-----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, VSTpbCaEayQ1Dq57bfa+QIvVe+ShjIE9eEAcMT5Kc/iI+plPniqEy40+pTPsd/Eg etmo37xWSZ46gCdpiPxXaA== 0000899243-98-001562.txt : 19980814 0000899243-98-001562.hdr.sgml : 19980814 ACCESSION NUMBER: 0000899243-98-001562 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DA CONSULTING GROUP INC CENTRAL INDEX KEY: 0001051209 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 760418488 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-43989 FILM NUMBER: 98685848 BUSINESS ADDRESS: STREET 1: 5847 SAN FELIPE RD STE 3700 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7133613000 MAIL ADDRESS: STREET 1: 5847 SAN FELIPE RD STREET 2: STE 3700 CITY: HOUSTON STATE: TX ZIP: 77057 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998. OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ______________ Commission File Number: 00-24055 DA CONSULTING GROUP, INC. (Exact name of registrant as specified in its charter) TEXAS 76-0418488 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5847 SAN FELIPE ROAD, SUITE 3700 HOUSTON, TEXAS 77057 (Address of principal executive offices) (Zip Code) (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (713) 361-3000 (Former name, former address and former fiscal year--if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] As of July 31, 1998, 6,546,861 shares of common stock $0.01 par value ("Common Stock") of the registrant were outstanding. ================================================================================ DA CONSULTING GROUP, INC. INDEX PART I FINANCIAL INFORMATION
PAGE NO. -------- Item 1. Financial Statements Condensed Consolidated Balance Sheet as of December 31, 1997 and June 30, 1998........... 3 Condensed Consolidated Statement of Income for the Three and Six Months ended June 30, 1997 and 1998............................................................... 4 Condensed Consolidated Statement of Cash Flows for the Six Months ended June 30, 1997 and 1998............................................................... 5 Notes to Condensed Consolidated Financial Statements..................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K......................................................... 12 Signatures......................................................................................... 13
2 PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. DA CONSULTING GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
December 31, June 30, 1997 1998 -------- -------- A S S E T S Current assets: Cash and cash equivalents..................................... $ 3,664 $ 17,732 Short-term investments........................................ -- 3,650 Accounts receivable: Trade, net................................................. 10,934 15,517 Other...................................................... 800 467 Unbilled revenue.............................................. 645 1,069 Prepaid expenses and other current assets..................... 250 554 -------- -------- Total current assets..................................... 16,293 38,989 Property and equipment, net..................................... 2,507 2,658 Other assets, net............................................... 898 130 Intangible assets, net.......................................... 437 427 -------- -------- Total assets............................................. $ 20,135 $ 42,204 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Revolving lines of credit..................................... $ 3,208 $ -- Note payable.................................................. 762 756 Accounts payable.............................................. 1,841 2,109 Accrued expenses.............................................. 5,517 6,973 Deferred income............................................... 312 1,283 Income taxes payable.......................................... 333 42 Deferred income taxes......................................... 219 213 -------- -------- Total current liabilities................................ 12,192 11,376 Commitments and contingencies Shareholders' equity: Preferred stock, $.01 par value: 10,000,000 shares authorized. -- -- Common stock, $.01 par value: 40,000,000 shares authorized; 4,829,191 and 6,571,420 shares issued and 4,808,475 and 6,546,861 shares outstanding............................... 48 66 Additional paid-in capital.................................... 6,449 27,578 Retained earnings............................................. 2,099 3,674 Treasury stock, at cost: 20,716 and 24,559 shares............. (91) (116) Notes receivable from shareholders............................ (503) -- Cumulative foreign currency translation adjustment............ (59) (374) -------- -------- Total shareholders' equity................................. $ 7,943 $ 30,828 -------- -------- Total liabilities and shareholders' equity............... $ 20,135 $ 42,204 ======== ========
The accompanying notes are an integral part of the condensed consolidated financial statements. 3 DA CONSULTING GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ----------------------- 1997 1998 1997 1998 ------- -------- -------- -------- Revenue.............................................................. $ 9,897 $ 19,703 $ 17,981 $ 34,290 Cost of revenue...................................................... 5,609 10,278 10,162 18,018 ------- -------- -------- -------- Gross profit....................................................... 4,288 9,425 7,819 16,272 Selling and marketing expense........................................ 898 1,214 1,622 2,435 Development expense.................................................. 250 536 495 996 General and administrative expenses.................................. 2,580 5,808 4,956 9,982 ------- -------- -------- -------- Operating income.................................................. 560 1,867 746 2,859 Interest (expense) income, net....................................... (24) 100 (26) 6 Other expense, net................................................... (9) (260) (9) (279) ------- -------- -------- -------- Income before taxes............................................... 527 1,707 711 2,586 Provision for income taxes........................................... 209 677 287 1,011 ------- -------- -------- -------- Net income........................................................ $ 318 $ 1,030 $ 424 $ 1,575 ======= ======== ======== ======== Basic earnings per share............................................. $ 0.07 $ 0.17 $ 0.09 $ 0.29 Weighted average shares outstanding.................................. 4,808 5,978 4,808 5,395 Diluted earnings per share........................................... $ 0.06 $ 0.16 $ 0.08 $ 0.28 Weighted average shares outstanding.................................. 5,053 6,264 5,053 5,681
The accompanying notes are an integral part of the condensed consolidated financial statements. 4 DA COUNSULTING GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, --------------------- 1997 1998 -------- -------- Cash flows from operating activities: Net income........................................................................ $ 424 $ 1,575 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization.................................................. 194 495 Deferred income taxes.......................................................... -- (6) Loss on sale of property and equipment......................................... -- 10 Changes in operating assets and liabilities: Increase in accounts receivable and unbilled revenue......................... (4,210) (4,674) Increase in prepaid expenses and other current assets........................ (87) (304) Increase in other assets..................................................... -- (130) Increase in accounts payable and accrued expenses............................ 459 1,724 Increase in deferred income.................................................. -- 971 Increase (decrease) in income taxes payable.................................. 49 (291) -------- -------- Total adjustments......................................................... (3,595) (2,205) -------- -------- Net cash used in operating activities..................................... (3,171) (630) -------- -------- Cash flows from investing activities: Proceeds from sale of fixed assets................................................ -- 20 Purchases of short-term investments............................................... -- (3,650) Purchases of property and equipment............................................... (484) (666) -------- -------- Net cash used in investing activities..................................... (484) (4,296) -------- -------- Cash flows from financing activities: Net proceeds from (repayments of) revolving lines of credit....................... 1,671 (3,208) Net repayments of note payable.................................................... (356) (6) Issuance of common stock.......................................................... 1,332 25,267 Repayments of notes receivable from shareholders.................................. -- 503 Employee stock issuances (repurchases)............................................ 4 (25) Deferred offering costs........................................................... (159) (3,222) -------- -------- Net cash provided by financing activities................................. 2,492 19,309 -------- -------- Effect of changes in foreign currency exchange rate on cash and cash equivalents.... (37) (315) -------- -------- (Decrease) increase in cash and cash equivalents.......................... (1,200) 14,068 -------- -------- Cash and cash equivalents at beginning of period.................................... 2,199 3,664 -------- -------- Cash and cash equivalents at end of period.......................................... $ 999 $ 17,732 ======== ========
The accompanying notes are an integral part of the condensed consolidated financial statements. 5 DA CONSULTING GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) ORGANIZATION AND BUSINESS DA Consulting Group, Inc. (the "Company") is a leading international provider of end-user support solutions to companies which are implementing enterprise resource planning software systems. (2) BASIS OF PRESENTATION The unaudited consolidated financial statements included herein have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, pursuant to such rules and regulations. The unaudited consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and the notes thereto as of and for the year ended December 31, 1997, included in the Company's Form S-1 Registration Statement No. 333- 43989. The unaudited consolidated financial information included herein reflect all adjustments, consisting only of normal recurring adjustments, which are necessary, in the opinion of management for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year. New Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No.133 establishes accounting and reporting standards for derivative instruments and hedging activities and requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Earlier application of all of the provisions of the Statement is encouraged, but it is permitted only as of the beginning of any fiscal quarter that begins after issuance of the Statement. As the Company is not presently involved in such instruments, adoption of this statement will not have a material impact on the consolidated financial statements of the Company. Short-Term Investments The Company records its short-term investments at cost, which approximates market value. Short-term investments are those, that when purchased, have maturities greater than three months. The Company has adopted the provisions of Statement of Financial Accounting Standards (SFAS) 115, "Accounting for Certain Investments in Debt and Equity Securities". As the Company does not intend to hold the investments until their stated maturity dates, the Company has classified all investments as available-for-sale. As of June 30, 1998, the short-term investments consist of variable rate municipal debt instruments, which result in no unrealized holding gains or losses. 6 DA CONSULTING GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (3) Initial Public Offering In connection with the consummation of the Company's initial public offering on April 29, 1998 (the "IPO"), the Company sold 1.7 million shares of its common stock, par value $0.01 per share. Additionally on May 28, 1998, the Company sold additional 42,586 shares of its common stock pursuant to and in connection with the underwriters' over-allotment option (the "Option Offering" and together with the IPO, the "Offering"). The Company received net proceeds of $21.1 million from the sale of such shares, after deducting the underwriting discount and other offering expenses. (4) EARNINGS PER SHARE Basic earnings per share has been computed based on the weighted average number of common shares outstanding during the applicable period. Diluted earnings per share includes the number of shares issuable upon exercise of stock options, less the number of shares that could have been repurchased with the exercise proceeds, using the treasury stock method. The following table summarizes the Company's computation of earnings per share for the three and six months ended June 30, 1998 and 1997 (in thousands, except per share amounts):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------------- ---------------------------- 1997 1998 1997 1998 ----------- ----------- ----------- ----------- Basic earnings per share............................................ $ 0.07 $ 0.17 $ 0.09 $ 0.29 Net income (numerator).............................................. $ 318 $1,030 $ 424 $1,575 =========== =========== =========== =========== Weighted average shares outstanding (denominator)................... 4,808 5,978 4,808 5,395 Computation of diluted earnings per share: Common shares issuable under outstanding stock options............ 449 449 449 449 Less shares assumed repurchased with proceeds from exercise of stock options.................................................... (204) (163) (204) (163) ----------- ----------- ----------- ----------- Adjusted weighted average shares outstanding (denominator)....... 5,053 6,264 5,053 5,681 Diluted earnings per share.......................................... $ 0.06 $ 0.16 $ 0.08 $ 0.28 =========== =========== =========== ===========
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW. The Company is a leading international provider of end-user support solutions to companies which are implementing enterprise resource planning ("ERP") software systems. The Company provides customized change communications, education and performance support services designed to maximize its clients' returns on their substantial investments in ERP systems. Recognizing the global nature of the ERP software market and the importance of being able to serve multi-national clients, the Company has built a substantial international presence. The Company is currently organized into three divisions: the Americas Division which includes its North, South, and Central America operations; the EMEA Division which includes its Europe, Middle East, and Africa operations; and the Asia Pacific Division which includes its Australia, New Zealand, and Asia operations. RESULTS OF OPERATIONS. Three Months ended June 30, 1998 Compared to Three Months ended June 30, 1997. Revenue. Revenue increased by $9.8 million, or 99.1%, from $9.9 million in the second quarter of 1997 to $19.7 million in the second quarter of 1998. The increase was substantially attributable to an increase in volume of services and rate increases. The Company experienced growth in each of its three divisions. Revenues from the Americas Division increased by 97.9% from $6.3 million to $12.4 million; revenue from the EMEA Division increased by 119.4% from $2.6 million to $5.7 million; and revenue from the Asia Pacific Division increased by 55.9% from $1,051,000 to $1.6 million. The Company ended the second quarter with 714 total employees, up from 478 employees at the end of the same period of the prior year. Gross profit. Gross profit increased by $5.1 million, or 119.8%, from $4.3 million to $9.4 million and increased from 43.3% of revenue in the second quarter of 1997 to 47.8% in the second quarter of 1998. This increase in the gross profit margin is primarily attributable to rate increases in the Americas Division and increased staff utilization in both the Americas and EMEA Divisions. Sales and marketing expense. Sales and marketing expense increased $316,000, or 35.2%, from $898,000 in the second quarter of 1997 to $1.2 million in the second quarter of 1998, and decreased as a percentage of revenue from 9.1% in the second quarter of 1997 to 6.2% in the second quarter of 1998. This decrease as a percentage of sales is primarily attributable to increased revenue as described above. Development expense. Development expense increased $286,000, or 114.4%, from $250,000 in the second quarter of 1997 to $536,000 in the second quarter of 1998. The increase is primarily attributable to the Company's expansion of its service offerings. These services include the Company's Fast Implementation Toolset (FIT) designed to enable the Company to specifically target SAP AG's middle market clients. The Company also increased its global technology infrastructure and service and support group, which allows the Company to rapidly deploy and support new services. The Company expects that development expense will continue to increase in the future as the Company expands its service offerings. 8 DA CONSULTING GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.--(CONTINUED) General and administrative expense. General and administrative expense increased by $3.2 million, or 125.1%, from $2.6 million in the second quarter of 1997 to $5.8 million in the second quarter of 1998 and increased as a percentage of revenue from 26.1% in the second quarter of 1997 to 29.5% in the second quarter of 1998. The increase in expense is attributable to the cost of building administrative infrastructure to support future growth. Operating income. Operating income increased by $1.3 million, or 233.4%, from $560,000 in the second quarter of 1997 to $1.9 million in the second quarter of 1998 and increased as a percentage of revenue from 5.7% in the second quarter of 1997 to 9.5% in the second quarter of 1998. This increase is composed of the changes described above. Other expense, net. Other expense, net increased from $33,000 in the second quarter of 1997 to $160,000 in the second quarter of 1998. The increase is attributable to $260,000 in the second quarter of 1998, partially offset by interest income of $100,000, compared to interest expense of $24,000 in second quarter of 1997. The increase in interest income is due to investment earnings related to proceeds from the Offering which was completed in April 1998. Provision for income taxes. The Company's effective rate was 39.6% in the second quarter of each of 1998 and 1997. Net income. The Company's net income increased by $712,000, or 223.9%, from $318,000 in the second quarter of 1997 to $1.0 million in the second quarter of 1998. Diluted earnings per share increased from $0.06 in the second quarter of 1997 to $0.16 in the second quarter of 1998. Six Months ended June 30, 1998 Compared to Six Months ended June 30, 1997. Revenue. Revenue increased by $16.3 million, or 90.7%, from $18.0 million in the first six months of 1997 to $34.3 million in the first six months of 1998. The increase was substantially attributable to an increase in volume of services and to rate increases. The Company experienced growth in each of its three divisions. Revenues from the Americas Division increased by 84.1% from $11.7 million to $21.5 million; revenue from the EMEA Division increased by 106.6% from $4.6 million to $9.5 million; and revenue from the Asia Pacific Division increased by 93.1% from $1.7 million to $3.3 million. The Company opened one new office (in San Francisco) during the first quarter of 1998, increasing the total number of offices to 16. Gross profit. Gross profit increased by $8.5 million, or 108.1%, from $7.8 million to $16.3 million and increased from 43.5% of revenue in the first six months of 1997 to 47.5% in the first six months of 1998. This increase in the gross profit margin is primarily attributable to rate increases in the Americas Division and increased staff utilization in both the Americas and EMEA Divisions. Sales and marketing expense. Sales and marketing expense increased $813,000, or 50.1%, from $1.6 million in the first six months of 1997 to $2.4 million in the first six months of 1998, and decreased as a percentage of revenue from 9.0% in the first six months of 1997 to 7.1% in the first six months of 1998. This decrease as a percentage of sales is primarily attributable to increased revenue. 9 DA CONSULTING GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.--(CONTINUED) Development expense. Development expense increased $501,000, or 101.2%, from $495,000 in the first six months of 1997 to $996,000 in the first six months of 1998. The increase is primarily attributable to the Company's expansion of its service offerings. These services include the Company's Fast Implementation Toolset (FIT). The Company also increased its global technology infrastructure and service and support group which allows the Company to rapidly deploy and support new services. The Company expects that development expense will continue to increase in the future as the Company expands its service offerings. General and administrative expense. General and administrative expense increased by $5,026,000, or 101.4%, from $4,956,000 in the first six months of 1997 to $10.0 million in the first six months of 1998 and increased as a percentage of revenue from 27.6% in the first six months of 1997 to 29.1% in the first six months of 1998. The increase in expense is attributable to the cost of building administrative infrastructure to support future growth. Operating income. Operating income increased by $2.1 million, or 283.2%, from $746,000 in the first six months of 1997 to $2.9 million in the first six months of 1998 and increased as a percentage of revenue from 4.1% in the first six months of 1997 to 8.3% in the first six months of 1998. Other expense, net. Other expense, net increased from $35,000 in the first six months of 1997 to $273,000 in the first six months of 1998. The increase is attributable to $279,000 in the first six months of 1998, partially offset by net interest income of $6,000 compared to interest expense of $26,000, for the same prior year period. The increase in interest income is due to investment earnings related to proceeds from the Offering which was completed in April 1998 compared to borrowings on the Company's line of credit during the same prior year period. Provision for income taxes. The Company's effective rate decreased slightly from 40.4% in the first six months of 1997 to 39.1% in the first six months of 1998. The decrease in the effective rate resulted from lower non-deductible expenses in the first six months of 1998, as compared to the first six months of 1997. Net income. The Company's net income increased by $1.1 million, or 271.4%, from $424,000 in the first six months of 1997 to $1.6 million in the first six months of 1998. Diluted earnings per share increased from $0.08 in the first six months of 1997 to $0.28 in the first six months of 1998. LIQUIDITY AND CAPITAL RESOURCES. The Company's cash and cash equivalents were $17.7 million at June 30, 1998 compared to $3.7 million at December 31, 1997. The Company's working capital was $27.6 million at June 30, 1998, and $4.1 million at December 31, 1997. The increases in cash and cash equivalents and working capital are primarily attributable to the proceeds from the Offering (see Note 3 of Part I, Item I.) The Company's operating activities used cash of $630,000 for the six months ended June 30, 1998, compared to $ 3.2 million used in operations for the same period in 1997. The decrease in cash used in operations resulted primarily from an increase in net income and from differences in the timing of payments of accounts payable and accrued liabilities and the timing of billings and collections in the six months ended June 30, 1998, compared to the same period in 1997. 10 DA CONSULTING GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. -- (CONTINUED) Investing activities used cash of $4.3 million in the six months ended June 30, 1998, compared to $484,000 for the same period in 1997. The Company invested $3.6 million of the proceeds from the Offering in available -for-sale securities. Financing activities provided cash of $19.3 million in the six months ended June 30, 1998, compared to $2.5 million for the same period in 1997. The Company received approximately $21.1 million in net proceeds from the consummation of the Offering during the second quarter in 1998. The Company received approximately $1.3 million in connection with private placements of shares of its common stock in February 1997. The Company used $3.2 million of the Offering proceeds to repay its revolving line of credit in April 1998, compared to borrowings of $1.7 million in the same prior year period. The Company has a $5.0 million unsecured revolving line of credit with a commercial bank, which bears interest at the prime rate of interest plus 0.5%. The Company utilizes this line of credit to finance a portion of its working capital needs. There was no outstanding balance as of June 30, 1998, compared to an outstanding balance of $3.2 million at December 31, 1997. During 1998, the Company expects to make $3.0 million in capital expenditures, primarily for office furniture, computer and office equipment, and leasehold improvements to support the anticipated growth in its professional and administrative staff. Capital expenditures in the first six months of 1998 were $666,000. The Company believes that its current cash balances, cash from future operations, and its revolving lines of credit will be sufficient to meet the Company's working capital and cash needs for at least the next 12 months. ACCOUNTING MATTERS. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No.133 establishes accounting and reporting standards for derivative instruments and hedging activities and requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Earlier application of all of the provisions of the Statement is encouraged, but it is permitted only as of the beginning of any fiscal quarter that begins after issuance of the Statement. As the Company is not presently involved in such instruments, adoption of this statement will not have a material impact on the consolidated financial statements of the Company. FORWARD LOOKING STATEMENTS. This Quarterly Report on Form 10-Q contains certain statements, that are not historical facts, which constitute forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995 which provides a safe harbor for forward-looking statements. These forward-looking statements are subject to substantial risks and uncertainties that could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. When used in this Report, the words "anticipate", "believe", "estimate", "expect", and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. Actual future results and trends may differ materially from historical results as a result of certain factors, including but not limited to: dependence on SAP AG and the ERP software market, risks associated with management of a geographically-dispersed organization, fluctuating quarterly results, the need to attract and retain professional employees, substantial competition, dependence on key personnel, risks associated with management of growth factors, rapid technological change, limited protection of proprietary expertise, methodologies and software, as well as those set forth in Management's Discussion and Analysis section of this Report and in the Company's final prospectus dated April 24, 1998 as filed with the Securities and Exchange Commission. 11 PART II--OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 27 Financial Data Schedule. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 1998. 12 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. DA CONSULTING GROUP, INC. Dated August 13, 1998 By: /s/ Nicholas H. Marriner ------------------------------------- Nicholas H. Marriner President and Chief Executive Officer By: /s/ Michael J. Mackey ------------------------------------- Michael J. Mackey Chief Financial Officer, EVP Finance and Administration 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 17,732 3,650 16,583 (599) 0 38,989 3,898 1,240 42,204 11,376 0 0 0 66 30,762 42,204 34,290 34,290 0 18,018 13,692 0 (6) 2,586 1,011 1,575 0 0 0 1,575 0.29 0.28
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