Item 1. BUSINESS
Introduction
QuesTech, Inc. (the Company), provides a broad spectrum of scientific, engineering, research, management and support services, primarily for defense and national security applications and, to a lesser extent, for general industrial and commercial applications. The Company's systems engineering and related services include signal and information processing and analysis, program management and logistics services, electronic and information warfare design and analysis, and related information technology, computer software, and systems integration and industrial analysis. A major portion of the Company's 1997 revenue was derived from competitively awarded contracts with U. S. Government clients, primarily agencies of the Department of Defense and the national security community.
The Company was incorporated as Quest Research Corporation under the laws of the Commonwealth of Virginia on December 31, 1968. Its name was changed to QuesTech, Inc. on August 26, 1981. Since its inception, the Company has provided its customers with leading edge systems and services designed for highly specialized applications. The Company believes that the application-specific knowledge it has developed, together with its recognized name in the industries it serves, represent significant assets of the Company in a highly competitive environment.
Industry Segments
The Company currently operates in two industry segments: government contracting and commercial. The government contracting segment consists of furnishing scientific, engineering, research, management and support services primarily to defense and intelligence agencies of the United States Government. The commercial segment consists of furnishing such services to non-governmental entities and the design, manufacture and sale of plastic containers. The revenue, operating profit (or loss) and assets employed in support of each segment are set forth in Note J of the attached Notes to the Company's Consolidated Financial Statements for the year ending December 31, 1997; which Note J is hereby incorporated herein by reference.
Description of the Business
The Company conducts its operations through four principal operating units, each of which possesses a distinct set of skills and is focused on a specific customer base, as follows: QuesTech Research Division ("QTRD") and QuesTech Service Company ("QTSC"), both of which are engaged primarily in the government contracting segment of the business, and QT Information Sciences Corportion ("QTISC") and QuesTech Packaging, Inc. ("QTPI"), both of which are engaged primarily in the commercial segment.
QuesTech Research Division
QTRD performs engineering services beginning with concept formulation and system design and continuing through engineering, technical and program management. In addition, QTRD acts as a research and development resource for its customers which consist primarily of agencies of the Department of Defense ("DOD") and the national security community. Occasionally QTRD provides similar engineering services to commercial customers as a subcontractor to its sister company, QTISC. QTRD's activities include:
- - Signal and Information Processing and Analysis: QTRD provides services and designs systems for the extraction, processing and analysis of meaningful intelligence information from electromagnetic signals (generally through computer collection, transformation, manipulation, decoding and interpretation of signals).
- - Intelligence and Electronic Warfare: Through analysis, modeling and simulation, rapid prototyping and customer support, broad technical expertise in signals analysis, data fusion, automatic target recognition, RF collection, lasers, infrared, radar and visible sensors, QTRD supports customer needs in the areas of intelligence and electronic warfare and sensor systems. Extensive systems integration experience results in timely transition of advanced technology to demonstrable and fielded equipment.
- - Software Engineering: QTRD participates in the design and implementation of defense and national security related software packages for use in a wide variety of computers and special purpose military processors; including development of special applications packages and real-time operational software and designing, validating and verifying complete turn-key systems.
- - Modeling and Simulation: QTRD develops software, using digital, analog and hybrid designs, to simulate a broad range of military problems; including design of war games ranging from detailed simulation of missile seekers to full battlefield campaign models.
- - Command, Control and Communications: QTRD provides a wide array of services with respect to the design and evaluation of special purpose commmunications and related systems; including design and evaluation of low vulnerability and low probability of intercept systems, interface analysis, test methodologies development, evaluation of the performance of countermeasures and counter-countermeasures, communication system vulnerability and spread spectrum analysis and simulation of the performance of complex interconnected communications systems.
- - Management and Logistics: QTRD assists the Army, Navy and Air Force in managing weapons systems acquisition programs by preparing documentation, providing data management and configuration control, analyzing costs and developing technical evaluation criteria.
- - Information Assurance: QTRD develops, integrates and demonstrates systems and capabilities that deny, disrupt and exploit modern command, control and information systems. In addition, QTRD applies its expertise to assess the vulnerability of these systems and to develop techniques and tools that provide protection from threat attacks.
QTRD's business is primarily derived from competitively awarded contracts with agencies of the United States Government. QTRD may receive work under such contracts either as prime contractor (directly from a U.S. Government agency) or a subcontractor (indirectly under a subcontract or purchase order from a company that is a prime contractor to a U.S. Government agency). Such contracts and subcontracts/purchase orders may be cost reimbursable, time and materials or fixed price. Most of QTRD's contracts and subcontracts/purchase orders are usually cost reimbursable or time and materials, which means, among other things, that the Company's costs will be reimbursed as incurred; subject to incurred cost audits in which the Government may from time to time disallow certain claimed costs. These contracts and subcontracts/purchase orders are also generally subject to termination at the convenience of the Government. If so terminated, the Company may be entitled to receive payment for work completed and allowable termination costs. Whether the occurrence of any such termination would have an adverse effect upon the Company would depend upon the particular contract and the nature of the termination.
QuesTech Service Company
QTSC provides a variety of field engineering and technical services, including electronic equipment and system installation, testing and maintenance (including command and control center electronic maintenance), computer software maintenance, test range support services (including test monitoring and operations and maintenance), and program support services, such as system analysis, integrated logistics support, equipment procurement, failure analysis, maintenance provisioning, field inspections and training. Its personnel may be deployed as required to customer facilities throughout the world. Its customers consist primarily of the same agencies of the Department of Defense ("DOD") and the national security community as QTRD and its business is likewise derived primarily from the same type of competitively awarded contracts as are described under the QTRD description of business.
QuesTech Packaging, Inc.
QTPI is a Virginia corporation which was incorporated on January 17, 1996 for the purpose of commercializing the patented scrapless, melt-phase thermoforming technology developed by its predecessor, QuesTech Ventures, Inc., which was dissolved in 1996. QTPI designs and manufactures plastic containers utilizing its patented process and custom-designed manufacturing equipment. Prospective customers for QTPI products include virtually all high volume users of plastic containers, such as sellers of food, drink, medicines, etc.
Virtually every product that QTPI sells is designed to meet the specific requirements of a particular customer. For this reason, there is a substantial lead time between the initial expression of interest by a potential customer and the sale of commercial quantities of a product. Before commercial quantities of a container can be produced, QTPI will perform some or all of the following tasks: design the container, select an appropriate material, produce one or more test batches, perform extensive testing and undertake one or more production runs.
QT Information Sciences Corporation
QTISC was incorporated on November 20, 1996 as a wholly owned subsidiary of QuesTech for the purpose of bringing QuesTech's extensive corporate knowledge and experience in Information Security to the commercial community. Drawing on lessons learned by QuesTech in over 30 years of related work for the Department of Defense and other Federal customers, QTISC developed a line of products and services uniquely attuned to the Information Security needs of corporations throughout the world. QTISC is able to design secure network architectures, conduct vulnerability analyses employing network penetration tools used by hackers and others interested in unauthorized entry into a system, help companies prepare sound security procedures and practices, and conduct a wide variety of professional training courses and seminars. As authorized by the National Computer Security Association (NCSA), QTISC also conducts Web Site Certifications.
Industrial and commercial operators of large and/or mission critical information systems (such as utilities, banks, etc.) are targeted customers. QTISC plans to offer its services on the basis of usual and customary commercial terms, which will be negotiated with customers on a case-by-case basis.
Intellectual Property
The Company applies for patent, copyright and trademark (service mark) protection when it believes that the expense of doing so is justified. The Company currently has seven U.S. patents, with three U.S. applications pending, and approximately 40 foreign patents, with two foreign applications pending. The Company attempts to protect its intellectual property by legal action where it feels such action is warranted. The Company also relies on a combination of trade secret and other intellectual property law, nondisclosure agreements and other protective measures to establish and protect its proprietary rights in its intellectual property. However, there can be no assurance such efforts will be successful, or that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to the Company's trade secrets.
Although the Company may occasionally obtain rights to the intellectual property of others under license, the Company is not a licensee of any intellectual property material to the conduct of its
business. In addition, the Company occasionally grants to others rights under certain of its intellectual property when deemed to be in the best interests of the Company.
Customers
Products and services offered by the Company are sold primarily to defense and intelligence agencies of the United States Government and to a lesser extent to users of plastic packaging for general consumer purposes. In 1997, approximately 43% of the Company's revenue was derived from the TEFS (Technical Engineering Fabrication Support) contract with the U.S. Department of the Army. It is expected that approximately the same percentage of the Company's revenue for 1998 will be derived from this contract.
Backlog
Set forth in the table below is the Company's funded and unfunded backlog as of December 31, 1997 and December 31, 1996:
"Backlog" is the aggregate contract revenues remaining to be earned under written contracts as of the stated date. "Funded backlog" is that portion which is covered by funding appropriations to and allotments by the procuring agencies. "Unfunded backlog" is that portion of backlog equal to the backlog less the funded backlog. Although there can be no assurance that unfunded backlog will become funded backlog, historically a majority of the Company's unfunded backlog has eventually been converted into funded backlog.
Competition
The markets for the Company's products and services are highly competitive. In the government contracting segment, the Company's competitors include large diversified firms having greater financial resources and larger technical staffs as well as smaller firms which are highly qualified in certain specialized areas and which may be able to offer lower prices and/or which may receive beneficial treatment under various government programs for small and disadvantaged businesses. In addition, the Government's in-house resources, as well as federally sponsored, not-for-profit research centers frequently compete with the Company. As the Government has reduced its defense spending and simultaneously tended to bundle information technology procurements into larger contracts, competition for the resulting smaller number of larger contracts has intensified despite effects of increasing propensity of the government to buy services via indefinite delivery/indefinite quantity
(IDIQ) contract awarded simultaneously to many firms who must then compete for tasks.
In the information technology portion of the commercial business segment, the Company's competitors include many of the same large and small firms with which it competes in the government contracting segment. In the plastic container portion of the commercial business segment, the Company's competitors include numerous large and small firms that produce plastic containers utilizing different manufacturing processes and/or different types of plastics, as well as producers of metal and paper containers.
In both segments the Company believes that its products and services compete favorably with those of its competitors. To remain competitive over the long term, the Company must continue to position itself to respond rapidly to changes in packaging and information technology, as well as changes in Government procurement practices and, among other factors, successfully retain qualified technical personnel.
Personnel
The Company and its subsidiaries, as of December 31, 1997, had approximately 636 employees on a regular full-time and part-time basis.
The nature of the services provided by the Company requires the employment of large numbers of professional and technical personnel, including engineers, analysts, scientists, computer software specialists, computer programmers and skilled technicians. The Company's future success will depend to a substantial extent on its ability to continue to attract and retain qualified personnel.
Foreign and Domestic Operations, Export Sales
During the years December 31, 1997, 1996 and 1995, the Company has conducted all of its operations in the United States and has not had any material export sales.
Item 2.
Item 2. PROPERTIES
The Company maintains [23] offices throughout the United States, the locations of which are based principally on customer requirements, the principal ones being described below:
The Company leases all of its facilities for terms of seven (7) years or less. Management believes that these facilities are adequate to serve the Company's needs in the foreseeable future.
Item 3.
Item 3. LEGAL PROCEEDINGS
The Company, including its subsidiaries, are not subject to any material pending legal proceedings, and none of the assets of the Company or its subsidiaries are subject to any such proceedings, other than routine litigation, if any, incidental to the business and against which the Company is either adequately insured, or which is not material.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1997, no matters were submitted to a vote of security holders.
PART II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on NASDAQ. Set forth below are the high and low selling prices1 for the Company's common stock for each full quarter of 1997 and 1996, during which such common stock has been publicly traded as reported by NASDAQ.
As of December 31, 1997 there were approximately 800 beneficial stockholders, including individuals and persons whose stock is held in street name by stockbrokers.
The Company has not paid dividends on its Common Stock since its inception. The payment of dividends in the future, if any, will be determined by the Board of Directors.
1/ The high and low over-the-counter market quotation reflects inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions.
Item 6.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data with respect to the Company and is qualified by reference to the Consolidated Financial Statements and Notes thereto included in Part IV.
Quarterly Results of Operations (Unaudited) (In thousands of dollars, except per share amounts)
(a) The income tax benefit for the three months ended December 31, 1996 included a benefit of $130,600 for certain one-time adjustments related to depreciation.
(b),(c) Earnings per share (basic and diluted) are calculated based on the requirements of SFAS 128, which replaced primary EPS with basic EPS. Diluted EPS is computed similarly to fully diluted EPS pursuant to Opinion 15. In complying with the requirements of SFAS 128, the Company has restated previously reported quarterly data.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: 1997 Compared With 1996
REVENUES
For 1997, the Company's consolidated revenues were $78.5 million, up 8% over the prior fiscal year. Most of the revenue growth was provided by the government contracts segment as a result of new contract awards and existing contracts which received additional funding. The Company's ability to achieve higher direct labor utilization and increased direct labor staffing were additional drivers of revenue growth in 1997.
Government Contracts Segment
For 1997, the Company's revenues grew by $6 million compared to 1996, of which $4 million is attributable to the QTSC unit of the government contract segment. QTSC's revenues have increased over the last three years due to new contract awards. Its recent awards include contracts requiring core competencies in video graphics production and technical and engineering acquisition support.
The QTRD unit of the government contract's segment continues to account for the most significant portion of the Company's revenues. QTRD's revenue growth for 1997 increased by 2% over 1996 and was due primarily to increased direct labor. Recently, QTRD was unsuccessful in a bid to retain a major contract which accounted for 8% of the 1997 revenues. This has contributed to a reduction in the Company's backlog as of the end of 1997, when compared to the end of 1996.
Commercial Segment
For 1997, commercial segment sales consisted primarily of sales by QTPI, including reimbursable costs arising under a contract with the U.S. Army Soldier Systems Command and reimbursable pre-production costs under a new production contract with a Fortune 100 Company. Full-scale production under the latter contract will not commence until March, 1998. Sales of $677,100 during 1996 were in fulfillment of an initial supply contract which has since ended.
QTISC, which was formed in late 1996, reported 1997 sales which were not material to the operations.
OPERATING EXPENSES
Operating expenses for 1997 were $76.7 million, or 97.7% of revenues, compared to $70.8 million, or 97.8% of revenues for 1996. Of these amounts, salaries, wages and employee benefits accounted for 54% of revenues for 1997, compared to 49% for 1996. Labor cost increases resulted from increased direct labor requirements in connection with the Company's various task order contracts. Other operating expenses declined to 45% of revenues for 1997, compared to 50% for 1996. The decline for 1997 when compared to 1996 was due primarily to reduced pass-through costs under government contracts, a reduction in QTPI's cost of operations and a reduction in certain reserves.
INCOME FROM OPERATIONS
Income from operations for 1997 was $1.8 million compared to $1.6 million for 1996, and remained at approximately 2% of revenues in each year. For 1997, growth in income from operations was offset by certain nonrecurring costs which impacted operating margins. These costs included those associated with:
- - the base closing of Vint Hill Farms Station (Virginia) and subsequent relocation of contract efforts to Fort Monmouth, New Jersey. Related costs included: employment guarantees for employees in transition, relocation of key employees, and recruitment of replacement employees;
- - increased bid, proposal, and business development activities;
- - recruiting technical and administrative staff during tight labor market conditions;
- - expansion of office facilities in the Northern Virginia area and Wall, New Jersey to accommodate increased employee staffing and to ensure close proximity to customers.
- - depreciation of newly acquired personal computers, servers, and project accounting software and other capitalized costs to support the Company's information systems and wide area network.
INTEREST EXPENSE
Interest expense for 1997 was $719,800, up 25% from 1996, due to increased line of credit borrowings to fund working capital requirements and from interest charges associated with the capital lease on manufacturing equipment. The capital lease was consummated in late 1996 and therefore did not impact interest in either 1996 or 1995.
INCOME TAXES
During each of the last three years, state income tax, net of the federal income tax benefit, diminished in significance as a component of the
effective income tax rate. During 1996, the Company benefited from a tax loss associated with an investment in a foreign subsidiary and changes in depreciation methods. See Note E of the financial statements.
NET EARNINGS AND EARNINGS PER SHARE
The Company's 1997 basic earnings per share were $.45 ($.42, diluted) on net earnings of $645,900 compared to $.59 ($.54, diluted) on 1996 net earnings of $818,300. The earnings per share calculation in 1996 and 1995 have been restated, based on the provisions of a newly issued accounting standard, SFAS 128, "Earnings per Share." See Note A14 of the Financial Statements.
FINANCIAL CONDITION
During 1997, cash used by operations was $851,400, with a significant portion of this amount used primarily to finance the growth in receivables. The accounts receivable balance increased by $3.4 million during 1997, as a result of delays in contract funding and overall increases in revenues. During 1996, the increase in receivables amounted to less than half of the 1997 increase, thereby contributing to cash flows of $955,300 provided by operations.
The Company used $1.5 million for investing activities, consisting primarily of capital expenditures for the purchase of personal computers, servers, and software applications to enhance the Company's wide area network, information and accounting systems. Management expects to complete its internal system development efforts by mid-1998. In addition, the hiring of new employees and the expansion of office facilities necessitated the purchase of additional personal computers, office equipment and furniture. During 1996, the Company's capital expenditures of $3.8 million were used primarily for enhancement of the production facility of QTPI in Newport News, Virginia. No significant capital projects are planned in 1998.
The Company relied principally on its line of credit facility to finance its operations and capital expenditures. Cash flows provided by financing activities were in excess of $2.0 million during 1997 and 1996 and consisted primarily of increased borrowings under the line of credit facility and proceeds from a capital lease, respectively. Management recently renegotiated its credit agreement to allow it to have the option to borrow at the prime rate or LIBO based (London Interbank Offered) rate, thereby potentially reducing interest costs. Additionally, management is exploring debt and equity financing options to support QTPI's investment and working capital requirements.
Management believes that its line of credit facility will be sufficient during 1998 to fund expected capital expenditures, working capital needs, and other cash requirements.
FORWARD-LOOKING STATEMENTS
Management's discussion and analysis of the results of operations and financial conditions and other sections of this Form 10-K may contain forward-looking statements on the Company's outlook for the future. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain factors could cause actual results to differ materially from the statements. These factors include the Company's ability to attract and retain key personnel, particularly those involved in technical efforts; interest rate levels; changes in technology; the potential impact of industry consolidation; and the Company's ability to successfully exploit its commercial packaging technology.
Year 2000 Issue
Management has undertaken an investigation of whether the Company will be adversely impacted by the issue of whether its systems are Year 2000 compliant. Based on this review, management has determined that a material adverse impact on the Company's financial statements is unlikely.
Outlook
Over the last few years, the federal government has moved from specific contracts to very general IDIQ (indefinite delivery/indefinite quantity) contracts. These contracts provide the winning bidder the right to market its products and services rather than a commitment from the purchasing agency to buy through the contract. This has made buying services and products easier for the federal government, but it has contributed to additional competitive pressures already heightened due to appropriation cutbacks. As a result, pressures on near-term profits in the industry have increased as companies build sales and marketing infrastructures to capture business.
Several segments within the industry, such as the area of application programming and information technology (IT), will provide growth opportunities for contractors. In addition to the expanding demand for IT services by the federal government, commercial demand for IT services is dramatically increasing. The increased demand is characterized by the need for government and the commercial sectors to focus on the Year 2000 date problem. Profit margins tend to be stable-to-higher in the area of information technology due to strong demand and scarce resources.
Management believes the Company is well poised to meet the challenges presented by the changing market, as many of its products and services are related to information technology.
RESULTS OF OPERATIONS: 1996 Compared With 1995
Revenues
During 1996, the Company's revenues were $72.4 million, up 25% over 1995. Both the government contracting and the commmercial packaging segments reported business growth compared to last year. The government contracting segment, which provides 99% of the Company's revenues, consists of two operating business units: QuesTech Research Division and QuesTech Service Company ("QTRD" and "QTSC" respectively). A significant portion of the revenues are derived from two major contracts with the Department of the Army. The commercial packaging segment has only one operating business unit, QuesTech Packaging, Inc. ("QTPI"). During 1996, QTPI had only one customer.
Government Contracts
Revenues from a large Army contract and its follow-on effort which commenced performance during 1996 have accounted for over 40% of the Company's revenue during each of the last four years. A significant portion of the revenue increase was derived from materials and subcontract-intensive work orders. Revenues from increased efforts on Navy contracts and a new 5-year $25 million Air Force contract also contributed to growth.
Commercial Packaging
During the first half of 1996, QTPI produced thermoformed infant bottle liners which were marketed under the "1-Step" Munchkin brand. Following a dispute on pricing terms and product specifications, QTPI drastically cut back its production and halted customer shipments during the third quarter. No sales were posted during the fourth quarter.
Operating Expenses
The Company's operating expenses during 1996 rose to $70.8 million, up 27% over 1995. Salaries, wages and employee benefits increased primarily as a result of increased direct labor staffing on government contracts. A major portion of the increase in operating expenses arose from materials-intensive delivery orders and subcontracting activities. Additionally, manufacturing costs increased during the production stages.
Income from Operations
Income from operations for 1996 was approximately $1.6 million, which declined by 22% compared to 1995. Operating income was negatively impacted by reduced margins arising from the costs of certain contractual requirements. Continuing losses at QTPI, which included unabsorbed production overhead in the absence of sales, and reserves for inventory and receivable write-downs, contributed to the decrease in operating income.
Interest Expense
Interest expense increased 46% over 1995. Interest costs associated with construction in progress at the manufacturing plant were charged to operations, instead of capitalized.
Taxes
The Company's 1996 effective tax rate declined to 18.5% from 42.9% during 1995. The decrease in tax rate resulted from a tax benefit arising from non-recurring adjustments to deferred taxes associated with depreciation and other favorable tax deductions.
Net Earnings
For 1996, basic and diluted earnings per share were $.59 and $.54 on earnings of $818,300; these amounts reflected a 51% and 59% increase over per share earnings of $.38 and $.34 (basic and diluted restated) during 1995.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company together with the report thereon of Grant Thornton LLP, dated February 6, 1998, and all Notes to such Consolidated Financial Statements are hereby incorporated herein by reference.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting and financial disclosure required to be reported herein.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information set forth under the caption "Election of Directors" on pages 2 and 3 of the definitive 1998 Proxy Statement of the Registrant to be furnished to shareholders in connection with its Annual Meeting to be held on May 15, 1998 (the "1998 Proxy Statement) with respect to the name of each nominee or director, his age, his positions and offices with the Registrant, his business experience, his directorships in other public companies, his service on the Registrant's Board of Directors and certain of his family relationships and information set forth under the caption "Stock Ownership of the Company's Directors, Nominees and Executive Officers" on pages 13 and 14 of the 1998 Proxy Statement with respect to Section 16 matters is hereby incorporated herein by reference.
Officers of the Registrant are elected annually by the Board of Directors at the meeting of the directors immediately following the annual meeting of shareholders. There are no arrangements or understandings between any officer and any other person pursuant to which the officer was selected. Information with respect to Executive Officers of the Registrant is set forth below:
Vincent L. Salvatori, age 65, has served as Chief Executive Officer of the Company since October, 1988. He has been a director of the Company since January 1968.
Gerald F. Mayefskie, age 57, has served as President of the Company since 1991. He has been a director of the Company since May, 1990.
William M. Fairl, age 49, has served as Senior Vice President of the Company since May, 1996. From January, 1995 to May, 1996 he served as Vice President-Group Manager of the Company and from December, 1988 to January, 1995 he served as Senior Computer Scientist with the Company.
Joseph P. O'Connell, Jr., age 53, has served as Vice President and Chief Financial Officer of the Company since March, 1989.
Joe W. Rigby, age 57, has served as Senior Vice President of the Company since August, 1996. For more than 30 years prior to August, 1996 he served in progressively more responsible positions in the United States Army, retiring in 1996 with the rank of Major General.
Michael P. Rivera, age 51, has served as Vice President, General Counsel and Secretary of the Company since September, 1997. From December, 1988 until July, 1997, he served as Vice President, General Counsel and Secretary to Union Switch & Signal, Inc.
Michael Stankosky, age 54, has served as Senior Vice President of the Company since April, 1997. From April, 1992 to April, 1997 he served as Vice President, U.S. and International Business Development, of Science Applications International Corporation.
Douglas Wood, age 53, has served as Senior Vice President of the Company since August, 1997. From January, 1992 to August, 1997 he served as Director, United States Army, CECOM, Intelligence and Electronic Warfare Directorate.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Information with respect to remuneration of executive officers and directors, and certain other matters set forth in the 1998 Proxy Statement (i) under the caption "Compensation of Officers and Directors" on pages 7, 8, and 9 thereof and (ii) under the caption "Compensation Committee Interlocks and Insider Participation" on page 10 thereof is, to the extent
such information is required by Item 402 of Regulation S-K, hereby incorporated herein by reference.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of (i) persons who beneficially own 5% or more of the outstanding shares of the Registrant's common stock, (ii) directors, nominees and named executive officers individually and (iii) directors, nominees and executive officers as a group set forth in the 1998 Proxy Statement under the caption "Stock Ownership of Certain Beneficial Owners and Management" on pages 13 and 14 thereof is, to the extent such information is required by Item 403 of Regulation S-K, hereby incorporated herein by reference.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to relationships and related transactions between the Registrant and any director, nominee for director, executive officer, security holder owning 5% or more of the Registrant's voting securities, any member of the immediate family of any of the above or certain persons to whom such persons are related, as set forth in the 1998 Proxy Statement under the caption "Compensation Committee Interlocks and Insider Participation" on page 10 thereof is, to the extent such information is required by Item 404 of Regulation S-K, hereby incorporated herein by reference.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. The following documents are filed as part of this report:
With the exception of the information herein expressly incorporated by reference, the 1998 Proxy Statement is not deemed filed as part of this Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
QuesTech, Inc.
Date: March 6, 1998 By: /s/ Vincent L. Salvatori ------------- ------------------------ Vincent L. Salvatori Chief Executive Officer and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures Title Date
/s/ Vincent L. Salvatori CEO and Chairman of March 6, 1998 ________________________ the Board (Principal _____________________ Vincent L. Salvatori Executive Officer)
/s/ Gerald F. Mayefskie President, March 6, 1998 ________________________ Chief Operating Officer _____________________ Gerald F. Mayefskie and Director
/s/ Joseph P. O'Connell, Jr. Chief Financial Officer March 6, 1998 ________________________ (Principal Financial and _____________________ Joseph P. O'Connell, Jr. Accounting Officer)
/s/ Vincent M. Russo March 6, 1998 ________________________ Director _____________________ Vincent M. Russo
/s/ Edward Broenniman March 6, 1998 ________________________ Director _____________________ Edward Broenniman
INDEX TO EXHIBITS
* Previously filed; incorporated herein by reference. ** Page in Consolidated Financial Statements for the year ended December 31, 1997.
Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act
The registrant shall furnish to the Commission, its annual report to security holders covering the registrant's last fiscal year, and the proxy statement, form of proxy, or other proxy soliciting material sent to more than ten of the registrant's security holders with respect to its 1998 Annual Stockholders' Meeting.