ML19338B840

Annual Financial Rept 1979

ML19338B840
Person / Time
Site:	Crane
Issue date:	12/31/1979
From:	DUNLAP & ASSOCIATES, INC.
To:
References
TASK-TF, TASK-TMR NUDOCS 8001200059
Download: ML19338B840 (17)

Text

- - - - - - - - -

DUNLAPAND ASSOCIATES ANNUAL REJORT 1979 s:Q 1

p, ja,..;w:3 1

m kf l

,..,,V f'

al o

3-f see mw

/

.[g i f N i( h I. g u n u 8-8 s J

s 4

rg.

una g

]pyi u er hr'

/

4 M[N8Te$2!BSE,Md't

,' ES3ilMs!3itiEMER% >--

Dunlap and Associates,Inc. is a diversified research and de-velopment company applying advanced behavioral and sys-tem science technology to the solution of governmental,indus-trial and societal problems re-lating to human performance, safety, health and learning.

Current areas of emphasis in-cude: highway safety, military systems, health care, alcohol and drug abuse, mass transpor-tation systems, consumer pred-uct safety, management infor-mation systems and training program development. Through its Reflectone subsidiary, the Company has become a strong competitor in the expanding field of designing and produc-ing flight simulators and train-ing devices for the military and commercial aerospace industry.

Founded in 1948 and headquar-tered in Darien, Connecticut, Dunlap operates five facilities in California, Connecticut, Florida and Massachusetts. The com-mon stock of Dunlap and Asso-ciates, Inc. is traded Over-the-Counter with a NASDAQ listing under the symbol DUNL.

)

Cover:

Contents The photograph at the left shows Dick Highlights 1 Haas, Reflectone Project Manager, in Chairman's Letter to Shareholders 2 the cockpit of an A-10 flight simulator as Reflectone 4 he checks out production details with D&A Research 7 George Seiden, Senior Vice President.

at the Company's Stamford facility

• Financial Statements 8 Notes to Financial Statements 11 In the middle photograph, Carol Five-Year Financial Summary 15 j

Preusser, Dunlap Research Associate.

Management's I

records the activities of schoolchildren Discussions and Analysis 15 as part of the Company's current r: search assignment from the Consumer Product Safety Commission relating to playground equipment safety.

The aircraft in the upper right is an S-76 multi-mission twelve passenger Sikorsky business helicopter and represents Reflectone's entry into the commercial Crospace market via the Company's recent contract to build a flight trainer f:r the S-76.

sec t zoo 09\\

r

REPRESENTATIVE THE g

CLIENTS ORGANIZATION DUNLAP and ASSOCIATES, INC.

1 f"Eiki N

(k.y GOVERNMENT D&A is a pubhcly-held research-consulting organization m

specializing in the practical apphcation of behavioral ar'd sys-National Highway Traffic Safety Administration tem science technology to complex commercial, industnal, m

e o NationalInstitute of Mental Health mihtary and social problems. It was founded in 1948 and has completed well over two thousand assignments for hundreds of NationalInstitute on Drug Abuse e

chents. Many chents of long standing demonstrate that expecta-e National Institute for Occupational Safety and Health tions have been surpassed more frequently than simply attained.

Transportation Systems Center D&A consists of an Eastern and Western Division with annual e

e Office of Naval Research sales totahng between St-2 milhon. A subsidrary. Reflectone.

e Air Force Omce of Scientific Research Inc., has over 30 years of experience in design and development pM, g

of training devices and simulators.

%~

i _,,

U S Army Human Engineenng Laboratory

~ "'

e Comprehensive proposals are prepared in response to wot'en U S. Naval Training Equipment Center or oral requests Work is initiated only a'ter writ +3n authorization e

Federal Highway Administration to proceed is received from the chent. Each project is the re-e e Law Enforcement Assistance Administration sponsibility of an officer of the Corporation who is stpported oy a a

Connecticut Department of Correction pr lect team which works in close contact with the chent e

Dallas County' Texas e

in a form selected by the chent Careful attenticn is given to the U S Navv Bureau of Medicine and Surgery tenets of National and cbent secunty ootn dunng and after as-e e State of New Hampshire signments e Nassau County, New York Simply stated. D&A provides for chente

)

a fresh insight into their r,roblems e

an objective and interdisciphnary approach BEHAVIORAL AND SYSTEM e

COMMERCIAL

,, y3nery o, sg,ii3,n specianzed fields SCIENCES e Bell Telephone Laboratories. Inc.

extensive expenence g tined from related assignments e

Eastman Kodak Campany e

on-time performance within a pre-estabhshed budget l

e S*orsky Aircrat Dmsson of UAC e

e ractical, costoffective results OF COMPLEX PROBLEMS Colkns Rad.o Company e

e Dorr-Obver, Inc.

Raytheon Company

=

e General Electnc Company One Parkland Drive ReSearCh.

Analysis e IBM Corporation DARIEN. CONNECTICUT 06820 RCA Corporation 203 - 655-3971 PlaDD/D9 OeSk]O e

e e ITT Defuse Communications Division e xerox Corparation us South Oak Str**'

e Evaluation Development INGLEWOOD. CALIFORNIA 90301 Corning Glass Works 213 - 674-1301 First Nat,onal Bank of Kansas City SOTV/COS e

e Time, incorporated Other offices e Internationaf M:nerals and Chemical Corporation Boston, Massachusetts e LaJolla. California e Amencan Oil Company D

D 9.k

~

OVER 25 YEARS Qy epw.

P-F SERVING THE GOVERNMENT, INDUSTRY c.."DUNilAP and ASSOCIATES, INC.

AND COMMUNITIES

PROFESSIONAL REPRESENTATIVE PROFESSIONAL STAFF SERVICES EXPERIENCE and FACILITIES AREAS OF SPECIAL SKILL RESEARCH STAFF Human per+0rmance us#g hancheid weaccns and ceWCes The cualty of serveces proceed ct:ents is f taHy dependent Crea%e prec'em soMng Ma ket potent al of seaage t eatment systems e

upco tre people ass.gned to projects Accord.ngry. our most VeNeie mterlocn Sys* ems to prevert er@vdis from dWg valuaO!e asset as our sta". corrposed ct pro'ess;onais tra ned e Accident anaFyts nNe micoCa!ed and esperienced in tne areas of-e Human factors eng.neer.ng and researd A0aphe p eactor techn.q.es to COct ol CO*p:ex systems psichology e Syses and cieratons analyses Pe crmance uncer hypnot cany mcuced stress a

gng.neer,ng e Jot >-task ana!ys:s

. Stat:stcs e veket researen and saweys ANALYSIS AND PLANNING

. vatemat cs Pe'atcrsn a teetaeen e ag atsse and dvng pe formance

. Econom cs e Compute tecnno:cgy Paysics Econom':s S'd s' ann:ng et amouance seroces

. Tra,n.ng and edscat on scace c: anne = for e ces and ca%s

. Pont ca! se ence s

. Laborat:9 and t+d resear:n Peavre ents and concepts tcr a wme omd cea anahzer

. toman ta::c s

. Com;uer 5: ences

. rp1dem.crogy

~

r HUMAN FACTORS DESIGN

" *'" 3"* "C

• S AREAS OF WORK Raca< and comr un;ca* ons syste s

. Bmsmess adm rust aton Tgee.te s a,o ccp ers for o't ces CO#9 " ' "#

e Cond;;t g psycheiog ca!. socat encrcrmental a^d Y:ss :e systems and persona l de' ease weapons ge..

e,3.,;,r.e,33,3cen,e s;3;e3 Pro'essionahsm is a creed at D&A Most of tre sta" se ecccome resear:n a%anceo ceg ees vay %ee Pn D cegee.n ite r tet v ca.sa factors in at: denis Anaiz.ng ::b reawrements.30^ty n,,

,e ve cahetect onc es r~e e

cmpete ce H0aevet mest prot ems : anscend ciass: cal s r es

,r

. t a.u.

ra.n n,3 rea _,e-T a n og ceuces anc s m rm

~

m are3s et tra.rmg and recsre scec:a' mierc:st+pLnary sws O&A scient sts work as a wei coord natec <nA-c s spbnes team of e Paen.ng cesqn rg and ewa uatag sistems ewp"ent res:./ts-cr emed pr t'em 50Ners Sc ertsts trst pragmansts p oce:ses and faca es DEVELOPMENT tc<emest preess,o.ea's aways tney ta e cr ce in dewe.ng T amg cu.cua m t e a eas cf eme :;e y mea calcare taa cmcsets cf engn quatty' en t me anc en b;cget v

,,e.etoc.ng reg iarons. scety prcrams. rar ng edsca-e s y e,.t c,,,,,

p.c,,,,,, ard o:wc,w sa'e!, and e

tena: canca a and px e irto< mat.on syste s rear Pecestnan sa'eyegiat:ns anc puta c recrmanen crograms FACILITIES Cond;:t eg tra.n ng programs. 4:4 snops se, nars and canet sess ons wna, eng neenng ces:gn gsces. r a,cooc-s and rnanva s Heacasartered in Dar:en. Connect: cut D&A mamtass Prec etor c sotays tar anuai c:rco! systems facat es.n tr e Bcston. vassacNse s a*ea ana ing'encoa anc e E.aoanng e cra-s pocacts anc precesses LaJoha CaHe<%a Scecial support resosces <nckce Compue zea da a crecess<ng APPLICATION

. e.amg ccevpuers inse;ctor t am ng p cgams AREAS OF APPLICATION Crea.e o csem s:v.ng sesses us ^9 re Daniae ce-Connot d: spray de.'ces vetped W :s tecnn 0;e Data record ng easement e g. EEG. poyg ach mooe 2

e H g~4a/ sa'ety e no stcrs sem,nars and nst tJes n :ne a ea cf r~ man came as and 0-o; ecto s. sord record.ng ewp ent.

. Crug a.c a'cc ci atuse i3CIU'S* P *"'3

• ** "* * *# 9 C* "

• S

. Au ence rea:t on a^d esper' ca e'sess o S e hea? Ca 9 syste"s Test set. c a eas for t*.e cond;ct oi psy:noenys cal esper-ggg e A,: a t sn vs. *e c'es weapcns a o secc t sys*e*s

. Tecmcal e a es

. Comm n. cat on a,d ecrat c, syste s EVALUATION s

u Com na: ps! ce systems anc procedfes

. Electro-eecham:ai sncas e o::aa ora: sasty a,e *eaan g, m g.e, ng c,fe, e3s_,e p739,3,s p,,,3,c, o laa er."Ae9e**

Printed instena's !O Co"Dat c%g aoJse Acational resoLrces a'e cD'a ned as reas. red 13 satis *y une o Corps".!/ act on p c73"s

. A rC'at ca r et la^cmg Wo'mance que needs of Chents includ'ng Ine f eid ng of tea"s and eOu p-e Cons.per :nd s!"al anc co":"e'c:3! pOO; cts Alamet".e rear us>on Systems ment to CondJCf researCM remcte from the p e%ses M

N..mhY D U N L A P A N D A S S O C I AT E S,

I N C. J dj),M_4 W;]}{!h, i, e, o( '

p g

i l

(

l A -

--:3 j= 1 i.'

9%x;,

,IE$. [i<

. ; ;. g

,: u....

S ykk

.k b}?(

JM-- ' g ; ~ Q'7/a..

-s,%

,,a; r,.. y.

-r c..

Fr 4--

T Df

• f,

l__ m m. ___ _m._ acs Sales Not income m n. <.ns ci.. am t-

z. z..,,. ;,4 Cash Dividends

,,,,,y,,,,gu,,,

u O)0 -

43 -

'~

a

,s -

1'.,

k is -

p 30 m

coo -

g g

,~

m

-l;h

((f a_

a

=

$1 skl['

r> -

3. to -

I c'.3

,.i

,,u0 -

j

-g j

hj 4-v)

.k p]..

l.

N) f h_

7_

D=r Sharcholdar:

[' [g%y 5dOk

,c O

p in the fiscal year ended March The greater Tampa area j

h.

fp#"

31,1979, for the seventh con-offers an excellent business en-l k Le 1 r

secutive year, your Company vironment, fine community fa-j achieved record sales, income cilities and has a moderate y

yQ s

before taxes and net income.

cost-of-living index. Our move Sales were $18,890,465, an to Florida will be a major factor 1

&u k%}

'6 increase of 52 percent over the in helping Reflectone recruit g

hg previous year's total of and retain the kind of engines.r-O

$12,401,635. Net income ing and scientific personnel so f

reached $625,508, a 19 percent essential to the growth of a high improvement over $526,883 in technology corrpany.

D fiscal 1978. Total income per in May 1978, we raised our share rose to $1.05 from a com-quarterly cash dividend from N

A

$.01 to $.02 per chare and an-k, parable $.87 per share earned s

d in the previous year. Income nounced a 10 percent stock div-J from operations in fiscal 1979 idend-our fourth since 1974. In

[

l totaled $1,218,493, a 24 percent November of last year we also improvement from the $985,539 increased the number of our registered a year earlier.

authorized shares to 2,000,000 and split the shares 3-for-2. Si-Highlight Events multaneously, we maintained in addition to these excellent the quarterly cash dividend of operating results, other impor-

$.02 on the new shares.

tant events took place during As part of our program to in-the year which may make fiscal crease the liquidity of our com-1979 the single most significant mon shares, late last year we 12-month period in our 31-year listed our stock on the National Corporate history.

Association of Securities Deal-In January of this year, as an-ers Automated Quotation sys-nounced in our special letter to tem (NASDAQ) with the symbol j shareholders, we made a major DUNL. Today, shareholders and I long-term financial commitment potential investors can read the i

to the future growth and profit-daily bid and asked prices of ability of our Reflectone subsid-our shares on the Over-the-iary-the largest source of Cor-Counter stock table page of porate earnings. In the near The Wall Street Journal. As a future, Reflectone will be mov-result of our program to in-ing operations to a new 120,000 crease Dunlap's national invest-square-foot facility in the ment exposure, the average l

Tampa West Industrial Park, weekly trading volume in DUNL The Tampa plant will expand shares has increased by more Reflectone's engineering and than 600 percent during the manufacturing production ca-past three years.

pacity to 70,000 square feet from the present 43,000-an in-Reflectone crease of 63 percent. For future The continued worldwide esca-expansion, we have an option to lation in the cost of oil and all lease contiguous acreage on energy is an ever-increasing which to build additional problem for most segments of facilities.

American industry. However, in 4

the case of our Reflectone sub-sidiary, the skyrocketing in-crease in the price of aviation fuel has been a major marketing advantage. The two charts on D

i D

D,$

.M.A page 5 offer a capsule illustra-dv o3-o am 1

2

tion of the economic opportuni-award in the Company's 31-year $2,564,736. These totals repre-ties in Reflectone's specialized Corporate history. Reflectone sent respective increases of 62 and fast growing high technol-reached another milestone dur-percent,116 percent and 33 per-ogy segment of the aerospace ing the last quarter of fiscal cent over the same figures for industry.

1979 when it obtained its first the end of fiscal 1978.

In fiscal 1979, Reflectone re-contract in the commercial Looking ahead, our immedi-ceived contract awards of al-aerospace market-an award to ate management priority is to most $34,000,000, an increase design and produce a flight insure the smooth transition of of 48 percent over the trainer for a business helicopter Reflectone from Stamford to

$23,000,000 received in fiscal manufactured by the Sikorsky Tampa. We have been greatly 1978. At the start of our fiscal Division of United Technolo-encouraged by the fact that year Reflectone's backlog was gies, Inc.

more than 80 percent of Reflec-approximately $47,400,000 as tone's key staff members have Eastern & Western Divisions contrasted with the 12-month-already decided to make the earlier total of $28,400,000.

In fiscal 1979, our Eastern and move with us. Additionally, our These two statistics are solid Western behavioral and system initial recruiting efforts indicate evidence of our expanding pen-science research divisione col-a significantly higher success etration of the growing flight lectivelyimproved their sales rate than ever achieved in the simulator market.

and profitability over the year Stamford area.

Last August Reflectone re.

earlier period. Revenues of the As we approach the end of ceived a $20,000,000 letter con-two operating groups totaled the first quarter of our new fis-tract to design and produce six

$2,058,447, a 17 percent in-cal year, we are optimistic that additional flight trainers for the crease over the results of fiscal our strong sales and earnings U.S. Air Force's A-10 close sup-1978.

performance will continue. I port aircraft. The contract was Diversification efforts by the extend my sincere appreciation the largest single contract Eastern Division resulted in re-for the dedication of all our em-search contract awards from ployees and the continued sup-new clients such as the Con-port of our shareholders who sumer Product Safety Commis-have jointly made the success sion and the States of New of the past year possible.

York, Connecticut and New S.incerely, Mexico. New awards also were l

Th3 cuttine map indicates the site of Reflectone's new received from the Department I

f;cility in Tampa, Florida.

of Transportation, National In-l stitute of Drug Abuse and the m

Army Research institute. In the private sector, Eastern Division Jack Wm. Dunlap, Ph.D.

is providing research-consulting Chairman of the services to such corporate Board of Directors v,. vats as RCA, Raytheon, AT&T, the 3M Company and

Systems ConsuPants, Inc.

June 1979

? TAMPA.

Financial Condition & Outlook

^

As of March 31,1979, Corporate current assets totaled $8,082,601 M and current liabilities were

$3,900,860, a ratio of 2.07 to 1.

3

,H At the same time,your Company e

^

] had total assets of $9,561,949, working capital of $4,181,741 and shareholders' equity of b.h..,

tm:

t

.d h

0 O

x A4, a..

o eo o

3

Rcficctone Fiscal 1979 was a milestone Moving to Tampa As this report is being pub-year for Reflectone in several Management's decision to lished, start-up operations in i

different respects. Some of move Reflectone from Stamford Tampa have commenced and these highlights include:

to Tampa (Florida)-announced we are busily engaged in re-E Decision to relocate from at a Tampa press conference on cruiting up to 50 engineers and January 18,1979-will have a 50 production personnel. By Stamford to Tampa I

positive impact on our subsid-year-end we expect to have a a Record contract awards of iary's ongoing ability to suc-total work foice of approxi-almost $34,000,000-an cessfully compete in its high mately 280 personnel.

Increase of 48 percent from technology specialized segment ntry Int n e er ial ar W the total of $23,000,000 in of the aerospace industry.

in February of this year we an-fiscal 1978 As briefly mentioned in the nounced that Reflectone had E Entry into the commercial Chairman's letter, the main rea-received its first contract to de-market via an award to design son for the move South is the sign and produce a flight simu-a flight trainer for Sikorsky's simple but all-important fact I tor for the commercial aero-S-76 business helicopter that the general environment nd lower cost of l..iving in the space market-a $2,000,000 i

m A $20,000,000 contract to pro-duce six flight simulators for Greater Tampa area will enable the Air Force's A-10 aircraft-us to dramatically improve our the largest single award in recruiting of the kind of engi-our Corporate history.

neering professionals that are essential to our industry. The move is also expected to signi-ficantly reduce production costs through long-term operat-ing efficiencier.

On the elevated produc-tion p!Itform, Dick Haas, j

Project Manager, confers with an Air Force officer g-

~L U

titting in the cockpit of s

En A.10 flight trainer. The

'iM,

=

technicitna in the fore-

'I

' [.. y.-

~

,C computer and systems

'u ground program the tsctics and other flight

~

' information data which is g

G

" ' ~

~~ w communicated to the

'- 7 trainer pilot.

1*

f.

g 2

r'

).

I

'r [

.i

-N y=

"k l

A H

j

_ j(

m j4 g

e

,3

Sikorsky Division of United Marketing Statistics now has 12 trainers for the Air Technologies,Inc. As the prime The Chairman's letter noted Force's close support aircraft in contractor, American's Flight that, unlike the negative impact various stages of design and Training Division-using our on many it.dustries, the ever-production. Delivery on the first A-10 simulator is set for late trainer-will provide flight and spiralling cost of oil (and avia.

maintenance crew training to tion fuel) has been a major ad.

this year, purchasers of the twelve pas-vantage to Reflectone. In a Delivery of the initial trainer for a different aircraft, the senger multi-mission helicopter. chart on this page you can see The market for simulators the tremendous difference in Marine Corps CH-46E helicop-and training devices for busi-the average hourly cost of ter, took place in late March when Dr. Jack Wm. Dunlap, ness aircraf t, including com-teaching a pilot to fly in a sim-Chairman and Anthony T.

mercial airliners and corporat3 ulator as opposed to the same jets, represents a new market-hourly cost of flight training in Langone, Vice President-ing area for Reflectone. Having an actual aircraf t. The com-Marketing, represented the successfully produced simu-panion chart illustrates the dy-Company at dedication cere-monies at the USMC installation lators with sophisticated motion namic growth of the new prod.

at New River, North Carolina.

systems for the military for uct market for military and more than eight years, Reflec-commercial flight simulators Last November the Company tone is well positioned to trans-between 1973 (before the OPEC received its second major con-late this technological experi-nations tightened the interna-tract involving the installatie, of ence into effective approaches tional oil spigot) and 1979.

visual systems, (i.e., cockpit for the commercial market.

Contract News With the $20,000,000 A-10 con-tract of last August, Reflectone New Product Market 2--

Aver ge Hourly Costs,1979 747 Aircraft -

35,o15,oo.

Military / Commercial -

Pilot Training * '.

747 Flight Trainer vs.

Flight Simulators.

. $625,000,000.

Actu:1747 Aircraft :

' Industry estimate -

m estimated by.

^--kan AirHnes

$400,000,000 ~

~

e i-g a

$150,000,000E

747 FlighiTrainer;

. Lss70.00 -

1973-'

1976

~1979

~. w..a a.,.

+--

D**]D

]D 03' l f e o Ju o Juud]..

Riflict ns--continued windows which give the appear-Reflectone, disputing the cor-ance of various exterior condi-rectness of the action, will avail tions such as aircraft, runways, itself of all possible remedies to aircraf t carrier and destrover settle any differences relating to decks, etc.) for flight trainers, contract terms. Af ter evaluation, Working on a $10,000,000 Air Management feels the CH-53D Force contract, Reflectone will action will have no effect on supply technical, administrative other contract relationships and support services while two with the Navy or other military manufacturers develop compet-agencies. With adjustment for ing visual systems which will the CH-53D, as of March 31, then be mounted on Reflectone 1979, Reflectone's backlog ap-A-10 trainers and submitted to proximated $47,400,000.

the Air Force for final evaluation and selection.

A few weeks after the close of the 1979 fiscal year, the U.S.

Navy terminated a contract to produce a flight trainer for the Navy's CH-53D heavy-lift heli-copter because of alleged de-lays in delivery of systems data.

^

vfy T 3 gew(.4@@z,edig-e T : g ?T 7 m ?'

NM'*C WyTWrfg" The Sikorsky Spirit helicopter pygy;Q.

(S-76) is shown heading for an

$75;yfys@,[3 offshore oil platform in the Gulf

- ~:

v

' 4.u. s,$_1.Wi@% jy #" ',N" 7;'E:NQlgM'd

g

I;.Gl3Eh 4 _,

of Mexico. Reflectone t.ntered C'Q@yhw;W 21.T Z C u-f_~2 4 -

t

,..=>4 ; t*W&sM4

+1]m,jhyyQ{k"$

g'${'Qp iD.

the commercial aerospace market when it obtained a

_, 0:1.sdfM2 E.-. c;7. W M,07 6 Ty

<mmy gqg contract to produce a f!Ight iM

.WJ8 trainer for this aircraft in Vew&Qj 7: wX.-tr*S-%

early 1979.

1 E-w ;.h. x ;

Qw mmnd

.n a DTNiMI

^:., MMY-$

M.4Edh. ' '-

Q xmm-1 j,_

ms Ch 9-rwhe

~

~ :.

D**D

• D'T, 4

oL.J a

6 oo

D&A R= arch Our Eastern and Western re-Traffic / Travel Safety sages-is now entering its fif th search divisions achieved solid in the area of highway safety year. Funding to date totals j

sales and profit gains in fiscal and manpower development, almost $800,000.

l 1979.Some highlights of the Eastern Division is conducting ary R&D i

year include:

a number of studies for the Na-From its base in LaJolla (Cali-l tional Highway Traffic Safety m The two divisions had com-f rnia), Western Division ob-Administration (NHTSA). Three bined sales of $2,058,447, a tained three new contracts and of these projects, totaHng gain of 17 percent over three renewal contracts from

$210,000, involve the develop-the U.S. Navy. These research ment of training programs for n income increased by 14 per-police officers in the use of dif-projects continue to focus on evaluating and measuring piiot cent from the year earlier ferent traffic speed measuring u Eastern Division diversified devices, traffic records analysis and aircraft carrier personnel into new research areas in-and motor vehicle titling and performance in air combat and carrier landings.The Eastern ciuding studies of consumer registration personnel.

Division's continuing human product safety, computerized One of the Company's largest factors engineering and sys-management information traffic and transportation proj-systems, fire prevention and ects, a $588,000 contract from tems analysis work on the Hawk nd Aegis missile systems in-control, and enforcement of the U.S. Department of Trans-l the 55 MPH speed limit portation (DOT) to study the creased significantly during the a Progress on ongoing and safety and security of future Past year and new work was i

automated guideway transit initiated on a Naval war gaming new assignments from such system and personnel selection y ems (AGT), will be com-major corporate clients as requirements for the infantry RCA AT&T 3M Corporation pleted this year. Another large, long-term program for DOT-and cavalry fighting vehicles.

and Flaytheon.

the development and field test-i ing of pedestrian safety mes-New Research Studies As a result of a major program to diversify its areas of research problem solving, Eastern Divi-M i

I 5

g$

a sion obtained its first contract award from the Consumer Prod-T'.M

-= ' ?' %

uct Safety Commission-a J.

[,#1

$84,000 study to determine the g,_;

i effectiveness of a public educa-M M*-

g p]"

f tion program for children, par-g.

M ents and teachers regarding

-d playground safety.

Another new public sector 4,

client, the State of New York,

]'

awarded Eastern Division a

$95,000 contract to evaluate the cost-effectiveness of the State's three-year-old Administrative Adjudication System which mandates minor traffic offenses l

be settled outside the court sys-tem. Another major award dur-ing fiscal 1979 was an assign-left: Research Associate Joan Edwards and Joseph T. Fucigna, Executive Vice ment from the National Institute President, determine the response of schoolchildren to drug abuse prevention of Drug Abuse to evaluate the materials as part of a current project for the National Institute of Drug Abuse.

effectiveness of its drug abuse Right: As part of a study for the NHTsA, Edward W. Bishop,(left) Vice Presiden'.

prevention materials (e.g., films, and Research Associate Charles Goransson analyze the tasks of a Darien posters, brochures).

(conn.) police officer as he demonstrates a radar device used in measuring automobile speed.

Mb 3'lf D d**D 3"D 7

DUNLAP AND ASSOCIATES, INC. and Subsidiaries Consolidated Balance Sheet M'ach 31 1979 1978 ASSETS Current assets Cash

$ 662,095

$ 569.930 Accounts receivable (Notes 1 and 2) 7,327,917 3,977,844 Prepaid expenses and other current assets 92,589 42.048 Total current assets 8,082,601 4,589.822 Receivables due after one year (Notes 1 and 2) 230,520 486,281 Property, plant and equipment-at cost (Notes 1 and 4)

Land 107,862 107,862 Building and improvements.

571,550 559,487 Machinery and equipment 323,493 186,000 Furniture and fixtures.

359,430 J38,179 Leasehold improvements 342,697 464.168 1,705,032

'5,696 Less: accumulated depreciation and amortization.

812,759 24.118 Other assets 892,273 731,578 Deferred charges (Note 3) 185,154 36,451 Other 171,401 45,390 356,555 81,841 TOTAL ASSETS

$9,561,949

$5,889.522 LIABILITIES AND STOCKHOLDERS' EQUITY J

Current liabilities Accounts payable

$2,900,283

$1,479,806 Accrued liabilities 770,100 824,404 Notes payable and current installments of long-term debt (Note 4) 142,325 118,188 Income taxes payable 4,925 158,197 Other current liabilities 83,227 75,892 Total current liabilities 3,900,860 2,656.487 Long. term liabilities (Note 4) 3,096,353 1.300,896 i

Commitments and contingencies (Note 9)

Stockholders' equity (Note 5)

Cor.w,on stock, par value $1.00; 2,000,000 shares authorized;

' mares issued: 590,163 and 355,897 590,163 355,897 j

/.Jditional paid-in capital 1,055,207 1,084,692 Retained earnings 998,755 594,916 2,644,125 2,035,505 Less: cost of 19,747 shares and 23,192 shares held in treasury,

(

60,546)

(

103,366) I Subscriptions receivable under employee stock purchase plan

(

18,843)

Total stockholders' equity 2,564,736 1,932.139 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$9,561,949

$5.889,522 See accompanying notes to financial statements.

8

DUNLAP AND ASSOCIATES, INC. and SubsiCiaries Consolidated Statement of income Year Ended March 31 1979 1978

$18,890,465

$12.401,635 Sales Costs and expenses Cost of sales 16,855,976 10,669,997 815,996 746.099 General and administrative 17,671,972 11.416.096 Income from operations 1,218,493 98",,539 Other income, principally net rentals,

113,572 76,840 Interest expense

(

187,457) (

117.521)

Income before income taxes, minority equity and extraordinary credit 1,144,608 946,858 Provision for income taxes 519,100 441.000 Income before minority equity and extraordinary credit 625,5a3 505,858 Minority equity in income of subsidiary.

(

28.038) income before extraordinary credit 625,508 477,820 Extraordinary credit-life insurance proceeds, not subject to taxation 49.063 Net income

$ 625,508

$ 526.883

==-

Income per common and common equivalent share (Note 1)

Income before extraordinary credit 1.05

.79 Extraordinary credit

.08 Net income.

1.05

.87 Weighted average shares outstanding 594,102 604,9..

Consolidated Statement of Changes in Stockholders' Equity Years Ended March 31,1979 and 1978 Additional Common paid in Retained Treasury stock capital earnings stock Balance-April 1,1977

$320,448

$ 900,827

$301,539 293 Net income 526,883 10% Stock dividend 31,740 184,064

( 216,443)

Cash dividends-$.05 per share

( 17,063)

Issuanco of common shares-Stock option plan 3,709

(

199)

Treasury shares purchased 103.073 Balance-March 31,1978.

355,897 1,084,692 594,916 103,366 Net income 625,508 Cash dividends-$.08 per share

( 37,804) 10% Stock dividend 33,430 150,435

( 183,865)

Stock split 196,684

(

196,684)

Issuart;of common shares-Stock option plans 3,060

(

12,014)

( 14,550)

Stock purchase pl an.

20,990

( 19,886)

For services.

1,092 7,788

( 13,139)

Treasury shares perchased 4,755 Balance-March 31 1979.

$590,163

$1,055,207

$998,755

$ 60,546 See accompanying n)tes to financial statements.

9

DURLAP AMD ASSOCIATES. INC. and Subsidiaries Consolidated Statement of Changes in Financial Position Year Ended March 31 j

1979 1978 Working capital was provided from:

Operations

$ 625,508

$ 477,820 income before extraordinary credit Expenses not requiring working capital Depreciation and amortization 117,245 111,138 Deferred compensation 28,610 28,284 Minority equity in subsidiary 28.038 Total before extraordinary credit 771,363 645,280 Extraordinary credit-life insurance proceeds 49,063 Working capital provided from operations 771,363 694,343 Other increaso in long-term debt.

1,852,795 221,893

)

Decrease in receivables due after one year 255,760 Other 62,394 12.942

$2,942,312

$ 929.178 Working capital was used for:

Additions to property, plant and equipment.

$ 304,741

$ 116,423 Additions to deferred and other assets 260,658 Reductions in, and maturities of long-term debt 85,948 78,279 Receivables due after one year 486,281 Purchase of treasury stock 4,755 103,073 Purchase of minority equity in subsidiary.

42,508 Cash dividends 37,804 17,702 Increase in working capital 2,248,406 84.912

$2,942,312

$ 929.178 Increase (Decrease) in components of working capital:

Current assets Cash

$ 92,165

($ 201,557)

Accounts receivable 3,350,073 1,144,874 Prepaid expenses and other current assets 50,541

(

9.135) l 3,492,779 934.182 Current liabilities Accounts payable.

1,420,477 659,503 Accrued liabilities.

(

54,304) 199,390 Current maturities o, e ing-term debt 24,137 54,468 income taxes payab'e

(

153,272)

(

53,970)

Other liabilities 7,335

(

10,121) 1,244,373 849,270 increase in working capital

$2,248,406

$ 84.912 See accompanying notes to financial statements.

10

DUNLAP AND ASSOCIATES. INC. and Subsidiaries Notes to Consolidated Financial Statements M;rch 31,1979 and 1978 i

Note 1-Significant Accounting Policies the assumed exercise of outstanding stock options, using the

{

Princ/ples of Consolidation-The consolidated financial state-treasury stock method.

m:nts i,7clude the accounts of the Company and its subsidi-tries, all of which are wholly-owned. Al; mter-company trans-tctions and balances have been climinated in consolidation.

Note 2-Accounts Receivable On March 31, 1978, the Company purchased the then out-st:nding 7% minority equity in one subsidiary. The excess of Accounts receivable, substantially all of which arise from con-n t assets acquired, as represented by the carrying value of tracts and programs undertaken for the United States Gov-tha minority equity, over the cost thereof, has been reflected ernment as a prime or cubcontractor, consist of the following:

in consolidation as a reduction of the subsidiary's noncurrent 1979 1978 a = ts.

Arnounts billed

" *"*9" Riv nue Recognition-Sales are derived principally from fixed price, time and material, and cost plus fixed fee con.

Subject to retainage 1,810,815 986,977 tracts with government agencies, income is recognized using Unbilled recoverable costs and th3 percentage of completion method of accounting, under accrued profits on contracts which the sales value of performance, including earnings in progress 2,701,797 1,258,414 thereon, are accrued on the basis of the percer'tage that

$7,327,917

$3.977,844 cach contract's cost to date bears to the total estimated cost.

Proj:cted losses, if any, are provided for in their entirety.

Retainages withheld pursuant to contract provisions are due Revisions in projected costs and earnings for contracts upon deliveries of items called for in the contracts. Unbilled which extend beyond one year are accounted for as changes recoverable costs and accrued profits comprise amounts of in estimates, revenue recognized on contracts for which billings have not Fees under certain government contracts may be increased been presented. It is anticipated that these amounts will be or decreased in accordance with cost or performance in-billed during the subsequent fiscal year. Based upon histori-centive provisions. Such fee awards or penalties are in-cal experience, estimated overhead rates used in calculating ciud:d in operations at the time they can be reasonably unbilled recoverable costs approximate such rates as finally determined.

determined after audit by cognizant agencies.

During the month of April,1979, Reflectone, Inc., a con-Property, Plant and Equipment-Property, plant and equip-solidated subsidiary, was notified that one of its government ment are depreciated by straight-line or accelerated methods contracts was terminated for default, in accordance with the at rates based upon their respective estimated useful lives, Company's revenue recognition poli;f, the potential known which approximate 10 to 55 years for building and related loss resulting from this termination was recognized as of components,5 to 15 years for machinery and equipment, and March 31,1979. The contingent liability, if any, with regard 5 to 10 years for furniture and fixtures. Improvements to to reprocurement costs is unknown at this time. Management leased premises are generally amortized over the related is of the opinion that the determination of a default was in lease term. Depreciation expense included in the consoli-error and is taking all appropriate steps to seek a reversal of dated statement of income for the years ended March 31, such determination, which if successful, will result in income 1979 and 1978 amount to $117,245 and $111,138, respectively, during a future fiscal year.

Expenditures which extend useful lives are capitalized.

Charges for incidental repairs and maintenance, and gains or losses upon disposal, are reflected in operations as ira-curred.

Note 3-Deferred Charges During the fiscal year ended March 31,1979, Reflectone, Inc.

Income Taxes-The Company provides prepaid and deferred leased property in Tampa, Florida and will move to this new income taxes in recognition of timing differences as between facility during the fiscal year ending March 31,1980. The the reporting of certain items for income tax and financial Company estimates that there will be costs approximating statement purposes. Investment and new job development

$1,250,000 related to this relocation, of which $120,478 was tax credits are reflected in income as realized.

incurred as of March 31, 1979. For financial statement pur-poses these costs will be amortized over a five year period, PJr Share Data-Income per common and common equiva-their estimated useful life, commencing with the fisca' yer lent share are based upon the historical weighted average ending March 31, 1980, whereas for inccrr.e tax purposes number of shares outstanding during each year, after reflect-these costs will be written off as incurred.

ing for both the 10% stock dividends declared in 1979 and 1978, the issuance in November,1978 of one and one-half shirzs of common stock for each share of the then issued stock, and adjusted to reflect the dilutive effect resulting from 11

DUNLAP AND ASSOCIATES. INC. and Subsidiaries Notes to Consolidated Financial Statements (continued)

Note 4-Long-term Liabilities Note 5-Common Stock Long-term liabilities consist of the following:

(a) Stock Option Plans-Under the Company's qualified stock option plan, options may be granted to certain employees at 1979 1978 not less than fair market value on the grant date. Options are Note payable-bank (a).

$2,200,000

$ 500,000 cumulatively exercisable at the rate of 20% per annum and 8%% mortgage payable (b).

600,060 616,678 expire after five years. Information with respect to this plan, retroactively reflects the 10% stock dividend paid during

.Geferred employee compensation (c) 117,627 108,047 May,1978 and the issuance of one and one-half shares of 8%-12%% sundry indebtedness, common stock in November,1978 for each share of the then and deferred taxes 320.991 194,359 issued stock. Shares available for future granting of options 3,238,678 1,419,084 amounted to 1,481 at March 31,1979 and 1,398 at March 31, 1978. The following tabulation summarizes certain data with Portion due in one year...

142.325 118,188 respect to this plan:

$3,096,353

$1,300,896 Number of Shares 1979 1978 (a) During the fiscal year ended March 31, 1979 the Company and its subsidiaries entered into a new long-term line of credit Outstanding at beginning of year.

25,984 32,543 agreement and retired its then existing notes payable. Under the Exercised 9,705 6,120 terms of the current a reement, the Companies may borrow an Cancelled 83 439 aggregate maximum of $2,500,000 through June 21,1981. On that date the unpaid portion may be converted to a term note, payable Outstanding at end of year in 48 consecutive monthly installments. Interest is charged at a (Exercisable at $.56 per share).

16,196 25,984 rate equal to the prime bank lending rate, plus 1%% The Com-pany is obligated to pay a commitment fee of % % per annum on Under the terms of a non-statutory stock option plan adopted the unutilized portion of the credit line.

In 1971, options may be granted to purchase shares of the The agreement, among other things, limits annual cash divi.

Company's common stock in amounts equal to the options dends to after tax net earnings and requires the Company to main.

held by participants in the qualified stock option plan, at tain minimum consolidated working capital, net worth, current prices which may be lower than the current market value of asset ratio, and total liabilities to net worth ratio. This loan is the common stock and under other terms as determined by collateralized by substanticily all of the assets of the parent the Board of Directors. At March 31, 1979, 17,677 shares of company and its subsidiaries.

common stock were reserved for issuance under this plan.

(b) The mortgage is payable in consecutive monthly installments of No options have been granted utider this plan to date.

$5,700 each, representing principal and interest, with a final pay-During the fiscal year ended March 31,1979, the Board of ment in April,1987. This indebtedness is collateralized by land,

,'a, rectors adopted a non-statutory stock option plan under a building, and certain furniture and equipment.

~9 terms of which options to purchase 75,000 shares of the vompany's common stock may be granted to employees, at (c) The Company has agreements with certain key employees, pro-prices which may be lower than the current market value of viding for the payment of retirement benefits. Provision is made the common stock and under other terms as determined by for such benefits over the estimated remaining service lives of the Board of Directors. This plan was approved by stock-the individual employees. Additionally, the agreements require that insurance policies be maintained on the life of each individ-holders at the Annual Meetin9 held on July 28,1978. The ual. In the event of death prior to retirement, the face value of following tabulation summarizes certain data with respect to the policy becomes payable to the employee's estate. Tho annual this plan during the fiscal year:

Number of Shares cost of the foregoing retirement program approximated $28,600.

Under an agreement with two former employees the Company Outstanding at beginning of year

. previously provided for guaranteed retirement income. Payments Granted 58,650 of amounts due under these agreements are currently being made and will continue to be made for approximately four years.

Exercised 30 Outstanding at end of year Maturities of long-term liabilities during the next five fiscal (Exercisable at $4.33 per share) 58,620 years are tabulated as follows:

(b) Employee Stock Purchase Plan-In September 1979 the Years Ended Company issued 6,628 common shares at $6.17 per share, March 31 Amount under an offering made pursuant to an Employee Stock Pur-1980

$142,325 chase Plan. This plan was approved by Stockholders at a special meeting held on October 30,1978. The subscription 1981 513,920 price is to be paid over a period ending September 30,1979.

1 2 623,806 (c) The following is a reconciliation of the shares of common 1983 613,567 stock outstanding and treasury shares for the two years 1984

' 606,698 ended March 31,1979:

12-

y-1979 1978 Note 8-Business Segment Information Common Treasury Common Treasury The following tabulation summarizes certain information re-lating to the Companies' two business segments as at and for g nn ng of year 355.897 23,192 320,448 225 the year ended March 31,1979 and 1978:

Stock dividend...

33,430 31,740 Stock split 196,684 8,658 I878 Behavioral and System Training options 3,060 (4,818) 3,709 Scier.co Devices Consolidated

~ Exarcise of stock Sales

$2.058,447 $16,832,018 $18.890,465 Employee stock (4,419)

Segment income beforo purchase plan issu;d for services.

1,092 (3,637) unallocated expense

$ 271.278 $ 1,763.211 $ 2,034,489

(

187,457)

Interest expense Trinury shares purchased.....

771 22.967 Corporate administrative

(

815,996) expense 113,572 Bdince at end Other income of year 590,163 19,747 355.897 23,192 Income before income

$ 1,144.608 taxes Identifiable assets

$ 734.526 $ 7,779.971 $ 8,514,497 Note 6-Employee Benefit Plan 1,047.452 Corporate assets Th3 Companies maintain employee benefit plans covering Total assets,

S 9,561.949 sub;tantially all employees. Contributions, which are discre-Depreciation S 25.891 $

77,788 $ 103,679 tiontry with the Boards of Directors, may not exceed 15% of 13.566 Corporate depreciation d fined compensation. The cost of the plans for the years

$ 117,245 ended March 31,1979 and 1978 was $395,773 and $348,695 Total depreciation resp!ctively.

Capital expenditures

$ 33,176 $ 162,210 $ 195,386 109,355 Corporate expenditures.

$ 304,741 Total capital expenditures Not7 7-income Taxes Th3 component elements of the provision for income taxes 197s Behavioral are tabulated as follows:

and System Training 1979 1978 Science Devices Consolidated F;diral Current

$366,900

$366,500 Sales

$1.758.325 $10.643.310 $12.401,635 Deferred.-

48,000

(

7,200)

Segment incoma before unallocated expense

$ 238.695 $ 1,492.943 $ 1,731,638 414,900 359,300 Interest expense

(

117,521)

Stats Corporate administrative

(

746,099)

Current.

94,300 83,200 expense 78,840 9,900

(

1.500) mer income Deferred 104,200 81,700 Income before income t' 4es, minority equity

$519,100

$441,000 and extraordinary cradit

$_946,858 Dif:rred taxes result primarily from the differences in timing Identifiable assets

$ 694.543 $ 4,539.814 $ 5,234,357 655,165 of expenses, principally relocation expenses and deferred Corporate assets compensation, for financial reporting and income tax pur-Total assets

$ 5 889.522 posts. The following is a reconciliation of the statutory fed-Depreciation

$ 22.100 84.844 $ 106.944 Crtl income tax rate and the actual rate reflected in the Corporate depreciation.

4,194 st:t ment ofincome:

1979 1978 Total depreciation S 111,138 St*tutory federal tax rate 47.5 %

48.0 %

Capital expenditures

$ 41,162 $

60,099 $ 101,261 15,162 Corporate expenditures.

Stitt income t' axes, net of federal tax benefit.

4.8 4.5 Total capital expenditures S 116,423 Investment and new job development The behavioral atiu system science segment conducts (5.6)

(4.7) tIx credit human factors analysis services and studies, principally for Surtix exemptions (1.4) f t.3) g vernment agencies. These services and studies are in 45.3 %

46.5%

areas such as safety and security in transportation systems, 13

L Canagement'a Discussion and Analysis of the Operating Results (continued) attributed to the Company's age of sales, increased from Although no extraordinary subsidiary, Reflectone, whose 6.7% in 1977 to 7.6% in 1978.

Item appeared in the 1977 state-sales increased 31%.

This was the effect of an in-ment, in 1978 the $49,063 item -

Although operating expenses crease in sales and a decrease represented the not life insur-increased 26%, the Company in operating expenses in rela-ance proceeds accruing to the experienced a slight decrease tion to sales.

Company as a result of the in these expenses as a percent-State income taxes increased death of one of the founders, age of sales. On the same basis, as a function of increased Net income, as a percentage general and administrative ex-earnings. The effective tax rate of sales,increrced from 3.1%

penses decreased from 7% in decreased from 1977 to 1978 in 1977 to 4.3 :. In 1978. This is 1977 to S.9% in 1978.

when the Company took ad-due in part to the decrease in Interest expense increased vantage of investment credit ratio of operating expenses to 22% and was directly related to and new job tax credit. These sales, the tax credits and ex-the working capital require-were deducted from the provi-traordinary item discussed ments of Reflectone.

sion for income taxes under the above.

Pre-tax income, as a percent-flow-through method.

Common Stock Prices Fiscal Year 197 Fiscal Year 1978 Bid Asked Bid Asked Quarter High Low High Low High Low High Low First 5

5 6%

6%..

.7 5%

8%

7 Second 6%

6%

7%

7%..

. 6%

5 6%

6%

Third.

10 5

11 6%.....

5 4%

8%

6 Fourth.

10 5

12 6%..

5 4

6%

6

• Prices supplied by National Quotation Bureau, Inc. They have not been adjusted for the 10 per cent stock dividend in the first cuarter of fiscal 1979 and the 3-for-2 stock split in the third quarter of fiscal 1979.

l i

l i

16

Directors and Officers Directors Officers Ralph C. Channell

• Jack Wm. Dunlap, Ph.D.

Retired President Chairman, President and Chief Executive Officer John N. Engelsted Chairman

• Joseph T. Fucigna Walker Magnetics Group, Inc.

Executive Vice President and Worcester, Mass.

Pr::l dent, Eastern Division Raymond J. Klemmer

• Robert W. Yates Vice President Vice Chairman Heidrick & Struggles, Inc.

New York, N.Y.

• Nicholas C. Graniere President William O. Rockwood Reflectone, Inc.

Member Rockwood, Edelstein & Duffy, P.C.

• George Seiden 320 Chappaqua Road Senior Vice President and Briarcliff Manor, N.Y.

Technical Director, Reflectone, Inc.

Robert A. Rosof Anthony T. Langone President Vice President, Marketirig Associated Marine Institute Reflectone, Inc.

Tampa, Florida

• Clyd.9 A. Brictson, Ph.D Senic, Vice President 1.id President, Westerre Division

• John A. Sanna, Jr.

Treasurer

• William O. Rockwood General Counsel and Secretary Edward W. Bishop Vice President Richard D. Blomberg Vice President Richard D. Pepler, Ph.D.

Vice President Robert G. Ulmer Vice President

• Also Directors Counsel Rockwood, Edelstein & Duffy, P.C.

320 Chappaqua Road Briarcliff Manor, N.Y.

Transfer Agent and Registrar Dunlap and Associates,Inc.

Darien, Conn.

Independent Certified Public Accountants Rothstein, Harrow and Co.

New York, N.Y.

l DUNLAP AND ASSOCIATES, INC.

On] Parkland Drive D:rien, Connecticut 06820 as Ag bk0g 3

A*g n