-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CUUDBnjM6nCBAtoUEYWeT7JS9H9YVaU41jeUpusBtX3ulPGphyZ4UcVwXwqrBZbQ UGffFTrSw7NjLuinbx7Ydg== 0000949459-97-000389.txt : 19970815 0000949459-97-000389.hdr.sgml : 19970815 ACCESSION NUMBER: 0000949459-97-000389 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION MANAGEMENT RESOURCES INC CENTRAL INDEX KEY: 0001021772 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 592911475 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28840 FILM NUMBER: 97659954 BUSINESS ADDRESS: STREET 1: 26750 U.S. HGWY 19 N, STE 500 CITY: CLEARWATER STATE: FL ZIP: 3462133761 BUSINESS PHONE: 8137977080 MAIL ADDRESS: STREET 1: 26750 U S HIGHWAY STREET 2: 19 NORTH SUITE 500 CITY: CLEARWATER STATE: FL ZIP: 33761 10-Q 1 INFORMATION MANAGEMENT RESOURCES, INC. ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1997 Commission File Number 0-28840 INFORMATION MANAGEMENT RESOURCES, INC. (Exact name of Registrant as specified in its charter) Florida 59-2911475 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 26750 U.S. Highway 19 North, Suite 500, Clearwater, Florida 34621 (Address of principal executive offices and zip code) 813-797-7080 (Registrant's telephone number, including area code) 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 August 6, 1997, there were 16,774,958 outstanding shares of the Registrant's Common Stock, par value $.10 per share. INFORMATION MANAGEMENT RESOURCES, INC. Table of Contents ----------------- Part I - Financial information ------------------------------ Page ---- Item 1. Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996.................. 3 Consolidated Statements of Income for the Three Month and Six Month Periods Ended June 30, 1997 and 1996..................................... 4 Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 1997 and 1996..................................... 5 Notes to Consolidated Financial Statements................. 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition......................... 9 Part II - Other Information --------------------------- Item 1. Legal Proceedings........................................ 14 Item 5. Other Information........................................ 14 Item 6. Exhibits and Reports on Form 8-K......................... 14 2 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands)
June 30, December 31, 1997 1996 ----------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents .............................. $ 19,059 $ 24,082 Marketable securities .................................. 11,613 5,644 Accounts receivable .................................... 13,006 5,670 Unbilled work in process ............................... 2,265 1,074 Accounts receivable, affiliate ......................... -- 646 Notes receivable, affiliate ............................ -- 533 Income taxes receivable ................................ 889 -- Deferred income taxes .................................. 2,846 -- Other current assets ................................... 1,342 890 -------- -------- Total current assets ............................. 51,020 38,539 Property and equipment, net of accumulated depreciation ... 7,829 3,703 Capitalized software costs, net of accumulated amortization 589 720 Note receivable, affiliate ................................ -- 159 Deposits and other assets ................................. 887 438 Goodwill, net of accumulated amortization ................. 10,205 5,394 -------- -------- Total assets ..................................... $ 70,530 $ 48,953 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Revolving credit loans ................................. $ 624 $ -- Accounts payable ....................................... 2,350 1,364 Accrued expenses ....................................... 7,669 2,878 Income taxes payable ................................... -- 477 Deferred income taxes .................................. -- 258 Current portion of long-term debt ...................... 162 -- Current maturities of capital lease obligations ........ 75 55 Current portion of notes payable-shareholders .......... -- 814 Deferred revenue ....................................... 7,116 1,965 -------- -------- Total current liabilities ........................ 17,996 7,811 Long-term debt ............................................ 1,018 -- Deferred income taxes ..................................... 375 634 Other liabilities ......................................... 95 85 -------- -------- Total liabilities ................................ 19,484 8,530 -------- -------- Minority interest ......................................... 92 67 -------- -------- Shareholders' equity: Preferred stock ........................................ -- -- Common stock ........................................... 1,523 1,447 Additional paid-in capital ............................. 44,961 38,359 Retained earnings ...................................... 4,578 669 Cumulative foreign currency translation adjustment ..... (108) (119) -------- -------- Total shareholders' equity ....................... 50,954 40,356 -------- -------- Total liabilities and shareholders' equity ....... $ 70,530 $ 48,953 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
3 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited and in thousands except per share data)
Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Revenues .................................... $ 18,767 $ 6,308 $ 33,114 $ 12,397 Cost of revenues ............................ 10,371 3,522 18,413 7,011 -------- -------- -------- -------- Gross profit ....................... 8,396 2,786 14,701 5,386 Selling, general and administrative expenses 4,751 1,699 8,671 3,275 Goodwill amortization ....................... 276 14 547 29 -------- -------- -------- -------- Total operating expense ............ 5,027 1,713 9,218 3,304 -------- -------- -------- -------- Income from operations ............. 3,369 1,073 5,483 2,082 Other income (expense): Interest expense ................... (69) (97) (136) (160) Interest income and other .......... 277 46 521 32 -------- -------- -------- -------- Total other income (expense) ...... 208 (51) 385 (128) -------- -------- -------- -------- Income before provision for income taxes and and minority interest .............. 3,577 1,022 5,868 1,954 Provision for income taxes .................. 1,082 39 1,934 115 -------- -------- -------- -------- Income before minority interest .... 2,495 983 3,934 1,839 Minority interest in net income ............. (18) (176) (25) (330) -------- -------- -------- -------- Net income ......................... $ 2,477 $ 807 $ 3,909 $ 1,509 ======== ======== ======== ======== Net income per share......................... $0.11 $0.18 ===== ===== PRO FORMA INCOME DATA Historical net income........................ $ 807 $ 1,509 Pro forma adjustment to income tax expense... 286 565 ------- -------- Pro forma net income......................... $ 521 $ 944 ======= ======== Pro forma net income per share............... $0.03 $0.06 ===== ===== Weighted average common and common stock equivalent shares...... 22,308 16,964 22,272 16,961 ====== ====== ====== ====== The accompanying notes are an integral part of these consolidated financial statements.
4 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands)
Six Months Ended June 30, ------------------------- 1997 1996 -------- -------- Cash flows from operating activities: Net income .............................................................. $ 3,909 $ 1,509 Adjustment to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization ........................................ 1,372 234 Unrealized exchange losses ........................................... (20) (14) Minority interest in net income ...................................... 25 330 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable and unbilled work-in-process .................. (5,180) (752) Other current assets .............................................. 274 (205) Deposits and other assets ......................................... (448) (118) Accounts payable .................................................. 219 (106) Accrued expenses .................................................. 2,090 (508) Income taxes payable .............................................. 216 -- Deferred income taxes ............................................. -- 12 Deferred revenue .................................................. 4,772 532 Other liabilities ................................................. 18 (6) -------- -------- Total adjustments ................................................. 3,338 (601) -------- -------- Net cash provided by operating activities ......................... 7,247 908 -------- -------- Cash flows from investing activities: Investment in marketable securities ..................................... (5,969) -- Additions to capitalized software costs ................................. (300) (87) Additions to property and equipment ..................................... (3,771) (502) Increase in equity investment and loans to affiliate .................... -- (393) Acquisition of subsidiaries, net of cash received and liabilities assumed (2,838) -- -------- -------- Net cash used in investing activities ............................. (12,878) (982) -------- -------- Cash flows from financing activities: Net (reductions) borrowings from revolving credit line .................. (311) 120 Proceeds from long-term debt ............................................ 1,180 900 Payments on long-term debt .............................................. -- (1,216) Payments on notes payable-shareholder ................................... (822) (246) Payments on capital lease obligations ................................... (45) (83) Payment of dividends .................................................... -- (22) Proceeds from issuance of common stock .................................. 528 3 Proceeds from exercise of stock options ................................. 46 -- Purchase of treasury stock at cost ...................................... -- (77) -------- -------- Net cash provided by (used in) financing activities ............... 576 (621) -------- -------- Effect of exchange rate changes ............................................ 32 13 -------- -------- Net decrease in cash and cash equivalents .................................. (5,023) (682) Cash and cash equivalents at beginning of year ............................. 24,082 1,621 -------- -------- Cash and equivalents at end of period ...................................... $ 19,059 $ 939 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
5 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 (Unaudited) 1. BASIS OF PRESENTATION In the opinion of management, the accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles and include all adjustments, consisting only of all normal recurring adjustments, necessary for a fair presentation. The results of operations for the three and six month periods ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1996, which are contained in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of Information Management Resources, Inc. ("IMR" or the "Company"), its wholly owned subsidiaries and its effectively controlled foreign subsidiary. All significant intercompany balances and transactions have been eliminated. MARKETABLE SECURITIES - The Company currently invests in only high quality, short-term investments which are classified as available-for-sale as defined by Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." As such there were no significant differences between amortized cost and estimated fair value at June 30, 1997. Additionally, because investments are short-term and are generally allowed to mature, realized gains and losses have been minimal through June 30, 1997. The following table presents the estimated fair value of marketable securities by category: June 30, 1997 (In Thousands) -------------- Municipal debt securities.................... $ 11,394 Certificates of deposit - foreign............ 19 Interest income receivable................... 200 ------------- $ 11,613 ============= The maturity of the above marketable securities at June 30, 1997, is between one and two years. COMPUTATION OF NET INCOME PER SHARE - Net income per common and common equivalent shares has been computed using the weighted average number of common and dilutive common equivalent shares outstanding during each period presented. Shares of stock issuable pursuant to stock options have been included where their effect is dilutive. Fully diluted earnings per common share are not presented as they are not materially different from primary earnings per share. Dilutive common equivalent shares consist of stock options (using the treasury stock method). RECLASSIFICATION - Recruiting expenses have been reclassified from cost of revenues to selling, general and administrative expenses for the three and six month periods ended June 30, 1996 to conform to the new classification of these expenses for the three and six month periods ended June 30, 1997. 6 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 (Unaudited) 3. PRO FORMA NET INCOME Prior to November 1996, the Company elected to be taxed as an S Corporation under the provisions of the Internal Revenue Code whereby taxable income is generally reported by the shareholders on their individual income tax returns. In connection with the Company's initial public offering, the S Corporation election was terminated on November 11, 1996 and subsequently the Company became subject to U.S. federal and state income taxes as a C Corporation. To properly reflect the Company's results of operations, the provision for income taxes is presented on a pro forma basis as if the Company had been a taxable entity subject to federal and state income taxes at the marginal rates for the three and six month periods ended June 30, 1996 as a C Corporation. 4. ACQUISITIONS LINK GROUP HOLDINGS LIMITED AND INFORMATION MANAGEMENT RESOURCES (U.K.) LIMITED ("IMR-U.K. Acquisition") - On February 10, 1997 (effective January 8, 1997), the Company acquired 100% of the outstanding stock of Link Group Holdings Limited ("Link"), a United Kingdom limited liability company. Link provides transitional software outsourcing solutions to the information technology departments of large businesses located in the U.K. In exchange for Link's common stock, Link's shareholders received $2.1 million in cash and 107,562 shares of the Company's common stock. In addition, $1.6 million in cash is payable to Link's former shareholders one year from closing. The Link acquisition is accounted for as a purchase pursuant to the provisions of APB Opinion No. 16. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the net assets acquired will be amortized over a period not to exceed ten years. Coincident with the above acquisition, the Company also acquired 10.5% of Information Management Resources (U.K.) Limited (IMR-U.K.) from the Company's majority shareholder and his spouse for $520,000 in cash. The purchase price was determined through negotiations between the Company and the shareholder and his spouse. The excess of the $520,000 purchase price over the net assets acquired was charged as a reduction in equity. Prior to the above acquisitions, the Company owned 39.5% of IMR-U.K. and Link owned 50% of IMR- U.K. After the above acquisitions the Company effectively owns 100% of both Link and IMR-U.K. Movitone Electronics Limited. - In March 1997, the Company acquired 100% of the outstanding stock of Movitone Electronics Limited (an Indian limited liability company) for approximately $1.7 million in cash. Movitone Electronics Limited has no significant ongoing activities and its only significant asset is a building located in India's Santacruz Electronics Export Processing Zone in Mumbai, India. The acquisition is recorded as a purchase pursuant to the provisions of APB Opinion No. 16. The entire purchase price was allocated to the building as it approximated its fair value. 7 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 (Unaudited) 5. SHAREHOLDERS' EQUITY On June 19, 1997, the Company declared a 3-for-2 stock split in the form of a stock dividend payable on July 10, 1997 to shareholders of record on June 26, 1997. All applicable share and per share data in the accompanying financial statements have been retroactively adjusted to reflect this dividend. Changes in shareholders' equity for the six months ended June 30, 1997 is summarized as follows (in thousands):
Common Stock ------------------- Paid-in Retained Translation Shares Amount Capital Earnings Adjustment Total -------- -------- -------- -------- -------- -------- Balance, December 31, 1996 ........... 14,474 $ 1,447 $ 38,359 $ 669 $ (119) $ 40,356 Link Acquisition ..................... 108 11 1,078 -- -- 1,089 Employee Stock Purchase .............. 64 7 521 -- -- 528 Stock options exercised .............. 582 58 (12) -- -- 46 Tax benefit of stock options exercised -- -- 5,015 -- -- 5,015 Net income ........................... -- -- -- 3,909 -- 3,909 Translation Adjustment ............... -- -- -- -- 11 11 -------- -------- -------- -------- -------- -------- Balance, June 30, 1997 ............... 15,228 $ 1,523 $ 44,961 $ 4,578 $ (108) $ 50,954 ======== ======== ======== ======== ======== ========
6. SUBSEQUENT EVENT On August 5, 1997, the Company completed a second public offering of 1,500,000 shares of its authorized but unissued Common Stock, par value $0.10 per share. Net proceeds from this offering were approximately $45.6 million. 8 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for historical information contained herein, some matters discussed in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company notes that a variety of risk factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. Reference is made in particular to the discussion set forth below in this report and set forth in the Company's Registration Statement on Form S- 1 (Registration No. 333-30741) and its Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996 For the three months ended June 30, 1997, revenues increased to $18.8 million representing a 197.5% increase over revenues of $6.3 million for the three months ended June 30, 1996. The January 8, 1997 IMR- U.K. acquisition (see Note 4 of the Consolidated Financial Statements) accounted for $4.0 million of the revenue increase. In addition, transitional outsourcing services (software development, application maintenance, migration and re-engineering) revenues increased 36.6% over the second quarter of 1996. The largest revenue increase was attributable to the Company's continued expansion of its Year 2000 service offering. Second quarter revenues from the Company's Year 2000 services increased to $10.3 million (including IMR-U.K. revenues), compared to less than $1.0 million for the second quarter of 1996. Gross profit increased to $8.4 million in the second quarter of 1997 compared to $2.8 million in the prior comparable period. As a percentage of revenues, gross profit increased to 44.7% in the second quarter of 1997 compared to 44.2% in the second quarter of 1996. The Company's gross profit margin increased for the U.S. and India operations, however, the U.K. operations partially offset this increase as the newly acquired company derived a substantial portion of its revenues from professional services which generally result in lower profit margins. For the three months ended June 30, 1997, selling, general and administrative (SG&A) expenses increased to $4.8 million, compared to $1.7 million for the three months ended June 30, 1996. As a percentage of revenues, SG&A expenses for the three months ended June 30, 1997 decreased to 25.3% from 26.9% for the same period in 1996. This decrease as a percentage of revenue occurred due to the rapid increase in revenues compared to the rate of increase in SG&A. The increase in dollars is attributable to the IMR-U.K. acquisition, expansion of the delivery capacity, regionalization of operations, additional costs associated with being a public company, and increases in costs related to expanding the Company's general support staff (primarily recruiting, research and development and human resources). The Company will continue to increase its SG&A expense in anticipation of a potential increase in business volume in late 1997 and 1998. 9 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996 Goodwill amortization increased to approximately $276,000 for the three months ended June 30, 1997 from approximately $14,000 for the three months ended June 30, 1996. This increase reflects the goodwill resulting from the acquisition of 64.0% of IMR-India in the second half of 1996 and the IMR-U.K. acquisition effective January 8, 1997. Operating income for the second quarter of 1997 was $3.4 million compared to $1.1 million in the comparable period of 1996, representing a 214.0% increase. As a percentage of revenues, income from operations for the three months ended June 30, 1997 increased to 18.0% from 17.0% in the comparable period in 1996. The Company realized net other income of approximately $208,000 in the second quarter of 1997 compared to net other expense of approximately $51,000 in the comparable period of 1996. Other expense in the second quarter of 1996 included interest expense of $97,000, interest and other income of $30,000 and a gain related to the Company's equity investment in IMR-U.K. of approximately $16,000. During the second quarter of 1997, the Company recognized approximately $277,000 in investment income from the investment of the remaining net proceeds from its initial public offering and incurred approximately $69,000 of interest expense related primarily to credit facilities in India and the U.K. The provision for income taxes increased to approximately $1.1 million for the three months ended June 30, 1997 from approximately $39,000 for the three months ended June 30, 1996. This increase is due to increased earnings and the Company's termination of its S Corporation tax status in conjunction with its initial public offering in November 1996. Prior to this termination the provision for income taxes only reflected taxes related to IMR-India. On a pro forma basis, giving effect to the Company's termination of its S Corporation tax status as of November 11, 1996, the income tax provision for the second quarter of 1996 would have been approximately $325,000. This represents an effective pro forma tax rate of 30.2% and 31.8% for the three month periods ended June 30, 1997 and June 30, 1996, respectively. The decrease in the effective tax rate reflects a greater portion of profits generated by the operations in India which has favorable tax rates and the investment of excess liquid assets into tax exempt investments. Minority interest in net income decreased to approximately $18,000 for the three months ended June 30, 1997 from approximately $176,000 in the comparable period in 1996. This represents the portion of IMR- India's net income which is allocated to IMR-India's minority shareholders. This decrease was a result of the acquisition of 64.0% of IMR-India by IMR-U.S. during late 1996. Net income for the second quarter of 1997 is approximately $2.5 million or $.11 per share compared to pro forma net income of approximately $521,000 or $.03 per share in the comparable period in 1996. 10 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 For the six months ended June 30, 1997, revenues increased to $33.1 million representing a 167.1% increase over revenues of $12.4 million for the six months ended June 30, 1996. The January 8, 1997 IMR-U.K. acquisition (see Note 4 of the Consolidated Financial Statements) accounted for $7.8 million of the revenue increase. In addition, transitional outsourcing services (software development, application maintenance, migration and re-engineering) revenues and in particular Year 2000 revenues continued to expand. For the first six months of 1997 revenues from the Company's Year 2000 services increased to $16.5 million (including IMR-U.K. revenues), compared to approximately $1.5 million for the first six months of 1996. Gross profit increased to $14.7 million in the first six months of 1997 compared to $5.4 million in the prior comparable period. As a percentage of revenues, gross profit increased to 44.4% in the first six months of 1997 compared to 43.4% in the first six months of 1996. The Company's gross profit margin increased for the U.S. and India operations, however, the U.K. operations partially offset this increase as the newly acquired company derived a substantial portion of its revenues from professional services which generally result in lower profit margins. For the six months ended June 30, 1997, selling, general and administrative (SG&A) expenses increased to $8.7 million, compared to $3.3 million for the six months ended June 30, 1996. As a percentage of revenues, SG&A expenses for the six months ended June 30, 1997 decreased to 26.2% from 26.4% for the same period in 1996. While as a percentage of revenues SG&A expenses decreased slightly, the increase in real terms is attributable to the inclusion of IMR-U.K. SG&A expenses, expansion of the delivery capacity, regionalization of operations, additional costs associated with being a public company, and increases in costs related to expanding the Company's general support staff (primarily recruiting, research and development and human resources). The Company will continue to increase SG&A expense in anticipation of a potential increase in business volume in late 1997 and 1998. Goodwill amortization increased to approximately $547,000 for the six months ended June 30, 1997 from approximately $29,000 for the six months ended June 30, 1996. This increase reflects the goodwill resulting from the acquisition of 64.0% of IMR-India in the second half of 1996 and the IMR-U.K. acquisition effective January 8, 1997. Operating income for the first six months of 1997 was $5.5 million compared to $2.1 million in the prior comparable period, representing a 163.4% increase. As a percentage of revenues, income from operations for the six months ended June 30, 1997 decreased to 16.6% from 16.8% in the comparable period in 1996. As a percentage of revenues, 1.7% of this change was attributable to expanded goodwill amortization described above, offset by the affect of revenues increasing more rapidly than operating expenses. 11 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 The Company realized net other income of approximately $385,000 in the first six months of 1997 compared to net other expense of approximately $128,000 in the comparable period of 1996. Other expense in the first six months of 1996 included interest expense of $160,000 offset by interest and other income of $32,000. During the first six months of 1997, the Company recognized approximately $521,000 in investment income from the investment of the remaining net proceeds from its initial public offering and incurred approximately $136,000 of interest expense related primarily to credit facilities in India and the U.K. and shareholder notes payable. The provision for income taxes increased to approximately $1.9 million for the six months ended June 30, 1997 from approximately $115,000 for the six months ended June 30, 1996. This increase is due to increased earnings and the Company's termination of its S Corporation tax status in conjunction with its initial public offering in November 1996. Prior to this termination the provision for income taxes only reflected taxes related to IMR-India. On a pro forma basis, giving effect to the Company's termination of its S Corporation tax status as of November 11, 1996, the income tax provision for the first six months of 1996 would have been approximately $680,000. This represents an effective pro forma tax rate of 33.0% and 34.8% for the six month periods ended June 30, 1997 and June 30, 1996, respectively. The decrease in the effective tax rate reflects a greater portion of profits generated by the operations in India which has favorable tax rates and the investment of excess liquid assets into tax exempt investments.. Minority interest in net income decreased to approximately $25,000 for the six months ended June 30, 1997 from approximately $330,000 in the comparable period in 1996. This represents the portion of IMR- India's net income which is allocated to IMR-India minority shareholders. This decrease was a result of the acquisition of 64.0% of IMR-India by IMR-U.S. during late 1996. Net income for the first six months of 1997 is approximately $3.9 million or $.18 per share compared to pro forma net income of approximately $944,000 or $.06 per share in the comparable period in 1996. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1997, the Company had a current ratio of 2.8 to 1, highly liquid assets (cash, cash equivalents and marketable securities) of $30.7 million and available bank lines of credit of approximately $6.0 million. In addition, on August 5, 1997, the Company completed a second public offering which yielded net proceeds of approximately $45.6 million to the Company. The Company continuously reviews its future cash requirements, together with its available bank lines of credit and internally generated funds. The Company believes it will meet all working capital obligations and fund further development of its business for at least the next 12 months. 12 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OTHER MATTERS During June 1997, the Company initiated operations in Belfast, Northern Ireland which will serve as a software development center. Initial operations will include establishing an infrastructure, recruiting resources and training project personnel. In March 1997, the Company acquired a building located in Mumbai, India (Movitone Electronics Limited) to develop a new offshore software development center. The building is located in an area designated for certain tax incentives and relaxed regulatory restrictions similar to those applicable to IMR's Bangalore operations. Currently, the Company is in the process of renovating this facility and expects it to be operational by the third quarter of 1997. During the renovation, the Company has operated in Mumbai from temporary facilities. No assurance can be given that renovations of the Mumbai facility will be completed on time or that the Indian government will continue to provide tax and other incentives to the software industry or in the area in which this facility is located. 13 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES Part II. Other Information ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any pending material litigation. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 14 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. INFORMATION MANAGEMENT RESOURCES, INC. Date August 13, 1997 /s/ Satish K. Sanan ------------------------- ---------------------------------------- Satish K. Sanan Chief Executive Officer Date August 13, 1997 /s/ John R. Hindman ------------------------- ---------------------------------------- John R. Hindman Chief Financial Officer 15 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES EXHIBIT INDEX Exhibit Number Description Page - ------ ----------- ---- 11 Computation of earnings per common share for the three month and six month periods ended June 30, 1997 and 1996... 17 27 Financial Data Schedule.......................................... 18 16 EX-11 2 EXHIBIT 11 EXHIBIT NUMBER 11 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited and in thousands except per share data)
Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 1997 1996 1997 1996 ------- ------- ------- ------- Pro forma net income ........................... $ 2,477 $ 521 $ 3,909 $ 944 Shares: Weighted average number of common shares outstanding .............................. 15,060 9,606 15,057 9,606 Assuming conversion of options issued and outstanding .............................. 7,248 7,358 7,215 7,355 ------- ------- ------- ------- Weighted average common and common stock equivalent shares outstanding 22,308 16,964 22,272 16,961 ======= ======= ======= ======= Pro forma net income per share.................. $0.11 $0.03 $0.18 $0.06 ===== ===== ===== =====
17 EX-27 3 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS OF INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 19,059 11,613 13,006 0 0 51,020 9,989 2,160 70,530 17,996 1,018 0 0 1,523 49,431 70,530 0 33,114 0 18,413 9,218 0 136 5,868 1,934 3,909 0 0 0 3,909 .18 .18
-----END PRIVACY-ENHANCED MESSAGE-----