-----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, No+eORoLoGcJcT7f6u3ookz2FAd18WQQbdWLNngmS7bbdlmpjrd6l7yopnRgD/fY fWcrK0Oeq7+Zkvbjev4vNA== 0001042910-98-000371.txt : 19980514 0001042910-98-000371.hdr.sgml : 19980514 ACCESSION NUMBER: 0001042910-98-000371 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 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: SEC FILE NUMBER: 000-28840 FILM NUMBER: 98617581 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 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 for the quarterly period ended March 31, 1998 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 33761 (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 May 4, 1998, there were 25,798,652 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 March 31, 1998 and December 31, 1997 .............................. 3 Consolidated Statements of Income for the Three Month Periods Ended March 31, 1998 and 1997.................... 4 Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 1998 and 1997.................... 5 Notes to Consolidated Financial Statements................................... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition........................................... 8 Part II - Other Information --------------------------- Item 1. Legal Proceedings ......................................................... 11 Item 5. Other Information ......................................................... 11 Item 6. Exhibits and Reports on Form 8-K........................................... 11
2 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands)
March 31, December 31, 1998 1997 ---------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $87,042 $85,819 Marketable securities 5,643 4,453 Accounts receivable 17,046 11,156 Unbilled work in process 6,980 6,390 Other current assets 4,400 6,553 -------- -------- Total current assets 121,111 114,371 Property and equipment, net of accumulated depreciation 12,871 9,818 Capitalized software costs, net of accumulated amortization - 47 Deposits and other assets 1,540 960 Goodwill, net of accumulated amortization 9,870 10,157 -------- -------- Total assets $145,392 $135,353 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $2,792 $3,136 Accrued compensation 6,936 8,430 Deferred revenue 4,337 4,413 Other current liabilities 9,678 4,599 -------- -------- Total current liabilities 23,743 20,578 Long-term debt 693 885 Deferred tax liability 545 546 Other liabilities 130 133 -------- -------- Total liabilities 25,111 22,142 -------- -------- Minority interest 6 4 -------- -------- Shareholders' equity: Preferred stock - - Common stock 2,580 2,565 Additional paid-in capital 100,356 98,735 Retained earnings 17,988 12,564 Cumulative foreign currency translation adjustment (649) (657) -------- -------- Total shareholders' equity 120,275 113,207 -------- -------- Total liabilities and shareholders' equity $145,392 $135,353 ======== ========
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 March 31, --------------------------- 1998 1997 --------- --------- Revenue $31,460 $14,347 Cost of revenue 16,981 8,042 --------- ---------- Gross profit 14,479 6,305 Selling, general and administrative expenses 7,574 3,921 Goodwill amortization 290 271 --------- ---------- Income from operations 6,615 2,113 Other income (expense): Interest expense (27) (66) Interest income and other 1,114 244 --------- ---------- Total other income (expense) 1,087 178 --------- ---------- Income before provision for income taxes and minority interest 7,702 2,291 Provision for income taxes 2,278 852 --------- ---------- Income before minority interest 5,424 1,439 Minority interest in net income - (7) --------- ---------- Net income $5,424 $1,432 ========= ========== Earnings per share: Basic $0.21 $0.06 ========= ========== Diluted $0.15 $0.04 ========= ========== Shares outstanding: Basic 25,798 21,932 ========= ========== Diluted 36,997 32,916 ========= ==========
The accompanying notes are an integral part of these consolidated financial statements. 4 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended March 31, --------------------------- 1998 1997 --------- -------- Cash flows from operating activities: Net income $5,424 $1,432 Adjustment to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 799 611 Deferred taxes (41) - Tax benefit of stock options 1,499 - Unrealized exchange losses 46 - Minority interest in net income - 7 Changes in operating assets and liabilities: Accounts receivable and unbilled work-in-process (6,480) (1,324) Other current assets 2,150 177 Deposits and other assets (622) (76) Accounts payable and other liabilities 4,207 (1,959) Accrued compensation (1,494) 537 Income tax 559 131 Deferred revenue (77) 282 ------------ ------------- Total adjustments 546 (1,614) ------------ ------------- Net cash provided by (used in) operating activities 5,970 (182) ------------ ------------- Cash flows from investing activities: Acquisition of interest in consolidated subsidiaries - (2,704) Investment in marketable securities, net (1,190) (6,106) Additions to capitalized software costs - (150) Additions to property and equipment (3,502) (2,725) ------------ ------------- Net cash provided by (used in ) investing activities (4,692) (11,685) ------------ ------------- Cash flows from financing activities: Net (repayments) borrowings from revolving credit line - 136 Proceeds from long-term debt and notes - 931 Payments on notes and capital leases (180) (851) Proceeds from issuance of common stock 137 392 ------------ ------------- Net cash provided by (used in) financing activities (43) 608 ------------ ------------- Effect of exchange rate changes (12) (6) ------------ ------------- Net increase in cash and cash equivalents 1,223 (11,265) Cash and cash equivalents at beginning of year 85,819 24,082 ------------ ------------- Cash and cash equivalents at end of year $87,042 $12,817 ============ =============
The accompanying notes are an integral part of these consolidated financial statements. 5 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1998 (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 month period ended March 31, 1998 are not necessarily indicative of the results to be expected for the full year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1997, 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"), and its wholly and majority owned subsidiaries. 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 March 31, 1998. Additionally, because investments are short-term and are generally allowed to mature, realized gains and losses have been minimal through March 31, 1998. Computation of Earnings per Share - Per share data and number of shares outstanding have been adjusted to reflect the 3-for-2 stock splits in the form of stock dividends paid by the Company on April 3, 1998 and July 10, 1997. Basic earnings per share is computed using the weighted average of common stock outstanding. Diluted earnings per share is computed using the treasury stock method which is summarized as follows (in thousands): March 31, -------------------------- 1998 1997 --------- ------- Weighted average common stock outstanding 25,798 21,932 Weighted average common stock equivalents 11,199 10,984 ----------- ----------- Shares used in diluted earnings per share calculation 36,997 32,916 =========== ============ 6 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1998 (Unaudited) 3. Shareholders' Equity On June 19, 1997 and March 9, 1998, the Company declared 3-for-2 stock splits in the form of stock dividends payable on July 10, 1997 and April 3, 1998 to shareholders of record on June 26, 1997 and March 20, 1998, respectively. All applicable share and per share data in the accompanying financial statements have been retroactively adjusted to reflect these dividends. Changes in shareholders' equity for the three months ended March 31, 1998 is summarized as follows (in thousands):
Common Stock Paid-in Retained Translation Shares Amount Capital Earnings Adjustment Total ------- ------- ------- -------- ------------ ------ Balance, December 31, 1997 25,651 $ 2,565 $ 98,735 $ 12,564 $ (657) $ 113,207 Employee stock purchase plan 7 1 71 - - 72 Stock options exercised 142 14 51 - - 65 Tax benefit of stock options exercised - - 1,499 - - 1,499 Net income - - - 5,424 - 5,424 Translation adjustment - - - - 8 8 --------- --------- ----------- --------- --------- ---------- Balance, March 31, 1998 25,800 $ 2,580 $ 100,356 $ 17,988 $ (649) $ 120,275 ========= ========= =========== ========= ========= ==========
7 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for historical information contained herein, some matters discussed in this report, including but not limited to statements relating to the Company's anticipation of an increase in business volume during 1998, 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 Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as filed with the Securities and Exchange Commission. Results of Operations Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997 Revenues. For the three months ended March 31, 1998, revenues increased to $31.5 million representing a 119.3% increase over revenues of $14.3 million for the three months ended March 31, 1997. Revenues from the Company's core transitional outsourcing services (software development, application maintenance and migration and re-engineering services) increased 88.3% over the first quarter of 1997. First quarter revenue from the Company's Year 2000 conversion services increased to $17.4 million, compared to $6.2 million for the first quarter of 1997. Cost of Revenue. Cost of revenue was $17.0 million, or 54.0% of revenues, for the three months ended March 31, 1998, as compared to $8.0 million, or 56.1% of revenues, for the three months ended March 31, 1997. The decrease in cost of revenue as a percentage of revenue reflects: (i) a higher percentage of Year 2000 conversion services, application development and legacy transformation projects in the most recent quarter, which generally have resulted in higher margins than contracts for the Company's professional service and maintenance service offerings; (ii) a 10.4% devaluation in the Indian Rupee since September 30, 1997, which resulted in reduced costs at the Company's Indian software development centers; and (iii) improved utilization of software development personnel in India and Northern Ireland. Wage costs continue to increase at a greater rate than general inflation in each of the countries in which IMR has operations, and the Company anticipates that this trend will continue in the near term. The Company has been able to pass these wage increases on to its customers in the form of increased prices for its service offerings. However, there can be no assurance that the Company will be able to continue to increase prices to its customers to offset future wage increases. Gross Profit. Gross profit increased to $14.5 million in the first quarter of 1998 compared to $6.3 million in the prior comparable period. As a percentage of revenues, gross profit increased to 46.0% in the first quarter of 1998 compared to 43.9% in the first quarter of 1997. 8 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997 Selling, General and Administrative Expenses. For the three months ended March 31, 1998, selling, general and administrative (SG&A) expenses increased to $7.6 million, compared to $3.9 million for the three months ended March 31, 1997. As a percentage of revenues, SG&A expenses for the three months ended March 31, 1998 decreased to 24.1% from 27.3% for the same period in 1997. This decrease as a percentage of revenue occurred due to the rapid increase in revenue in the first quarter of 1998 compared to the rate of increase in SG&A in the same period. The dollar increase in SG&A expenses is attributable to the addition of SG&A expenses resulting from expansion of the Company's delivery capacity, regionalization of operations, increases in costs related to expanding the Company's general support staff (primarily recruiting, research and development and human resources personnel) and costs related to the establishment of Information Management Resources (Northern Ireland) Ltd. ("IMR-N.I.") in the third quarter of 1997. The Company intends to continue to expand its SG&A infrastructure in order to generate continued revenue growth. Goodwill Amortization. Goodwill amortization increased to approximately $290,000 for the three months ended March 31, 1998 from approximately $271,000 for the three months ended March 31, 1997. The additional expense reflects the amortization of goodwill generated by the acquisition of IMR-N.I. and certain minority stockholders interests in Information Management Resources (India) Limited ("IMR-India") during 1997. Income from Operations. Operating income for the first quarter of 1998 was $6.6 million compared to $2.1 million in the comparable period of 1997, representing a 213.1% increase. As a percentage of revenue, income from operations for the three months ended March 31, 1998 increased to 21.0% from 14.7% in the comparable period in 1997. The increase in income from operations as a percentage of revenue reflects a four quarter trend whereby revenue has grown at a faster rate than cost of revenue and SG&A expenses. The current increase is a result of higher prices for the Company's services and increased efficiencies relative to the Company's fixed costs. Due to increased infrastructure investments management does not expect income from operations as a percentage of revenue to increase significantly from current levels in the near term. Other Income (Expense). The Company realized net other income of approximately $1.1 million in the first quarter of 1998 compared to net other income of approximately $178,000 in the comparable period of 1997. Other income in the first quarter of 1997 included interest expense of $66,000 and interest and other income of $244,000. During the first quarter of 1998, the Company recognized approximately $1.1 million in investment income primarily from the investment of the net proceeds from its August 1997 public offering. 9 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997 Provision for Income Taxes. The provision for income taxes increased to approximately $2.3 million for the three months ended March 31, 1998 from approximately $852,000 for the three months ended March 31, 1997. This increase is due to increased earnings in the current year. This represents an effective tax rate of 29.6% and 37.2% for the three month periods ended March 31, 1998 and March 31, 1997, respectively. The effective tax rate is lower in the current period due to proportionally higher earnings of IMR-India in the current period, which earnings are taxed at a lower rate than earnings generated in the U.S., and the Company's investment in tax free marketable securities in the most recent period. Net Income. Net income for the first quarter of 1998 is approximately $5.4 million or $.15 per share compared to net income of approximately $1.4 million or $.04 per share in the comparable period in 1997. Liquidity and Capital Resources As of March 31, 1998, the Company had working capital of $97.4 million; a current ratio of 5.1 to 1; liquid assets (cash, cash equivalents and marketable securities) of $92.7 million; and available bank lines of credit of approximately $10.8 million. Additionally, cash provided by operations was $6.0 million for the three months ended March 31, 1998. During August 1997, the Company committed approximately $1.7 million for the acquisition of a facility in New Delhi, India. The Company intends to use this facility as a software development center. The Company has no other material financial commitments. The Company continuously reviews its future cash requirements, together with its available bank lines of credit and internally generated funds. The Company believes it has adequate capital resources to meet all working capital obligations and fund development of its current business operations. 10 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 11 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: May 13, 1998 /s/ Satish K. Sanan ------------ --------------------------------------- Satish K. Sanan Chief Executive Officer Date: May 13, 1998 /s/ Robert M. Molsick ------------ --------------------------------------- Robert M. Molsick Chief Financial Officer 12 INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES EXHIBIT INDEX Exhibit Number Description - ------- ----------- 27 Financial Data Schedule 13 EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 $87,042 5,643 17,046 0 0 121,111 16,776 3,905 145,392 23,743 693 0 0 2,580 117,695 145,392 0 31,460 0 16,981 7,864 0 27 7,702 2,278 5,424 0 0 0 5,424 0.21 0.15
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