical commercial operations.     

DEPRECIATION, AMORTIZATION, AND OTHER                                           

         Depreciation,  amortization,  and other costs  increased  in the second
quarter of 1997,  compared  to the  second  quarter  of 1996.  The  depreciation
component increased,  reflecting depreciation expense of acquired businesses and
an  increase  from  the   implementation  of  a  new  financial  and  management
information  system in the  fourth  quarter of 1996 at  Federal  Systems.  These
increases  were  partially  offset by the impact of the German mark to US dollar
exchange rate on depreciation  related to fixed assets in Germany.  Amortization
expense increased for the three and six months ended June 30, 1997,  compared to
the same  periods in the prior year,  reflecting  amortization  of goodwill  and
other intangible assets  associated with acquisitions  completed during 1996 and
1997.                                                                           

INTEREST EXPENSE (INCOME), NET                                                  

         The  Company  reported  net  interest  expense of $0.2  million for the
second  quarter of 1997,  and net  interest  income of $0.7  million for the six
months  ended June 30,  1997.  This is compared to net  interest  income of $0.8
million and $1.0 million for the comparable periods in 1996, respectively.  This
change reflects  interest costs on acquisitions  completed during 1996 and 1997,
as well as lower advances from customers in Germany that reduced interest earned
on cash balances.                                                               

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EQUITY IN EARNINGS OF AFFILIATES                                                

         Equity in earnings of  affiliates  represents  the  Company's  share of
earnings from unconsolidated joint ventures.  These amounts have remained stable
compared to the prior year period.                                              

MINORITY INTEREST                                                               

         The minority interest share of earnings  increased  somewhat during the
second  quarter of 1997 compared to the same period in the previous  year.  This
increase reflects improved profitability of joint ventures in the Middle East.  

PROVISION FOR INCOME TAXES                                                      

         The  difference  between the combined  statutory  federal,  state,  and
foreign  income tax rate of 42% and the Company's  actual  effective  income tax
rate of 43% is primarily  attributable to certain goodwill  amortization that is
not deductible for federal income tax purposes.  This effective  income tax rate
also reflects the impact of the Company's international expansion into countries
with higher income tax rates than the United States.                            

LIQUIDITY AND CAPITAL RESOURCES                                                 

         The Company's cash flow from operating  activities reflects an increase
in days sales  outstanding,  and lower  advances  from  international  customers
received than in prior periods.  Cash from other aspects of operations partially
offset this reduction in cash flow,  and a slight  increase in borrowings on the
Company's revolving credit agreement also provided additional resources to cover
peak cash needs during the period.                                              

         Cash flow related to investing activities included cash paid to acquire
businesses,  including $32.1 million paid for Largotim and $1.8 million for ASD.
Capital  expenditures of $19.9 million  included a cash payment of approximately
$7.6  million  made in the first  quarter  of 1997  related to the  purchase  of
property by the Company's German subsidiary, IABG.                              

         Financing  activities  consisted  primarily of changes in borrowings on
the  Company's  working  capital  facility for the  acquisition  of Largotim and
repayment  of other  acquisition  debt.  In addition,  the Company  continued to
provide a benefit to  employees  by enabling  them to purchase  shares of common
stock  through  stock option  exercises  and an employee  stock  purchase  plan.
Financing  cash flow for the first  quarter of the prior year also  included the
net proceeds from a public stock offering of $15.3 million completed in March of
1996.                                                                           

 ***

         The  foregoing  discussion  of various  factors  that may  impact  1997
performance contain certain forward looking statements. In addition, the Company
or its  representatives  from time to time may make or have made certain forward
looking statements.  Those forward looking statements made by the Company or its
representatives  are qualified in their  entirety by reference to the discussion
in this  document and other public  documents,  and the  discussion of important
factors that could cause the Company's actual results to differ  materially from
those projected or discussed in those forward looking statements. It is intended
that the foregoing constitute  meaningful  cautionary statements so as to obtain
the  protections  of the safe  harbor  established  for such  statements  by the
Private Securities Litigation Reform Act of 1995.                               

 # # #

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 PART II

Item 6.   Exhibits and Reports on Form 8-K.                                     

(a)   Exhibits:                                               

11.   Statement of Computation of Earnings Per Share          

(b)   Reports on Form 8-K:                                    

None.                                       

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 BDM INTERNATIONAL, INC.

SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.                                          

July 25, 1997                              BDM INTERNATIONAL, INC.              

                               C. Thomas Faulders, III
                                       -------------------------------
                               C. Thomas Faulders, III
                                           Executive Vice President, Treasurer
                                   and Chief Financial Officer

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BDM INTERNATIONAL, INC. 

 INDEX TO EXHIBITS

Exhibit No.                                                                     

11.      Statement of Computation of Earnings Per Share                         

27.      Financial Data Schedule

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	12/31/98	7
	12/15/97	6
Filed on:	7/25/97	15
For Period End:	6/30/97	1	12
	6/9/97	10	11
	5/9/97	7		DEF 14A, PRE 14A
	4/30/97	7
	3/20/97	7		10-C
	3/6/97	7
	2/21/97	7
	1/1/97	10
	12/31/96	2	6	10-K, 11-K
	11/4/96	7
	11/1/96	7
	6/30/96	2	12	10-Q
	2/20/96	7		8-K
				List all Filings

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BDM International Inc/DE – ‘10-Q’ for 6/30/97

As of: Friday, 7/25/97 · For: 6/30/97 · Accession #: 870763-97-17 · File #: 0-23966

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