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BDM International Inc/DE · 10-Q · For 6/30/96

Filed On 8/6/96 · SEC File 0-23966 · Accession Number 870763-96-7

  As Of               Filer                 Filing     As/For/On Docs:Pgs

 8/06/96  BDM International Inc/DE          10-Q        6/30/96    3:18

Quarterly Report · Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     45K 
 2: EX-11.1     Statement re: Computation of Earnings Per Share        1      4K 
 3: EX-27       Financial Data Schedule                                1      3K

10-Q · Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Exhibits and Reports on Form 8-K Financial Statements Managements' Discussion and Analysis Submission of Matters to a Vote of Security Holders
1	1st Page
3	Item 1. Financial Statements
9	Item 2. Managements' Discussion and Analysis
14	Item 4. Submission of Matters to a Vote of Security Holders
"	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, 1996                     Number:  000-23966           

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

Delaware                          4-1561881           
(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 July 31, 1996,  the  registrant  had  outstanding
14,174,031 shares of Common Stock, par value $.01 per share.                    

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CONTENTS

Part I.  Financial Information                                                  

  Item 1.    Financial Statements............................................2

Item 2.    Management's Discussion and Analysis of Financial Condition    
                   and Results of Operations.................................8

Part II. Other Information                                                      

  Item 4.    Submission of Matters to a Vote of Securities Holders..........13

  Item 6.    Exhibits and Reports on Form 8-K...............................13

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PART I

Item 1.  Financial Statements.                                                  
-------  ---------------------                                                  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

BDM International, Inc.:                                                        

Consolidated Balance Sheets as of                                             
         June 30, 1996 (Unaudited) and December 31, 1995.....................3

Consolidated Statements of Operations for the                                 
         Three and Six Months Ended June 30, 1996 and 1995 (Unaudited) ......4

Condensed Consolidated Statements of Cash Flow for the                        
         Six Months Ended June 30, 1996 and 1995 (Unaudited) ................5

Notes to Consolidated Financial Statements (Unaudited) ......................6

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                                                        [Enlarge/Download Table]



                             BDM INTERNATIONAL, INC.                                                       
                           CONSOLIDATED BALANCE SHEETS                                                     
                        (in thousands, except share data)                                                  

                                                                            June 30,           December 31,
                                                                              1996                1995     
                                                                        -----------------  ----------------
                                                                           (unaudited)                     
                                                                                                           

ASSETS                                                                                                     

Current assets:                                                                                            
Cash and cash equivalents                                               $      58,817       $     69,143   
Accounts receivable, net                                                      215,782            219,354   
Prepaid expenses and other                                                      7,135              6,157   
                                                                        -----------------  ----------------
   Total current assets                                                       281,734            294,654   

Property and equipment, net                                                    46,670             45,722   
Intangible assets, net                                                         25,036              9,615   
Deposits and other                                                              6,856              8,580   
Equity in and advances to affiliates                                            6,009              5,222   
                                                                        -----------------  ----------------
  Total assets                                                          $     366,305       $    363,793   
                                                                        =================  ================

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                       

Current liabilities:                                                                                       
Accounts payable and accrued expenses                                   $     148,009       $    168,253   
Debt currently payable                                                          2,992                449   
Income taxes payable                                                            4,624              3,465   
Deferred tax liability                                                          4,243              6,363   
                                                                        -----------------  ----------------
  Total current liabilities                                                   159,868            178,530   

Deferred tax liability                                                          3,402              3,638   
Long term debt                                                                  8,009             25,900   
Severance and other                                                             9,440             12,099   
Minority interest                                                              30,412             28,157   
                                                                        -----------------  ----------------
  Total liabilities                                                           211,131            248,324   
                                                                        -----------------  ----------------

Commitments and contingencies                                                                              

Stockholders' equity:                                                                                      
Preferred stock, $.01 par value;                                                                           
 500,000 shares authorized, none issued                                                                    
                                                                                    -                  -   
Common  stock,  $.01 par value;  14,126,973                                                                
  and  12,962,342  shares  issued and outstanding at                                                       
  June 30, 1996 and December 31, 1995,  respectively                             141                 130   
Additional paid in capital                                                     97,039             68,535   
Retained earnings                                                              58,852             46,790   
Deferred compensation                                                          (1,697)              (395)  
Cumulative translation adjustment                                                 839                409   
                                                                        -----------------  ----------------
  Total stockholders' equity                                                  155,174            115,469   
                                                                        -----------------  ----------------
  Total liabilities and stockholders' equity                            $     366,305       $    363,793   
                                                                        =================  ================

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


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                         BDM INTERNATIONAL, INC.                                                                      
                  CONSOLIDATED STATEMENTS OF OPERATIONS                                                               
             (in thousands, except earnings per share data)                                                           
                               (unaudited)                                                                            

                                                                         For the three months       For the six months
                                                                            ended June 30,            ended June 30,  
                                                                            -------------             -------------   
                                                                          1996         1995        1996         1995  
                                                                       ---------    ---------   ---------    ---------
                                                                                                                      
Revenue                                                                $251,854    $ 213,064   $ 476,961    $ 404,965 
                                                                       ---------    ---------   ---------    ---------

Cost of sales                                                           211,334      178,744     400,226      335,734 
Selling, general and administrative                                      23,328       20,854      43,769       40,239 
Depreciation, amortization and other                                      4,536        4,676       8,594       10,298 
                                                                       ---------    ---------   ---------    ---------

      Operating profit                                                   12,656        8,790      24,372       18,694 

Interest (income) expense, net                                             (765)       1,364      (1,013)       2,485 
Equity in earnings of affiliates                                           (465)        (503)       (916)        (835)
Minority interest                                                         2,258          786       5,179        3,012 
                                                                       ---------    ---------   ---------    ---------

       Income before income taxes                                        11,628        7,143      21,122       14,032 

Provision for income taxes                                                4,973        3,273       9,060        6,828 
                                                                       ---------    ---------   ---------    ---------

         Net income                                                      $6,655    $   3,870   $  12,062    $   7,204 
                                                                       =========    =========   =========    =========

 Earnings per common and                                                                                              
      common equivalent share:                                                                                        
 Net income per common share                                              $0.45    $    0.38       $0.84    $    0.71 
                                                                       =========    =========   =========    =========

 Weighted average common                                                                                              
      shares outstanding                                                 14,908       10,237      14,324       10,113 
                                                                       =========    =========   =========    =========

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


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                        BDM INTERNATIONAL, INC.                                                        
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW                                             
            For the six months ended June 30, 1996 and 1995                                            
                       (unaudited, in thousands)                                                       

                                                                            For the six months ended   
                                                                                    June 30,           
                                                                          1996                1995     
                                                                      -------------      --------------
                                                                                                       
 Cash flow from operating activities:                                                                  
  Net cash provided by operating activities                            $  11,084            $   7,220  
                                                                      -------------      --------------

Cash flow from investing activities:                                                                   
  Additions to property and equipment                                     (8,037)              (5,235) 
  Purchase of businesses, net of cash acquired                            (8,695)                  --  
  Reimbursement of acquisition costs                                          --                1,143  
  Contributions from minority owners                                          --                1,862  
  Distributions from unconsolidated affiliates                               990                  800  
  Investment in unconsolidated affiliates                                 (1,358)                (799) 
                                                                      -------------      --------------

  Net cash used in investing activities                                  (17,100)              (2,229) 
                                                                      -------------      --------------

Cash flow from financing activities:                                                                   
  Net  repayments of  revolving borrowings                               (24,950)             (21,573) 
  Repayment of acquisition debt                                           (1,954)                  --  
  Proceeds from issuance of common stock                                  25,448                1,274  
  Acquisition of treasury stock                                               --               (1,088) 
                                                                      -------------      --------------

  Net cash used in financing activities                                   (1,456)             (21,387) 
                                                                      -------------      --------------

Effect of exchange rate changes on cash and cash equivalents              (2,854)               4,242  
                                                                      -------------      --------------

Net decrease in cash and cash equivalents                                (10,326)             (12,154) 

Cash and cash equivalents, beginning of period                            69,143               45,314  
                                                                      -------------      --------------

Cash and cash equivalents, end of period                               $  58,817           $   33,160  
                                                                      =============      ==============

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


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 BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

(1)      General                                                                
-------                                                       

         The accompanying  financial  statements of BDM International,  Inc. and
subsidiaries  (BDM or the  Company) as of June 30, 1996 and for interim  periods
ended June 30, 1996 and 1995,  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,  1995,  was derived  from the  Company's  audited
consolidated financial statements, but does not include all disclosures required
by generally  accepted  accounting  principles.  Certain other  information  and
disclosures  included in the Company's annual consolidated  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 recurring nature, except for the write-off of goodwill
in March 1995, as discussed below.                                              

(2)      Income Taxes                                                           
------------                                                  

         The Company uses the estimated annual effective rate method for interim
income tax  purposes.  The Company also  recognizes  an expense for U.S.  income
taxes on  undistributed  earnings  of its  foreign  subsidiaries  as though  the
earnings had been distributed.                                                  

         The difference  between the combined statutory federal and state income
tax rate of 42% and the Company's  actual  effective  income tax rate of 43% for
the six months  ended June 30,  1996,  is  primarily  attributable  to  goodwill
amortization  which is not  deductible  for  federal  income tax  purposes.  The
difference  between the combined  statutory federal and state income tax rate of
41% and the Company's actual effective income tax rate of 49% for the six months
ended June 30,  1995,  is  primarily  attributable  to a charge of $1.6  million
recognized in the first quarter of 1995 to reflect management's  estimate of the
recoverability  of  unamortized   goodwill  generated  in  an  earlier  business
acquisition.  This  charge,  as  well as the  majority  of the  Company's  other
goodwill,  is not deductible for federal income tax purposes,  thus resulting in
the higher effective tax rate.                                                  

(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.                                                                        

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 BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

(4)      Capital stock transactions                                             
--------------------------                                    

     On March 27,  1996,  the Company  completed a secondary  offering of common
stock to the  public in which  3,220,000  shares of  Common  Stock  were sold at
$36.50 per share.  Of the total  3,220,000  shares  sold,  450,000  were primary
shares and the remaining  2,770,000 shares were sold by certain of the Company's
shareholders,  including  400,000  of Class B shares,  which were  converted  to
Common  Stock  immediately  prior to the  offering.  The net  proceeds  of $15.3
million  was  used  for  general  corporate   purposes  and  to  finance  future
acquisitions.                                                                   

         The remaining  shares of stock  available under the 1995 Employee Stock
Purchase  Program were purchased by employees during the months January to April
1996.  In May a  successor  plan (the  1996  Plan) was  established  which  made
available 1,000,000 shares of BDM common stock, with a maximum of 500,000 shares
available for purchase in any 12-month period. During the offering period of May
1, 1996 to October 31, 1996,  the purchase  price is 85% of the closing price of
BDM common stock on May 1, 1996 (the base price), or 85% of the closing price at
the end of each month, whichever is less. The base price will be reset every six
months to 85% of the closing price on the first trading day of the next offering
period.  The new  1996  Plan  includes  a 90-day  holding  period  during  which
employees may not sell shares purchased under the 1996 Plan.                    

(5)      Acquisition                                                            
-----------                                                   

         On February 20, 1996,  the Company  completed the  acquisition of 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.  The acquisition of
these  companies has been accounted for as a purchase,  and the results of their
operations have been included in the Company's  consolidated statement of income
since the date of  acquisition.  Of the total purchase  price,  $8.8 million was
paid out of existing  cash  balances and $9.7  million was financed  through the
issuance of notes payable to the previous owners. The notes are payable over two
years and bear an interest rate equal to the prevailing yield rate on twenty-six
week United States  Treasury  Bills,  determined  every six months (4.71 % as of
June 30, 1996).  Interest is payable on a quarterly  basis.  Resulting  goodwill
totaled $16  million,  and will be amortized  on a  straight-line  basis over 15
years. Other intangible assets, relating to non-compete agreements, totaled $1.4
million and will be amortized over two years.                                   

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Item 2.  Managements' Discussion and Analysis                                   
-------  ------------------------------------                                   

OVERVIEW                                                                        

         The Company achieved strong increases in revenue and  profitability for
the second  quarter of 1996.  For the three months ended June 30, 1996,  revenue
grew 18%, net income grew 72%, and earnings per share  increased 18% compared to
the same period in 1995.  For the six months  ended June 30,  1996,  the Company
experienced  growth in revenue of 18%, net income of 67%, and earnings per share
of 18%  compared to the same period in 1995.  Proposal  activity has been robust
resulting  in proposal  backlog of $2.3  billion as of June 30,  1996.  Contract
backlog of $1.6 billion as of June 30, 1996, will increase  significantly in the
third quarter as a result of a large contract award in early July.              

REVENUE                                                                         

                                                        [Enlarge/Download Table]


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

                                       1996       %      1995       %       1996       %       1995       % 
                                       ----       -      ----       -       ----       -       ----       - 
                                                                                                            
Client Category                                                                                             
---------------                                                                                             
U.S. Department of Defense           $103.7     41%    $ 77.2     36%    $ 186.5     39%    $ 144.2     36% 
International Defense                  57.6     23%      50.6     24%      116.5     25%      101.6     25% 
Civil Government                       55.5     22%      54.6     26%      101.0     21%       99.0     24% 
Commercial                             35.1     14%      30.7     14%       73.0     15%       60.2     15% 
                                       ----     ---      ----     ---       ----     ---       ----     --- 
     Total                          $ 251.9    100%   $ 213.1    100%    $ 477.0    100%    $ 405.0    100% 
                                    =======    ====   =======    ====    =======    ====    =======    ==== 

Services Provided                                                                                           
-----------------                                                                                           
Systems & Software Integration       $ 85.5     34%    $ 69.5     33%    $ 169.4     36%    $ 123.9     31% 
Computer & Technical Services         130.1     52%     114.4     53%      250.0     52%      231.2     57% 
Enterprise Management & Operations     36.3     14%      29.2     14%       57.6     12%       49.9     12% 
                                       ----     ---      ----     ---       ----     ---       ----     --- 
     Total                          $ 251.9    100%   $ 213.1    100%    $ 477.0    100%    $ 405.0    100% 
                                    =======    ====   =======    ====    =======    ====    =======    ==== 

Subsidiary                                                                                                  
----------                                                                                                  
BDM Federal                         $ 139.0     55%   $ 116.2     55%    $ 258.0     54%    $ 213.7     53% 
BDM Technologies                       21.5      9%      14.6      7%       38.6      8%       26.8      7% 
BDM Europe                             48.2     19%      46.7     22%      100.4     21%       95.5     23% 
Vinnell Corporation                    43.2     17%      35.6     16%       80.0     17%       69.0     17% 
                                       ----     ---      ----     ---       ----     ---       ----     --- 
     Total                          $ 251.9    100%   $ 213.1    100%    $ 477.0    100%    $ 405.0    100% 
                                    =======    ====   =======    ====    =======    ====    =======    ==== 


Revenue by Client Category                                    
--------------------------                                    

         U.S.  Department  of  Defense  (DOD):  Revenue  derived  from  the U.S.
         Department of Defense (DOD) increased 34% and 29% for the three and six
         month  periods  ended June 30,  1996,  compared to the same  periods in
         1995.  Particularly  noteworthy  was the strong growth in the Company's
         systems  and  software  integration  work  for the DOD  (primarily  the
         Defense Enterprise Integration Services contract), as well as growth in
         defense test and evaluation and technical support for ballistic missile
defense and other military programs.                          

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         International  Defense:  Revenue from  international  defense  business
         increased  14% and 15% for the three and six month  periods  ended June
         30, 1996,  compared to the same  periods in 1995 due to higher  revenue
         earned on BDM  Federal's  contract  with the Royal  Saudi Air Force and
         higher revenue on Vinnell's  contract with the Royal Saudi Land Forces.
         This was somewhat offset by a decrease in revenue on Vinnell's contract
         with the Saudi Arabian National Guard. The real growth in the Company's
         German defense business was masked by exchange rate fluctuations as the
         U.S.  dollar  strengthened  roughly 6% against  the German mark in 1996
         compared to 1995. Excluding the impact of changes in the exchange rate,
         international  defense business would have increased by 16% and 15% for
         the three and six month  periods  ended June 30, 1996,  compared to the
         same  periods in 1995.  Certain  1995  amounts  have been  reclassified
         between the International  Defense and the Civil Government  categories
to conform with the 1996 presentation.                        

         Civil  Government:  The increase of 2% in civil government  revenue for
         the three and six month periods ended June 30, 1996, reflects growth in
         Vinnell's Job Corps Center  contracts and BDM Federal's  work for local
         school  districts.  This growth was offset by a decline in revenue from
         BDM's  environmental  restoration and waste management programs for the
         Department of Energy,  as well as a slight decline in revenue generated
         from state governments.  The Federal government's  decision to delay by
         two years the  deadline by which states must have  federally  certified
         information  systems in place to manage and track their  child  support
         enforcement  programs has contributed to a flattening of revenue growth
         for BDM  Technologies'  state  government  business.  The  Company  has
         recently  won  two  substantial  state  government  contracts,  one  in
         Arkansas and the other in Montana.  Work on the Arkansas contract began
         in the third  quarter of 1996.  The  Company is  currently  providing a
         broad array of  information  services  support to the State of Montana.
         The new Montana  contract,  which will  commence  in early  1997,  will
expand upon the Company's current work.                       

         Commercial:  The increase of 14% and 21% in commercial  revenue for the
         three and six month  periods  ended June 30, 1996,  reflects  growth of
         information technology work for various clients,  principally generated
         from the companies acquired in late February.  International commercial
         revenue,  which  is  roughly  half of the  Company's  total  commercial
         business, was impacted by the aforementioned fluctuations in the German
         mark to U.S. dollar exchange rate. Excluding the impact of the currency
         fluctuations,  commercial  revenue would have  increased by 18% for the
         three months ended June 30, 1996,  compared to the same period in 1995.
         Timing issues related to the  installation  of the Company's  warehouse
         automation and  distribution  product,  MARC(TM)  Systems,  resulted in
         slower  than  expected  growth  for the  quarter  in BDM  Technologies'
         domestic commercial business, excluding the effect of the acquisitions.

Revenue by Services Provided                                  
----------------------------                                  

         Systems and software  integration revenue increased 23% and 37% for the
         three and six months ended June 30, 1996,  compared to the same periods
         in 1995.  This  increase  was  driven by growth in BDM  Federal's  DEIS
         contract with the Defense  Information  Systems Agency, as well as work
         for  a  variety  of  commercial   clients   primarily  related  to  the
         acquisitions  completed  in  February.  The  increase in  computer  and
         technical  services  revenue  of 14% and 8% for the three and six month
         periods is a result of growth in a number of  contracts  including  the
         expansion of work for the Royal Saudi Land Forces,  test and evaluation
         programs, and technical support for ballistic missile defense and other
         military programs. Vinnell's Job Corps contracts were a major driver of
the increase in enterprise management and operations revenue. 

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Revenue by Subsidiary                                         
---------------------                                         

         Revenue  at BDM  Federal  grew 20% and 21% for the three and six months
         ended  June 30,  1996,  compared  to the  same  periods  in 1995.  This
         increase  reflects  expanded  work for a wide variety of clients,  most
         notably involving information technology services on the DEIS contract,
         and also increased services and support in defense test and evaluation,
         ballistic  missile  defense,  and other military program areas. The 47%
         and 44% revenue  increases  at BDM  Technologies  for the three and six
         month  periods  ended June 30, 1996,  were largely due to growth in its
         commercial  information  technology work,  primarily resulting from the
         acquisitions   completed  in  February.  BDM  Europe's  higher  revenue
         reflected  additional work performed for the German Ministry of Defense
         and  commercial  clients.  In  local  currency,  BDM  Europe's  revenue
         increased approximately 13% and 9% for the three and six month periods.
         This real growth was masked by changes in the exchange  rate.  Finally,
         Vinnell's  revenue  increased  21% and 16% for the  three and six month
         periods ended June 30, 1996.  This increase was driven by its Job Corps
         Center  contracts  and work for the Royal Saudi Land  Forces,  although
         this  growth  was  partially  offset by a decrease  in revenue  for its
contract with the Saudi Arabian National Guard.               

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,
                                          1996            1995         1996             1995  
                                          ----            ----         ----             ----  
                                                                                              

Revenue                                  100.0%         100.0%        100.0%          100.0%  

Cost of Sales                             83.9           83.9          83.9            82.9   
Selling, general and administrative        9.3            9.8           9.2             9.9   
Depreciation, amortization and other       1.8            2.2           1.8             2.6   
                                       -------        -------      --------       ---------   

     Operating profit                      5.0            4.1           5.1             4.6   

Interest (income) expense, net            (0.3)           0.6          (0.2)            0.7   
Equity in earnings of affiliates          (0.2)          (0.2)         (0.2)           (0.2)  
Minority interest                          0.9            0.4           1.1             0.7   
                                       -------        -------      --------       ---------   

     Income before taxes                   4.6            3.3           4.4             3.5   

Provision for income taxes                 2.0            1.5           1.9             1.7   
                                       -------        -------      --------       ---------   

     Net income                            2.6%           1.8%          2.5%            1.8%  
                                       ========       ========     =========      ==========  


COST OF SALES                                                                   

         Cost  of  sales,  which  includes  salaries,  benefits,   subcontractor
expenses,  materials and overhead  costs,  was stable as a percentage of revenue
for the second quarter of 1996 compared to the same period in 1995, reflecting a
similar mix of services and  materials in the two periods.  The increase in cost
of sales as a percentage of revenue for the first six months of 1996 compared to
the same period in 1995  reflects a one-time  profit  recognition  in March 1995
from a Vinnell  contract,  which was  applicable to services  provided since the
inception  of the  contract  in May 1994.  This  lowered  the 1995 cost of sales
percentage.                                                                     

SELLING, GENERAL AND ADMINISTRATIVE                                             

         The decrease in selling, general and administrative (SG&A) expense as a
percentage of revenue for the three and six months ended June 30, 1996, compared
to the prior year periods  reflects revenue growth which has outpaced the dollar
increase in SG&A costs. The dollar increase in SG&A costs reflects the inclusion
of  the  companies  acquired  in  February  1996,  as  well  as an  increase  in
expenditures for marketing, product development, recruiting, and training. These
increases were partially offset by lower SG&A costs at BDM Europe.              

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DEPRECIATION, AMORTIZATION AND OTHER                                            

         Depreciation, amortization and other costs decreased as a percentage of
revenue for the three months ended June 30, 1996, compared to the same period in
1995.  This decrease  reflects the Company's  higher revenue base which has been
accompanied  by  relatively  flat  costs.  Amortization  expense  for the second
quarter included amounts related to the acquisitions  completed in 1996,  offset
by a decrease from other  intangibles that have become fully amortized.  For the
six months ended June 30, 1996, these costs decreased as a percentage of revenue
largely due to a $1.6 million write-off of goodwill in the first quarter of 1995
related to the FACE acquisition.                                                

INTEREST (INCOME) EXPENSE, NET                                                  

         The Company had net  interest  income of $0.8  million and $1.0 million
for the three and six  months  ended June 30,  1996,  compared  to net  interest
expense of $1.4  million  and $2.5  million for the same  periods in 1995.  This
resulted  from  applying  $49.4  million of net  proceeds  in July 1995 from the
initial  public stock  offering and $15.3  million of net proceeds in March 1996
from the secondary stock offering to reduce outstanding borrowings.             

EQUITY IN EARNINGS OF AFFILIATES                                                

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

MINORITY INTEREST                                                               

         The minority  interest  share of earnings  increased as a percentage of
revenue for the three and six months ended June 30,  1996,  compared to the same
periods in 1995. This increase reflects improved profitability of BDM Europe and
the expansion of Vinnell's joint ventures in the Middle East. Vinnell's contract
with the Saudi Arabian  National Guard was performed  under a joint venture,  in
which  Vinnell is a 51%  partner,  beginning  in July 1995.  The results of this
operation are included in the Company's consolidated financial statements,  with
the other partner's 49% ownership interest reflected as minority interest.  This
contract was  performed  solely by Vinnell in the first half of 1995,  and thus,
the Company reported no minority  interest for that contract at that time. These
increases were partially offset by a reduction in minority interest from 1995 to
1996 due to a one-time  profit  recognition  in March 1995 from a Vinnell  joint
venture in Saudi Arabia.                                                        

PROVISION FOR INCOME TAXES                                                      

         The  provision  for income taxes  decreased  as a percentage  of income
before  income taxes for the three and six months ended June 30, 1996,  over the
same periods in 1995.  The effective  rate decrease was related to the write-off
of $1.6 million in goodwill  from the FACE  acquisition  in the first quarter of
1995. This write-off was not deductible for income tax purposes. Offsetting this
somewhat was an increase in the Company's statutory tax rate from 41% in 1995 to
42% in 1996, reflecting the impact of the Company's international expansion into
countries  with  higher  income tax rates than the United  States.  This  higher
income tax rate  considers  foreign tax credits  which may expire prior to their
use.                                                                            

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LIQUIDITY AND CAPITAL RESOURCES                                                 
-------------------------------                                                 

         The Company's  principal sources of liquidity  continue to be cash from
operations,  as well as  available  credit  under  the  Company's  $150  million
revolving credit agreement.  For the six months ended June 30, 1996, the Company
had cash flow of $11 million from operating activities.  This positive cash flow
was achieved  despite a delay in funding for one of  Vinnell's  contracts in the
Middle East. This funding was approved subsequent to quarter end, and collection
is  expected  during the third  quarter of 1996.  If the cash had been  received
prior to quarter end, the Company  would have had cash flow from  operations  of
approximately $35 million for the six months ended June 30, 1996. As of June 30,
1996, the Company had  approximately  $147 million available for borrowing under
the revolving credit agreement.                                                 

         Cash flow related to  investing  activities  primarily  consists of the
investment made for the acquisition of three affiliated  companies.  On February
20, 1996, the Company completed the acquisition of CW Systems, Inc., IG Systems,
Inc., and Melco Systems,  Inc. for $18.5 million, $8.8 million of which was paid
out of existing  cash  balances  and $9.7  million was  financed  through  notes
payable to the previous owners. The acquired  companies  specialize in providing
information technology systems and services to large commercial organizations in
several industries,  as well as to certain state government  agencies.  Goodwill
totaled $16  million,  and will be amortized  on a  straight-line  basis over 15
years. Other intangible assets, relating to non-compete agreements, totaled $1.4
million and will be amortized over two years.                                   

         Other investing  activities included capital  expenditures,  which have
increased due to the  implementation of a new enterprise  reporting system (SAP)
at BDM Federal, and working capital infusions to and earnings distributions from
Vinnell's unconsolidated joint ventures.                                        

         Financing  activities include the net proceeds from the secondary stock
offering of $15.3  million  completed in March of this year and the reduction of
the Company's working capital facility by $25 million. In addition,  the Company
continued  to provide a benefit to its  employees  by enabling  them to purchase
shares of common stock  through stock option  exercises  and the employee  stock
purchase plan. The remaining  shares of stock  available under the 1995 Employee
Stock Purchase  Program were purchased by employees during the months January to
April 1996. In May, a successor plan (the 1996 Plan) was established  which made
available 1,000,000 shares of BDM common stock, with a maximum of 500,000 shares
available for purchase in any 12-month period. During the offering period of May
1, 1996 to October 31, 1996,  the purchase  price is 85% of the closing price of
BDM common stock on May 1, 1996,  or 85% of the closing price at the end of each
month,  whichever is less.  The purchase price will be reset every six months to
85% of the closing price on the first  trading day of the next offering  period.
The new 1996 Plan includes a 90-day  holding  period during which  employees may
not sell shares purchased under the 1996 Plan.                                  

General                                                                         

         Management  believes the Company has  sufficient  liquidity and working
capital  resources  necessary  to conduct  planned  business  operations  , debt
service requirements,  planned investments,  capital expenditures, and to ensure
compliance with restrictive bank covenants for the foreseeable future.          

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 PART II

Item 4.  Submission of Matters to a Vote of Security Holders                    
-------  ---------------------------------------------------                    

         At  the  Annual  Meeting  of   Shareholders   held  on  May  10,  1996,
shareholders  voted on the  election of nine  directors  for the  ensuing  year,
approval  of the 1996  Employee  Stock  Purchase  Plan (the  1996  Plan) and the
appointment of independent  accountants for 1996. Proxies were solicited for the
meeting  pursuant to Regulation 14, there was no  solicitation  in opposition to
the  management's  nominees  as  listed in the  proxy  statement  and all of the
nominees were elected.                                                          

         The 1996 Plan makes  available  1,000,000  shares of BDM common  stock,
with a maximum of 500,000 shares  available for purchase in any 12-month period.
During the  offering  period of May 1, 1996 to October 31,  1996,  the  purchase
price is 85% of the closing  price of BDM common  stock on May 1, 1996 (the base
price), or 85% of the closing price at the end of each month, whichever is less.
The base price will be reset every six months to 85% of the closing price on the
first trading day of the next offering  period.  The 1996 Plan includes a 90-day
holding period during which  employees may not sell shares  purchased  under the
1996 Plan.  Shareholders  cast 9,925,730 votes for and 372,027 votes against the
1996 Plan, with 11,894 votes abstained.                                         

         Shareholders  cast  11,072,713  votes  for  and  59,047  votes  against
approval of Coopers & Lybrand as the Company's independent accountants for 1996,
with 14,059 votes abstained.                                                    

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

(a)   Exhibits:                                               

11.1   Statement of Computation of Earnings Per Share         

(b)   Reports on Form 8-K:                                    

                  The Company  filed a Form 8-K dated  February 20, 1996 related
                  to the acquisition of three affiliated companies:  CW Systems,
   Inc., IG Systems, Inc., and Melco Systems, Inc.

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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.                                          

August 6, 1996                             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.                                                                     

11.1     Statement of Computation of Earnings Per Share

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Dates Referenced Herein and Documents Incorporated By Reference

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

	6/30/95	3	7	10-Q, 424B1
	12/31/95	3	7	10-K
	2/20/96	8	14	8-K
	3/27/96	8
	5/1/96	8	14
	5/10/96	14		DEF 14A, SC 13G/A
For The Period Ended	6/30/96	1	13
	7/31/96	1
Filed On / Filed As Of	8/6/96	15
	10/31/96	8	14

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Filing Submission - Alternative Formats (Word / Rich Text, HTML, Plain Text, SGML, XML, et al.)

BDM International Inc/DE · 10-Q · For 6/30/96

Filed On 8/6/96 · SEC File 0-23966 · Accession Number 870763-96-7

Quarterly Report · Form 10-QFiling Table of Contents

10-Q · Quarterly ReportDocument Table of Contents

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