10-Q 1 d10q.txt QUARTERLY REPORT 6/29/2001 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 2001 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 0-24343 ANSWERTHINK, INC. (Exact name of Registrant as specified in its charter) FLORIDA 65-0750100 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1001 BRICKELL BAY DRIVE, SUITE 3000 MIAMI, FLORIDA 33131 (Address of principal executive offices) (Zip Code) (305) 375-8005 (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 requirement for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of June 29, 2001, there were 45,359,344 shares of common stock outstanding. ================================================================================ ANSWERTHINK, INC. TABLE OF CONTENTS PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 29, 2001 and December 29, 2000........3 Consolidated Statements of Operations for the Quarter ended June 29, 2001 and June 30, 2000 and for the Six Months Ended June 29, 2001 and June 30, 2000..............................................................4 Consolidated Statements of Cash Flows for the Six Months Ended June 29, 2001 and June 30, 2000............................................5 Notes to Consolidated Financial Statements...................................6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................................9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........11 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS....................................................12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................12 SIGNATURES....................................................................13 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ANSWERTHINK, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) JUNE 29, DECEMBER 29, 2001 2000 -------------- -------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 43,526 $ 51,662 Accounts receivable and unbilled revenue, net of allowance of $12,700 and $11,122 in 2001 and 2000, respectively 52,280 59,706 Other receivables 962 3,547 Prepaid expenses and other current assets 16,352 15,044 -------------- -------------- Total current assets 113,120 129,959 Property and equipment, net 18,526 14,655 Other assets 1,436 1,450 Goodwill, net 79,275 82,612 -------------- -------------- Total assets $ 212,357 $ 228,676 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,952 $ 10,006 Accrued expenses and other liabilities 21,422 39,270 Media payable 1,537 7,346 -------------- -------------- Total current liabilities 28,911 56,622 Commitments and contingencies Shareholders' equity Preferred stock, $.001 par value, 1,250,000 authorized, none issued and outstanding -- -- Common stock, $.001 par value, authorized 125,000,000 shares; issued and outstanding: 45,359,344 shares at June 29, 2001; 44,234,837 shares at December 29, 2000 45 44 Additional paid-in capital 254,592 243,299 Unearned compensation (115) (348) Accumulated deficit (71,076) (70,941) -------------- -------------- Total shareholders' equity 183,446 172,054 -------------- -------------- Total liabilities and shareholders' equity $ 212,357 $ 228,676 ============== ==============
The accompanying notes are an integral part of the consolidated financial statements. 3 ANSWERTHINK, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
QUARTER ENDED SIX MONTHS ENDED ------------------------------- ------------------------------- JUNE 29, JUNE 30, JUNE 29, JUNE 30, 2001 2000 2001 2000 ------------- ------------- ------------- ------------- Net revenues $ 65,276 $ 81,729 $ 137,291 $ 158,026 Costs and expenses: Project personnel and expenses 40,668 46,738 86,049 91,479 Selling, general and administrative expenses 23,600 24,980 48,001 47,518 Stock compensation expense 1,613 213 4,644 426 ------------- ------------- ------------- ------------- Total costs and operating expenses 65,881 71,931 138,694 139,423 ------------- ------------- ------------- ------------- Income (loss) from operations (605) 9,798 (1,403) 18,603 Other income (expense): Litigation settlement -- 1,850 -- 1,850 Interest income 259 237 735 596 Interest expense (42) (70) (84) (157) ------------- ------------- ------------- ------------- Income (loss) before income taxes (388) 11,815 (752) 20,892 Income taxes (453) 4,844 (617) 8,566 ------------- ------------- ------------- ------------- Net income (loss) $ 65 $ 6,971 $ (135) $ 12,326 ============= ============= ============= ============= Basic net income (loss) per common share $ -- $ 0.17 $ -- $ 0.32 Weighted average common shares outstanding 44,030 39,982 43,106 38,900 Diluted net income (loss) per common share $ -- $ 0.16 $ -- $ 0.27 Weighted average common and common equivalent shares outstanding 46,214 44,742 43,106 44,899
The accompanying notes are an integral part of the consolidated financial statements. 4 ANSWERTHINK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
SIX MONTHS ENDED ---------------------------------- JUNE 29, JUNE 30, 2001 2000 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (135) $ 12,326 Adjustments to reconcile net income (loss) to net cash used in operating activities: Non-cash compensation expense 4,644 426 Depreciation and amortization 6,035 5,580 Provision for doubtful accounts 2,732 380 Gain on litigation settlement -- (1,850) Deferred income taxes (83) 1,045 Changes in assets and liabilities, net of effects from acquisitions: Decrease (increase) in accounts receivable and unbilled revenue 4,694 (10,304) Decrease (increase) in other receivables 2,585 (2,662) Increase in prepaid expenses and other assets (1,440) (1,906) Decrease in accounts payable (4,054) (2,020) Decrease in accrued expenses and other liabilities (12,616) (3,250) Decrease in media payable (5,809) (6,164) -------------- -------------- Net cash used in operating activities (3,447) (8,399) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (6,532) (3,957) Purchases of short-term investments -- (500) Sales and redemptions of short-term investments -- 2,932 Cash used in acquisition of businesses, net of cash acquired -- (4,317) -------------- -------------- Net cash used in investing activities (6,532) (5,842) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 1,843 11,459 Repayment of notes payable -- (1,000) -------------- -------------- Net cash provided by financing activities 1,843 10,459 -------------- -------------- Net decrease in cash and cash equivalents (8,136) (3,782) Cash and cash equivalents at beginning of period 51,662 27,124 -------------- -------------- Cash and cash equivalents at end of period $ 43,526 $ 23,342 ============== ==============
The accompanying notes are an integral part of the consolidated financial statements. 5 ANSWERTHINK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The consolidated financial statements of Answerthink, Inc. ("Answerthink" or the "Company") include the accounts of the Company and all of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company's financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 29, 2000 included in the Form 10-K filed by the Company with the Securities and Exchange Commission. The consolidated results of operations for the quarter and six months ended June 29, 2001 are not necessarily indicative of the results to be expected for any future period or for the full fiscal year. Certain prior period amounts have been reclassified to conform to current period presentation. 2. NET INCOME (LOSS) PER COMMON SHARE Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. With regard to common shares issued to employees under employment agreements, the calculation includes only the vested portion of such shares. Accordingly, common shares outstanding for the basic net income (loss) per share computation are lower than actual shares issued and outstanding. Income (loss) per common share assuming dilution is computed by dividing net income (loss) by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period. For the quarters ended June 29, 2001 and June 30, 2000, potentially dilutive securities included 1,232,300 and 3,861,178 shares, respectively, of unvested common stock issued under employment agreements and 951,157 and 899,243 shares, respectively, of common stock issuable upon the exercise of stock options and warrants assuming the treasury stock method. Potentially dilutive shares were excluded from the diluted loss per share calculation for the six months ended June 29, 2001 because their effects would have been anti-dilutive to the loss incurred by the Company. Therefore, the amounts reported for basic and diluted net loss per share were the same for the six months ended June 29, 2001. Potentially dilutive shares which were not included in the diluted loss per share calculation for the six months ended June 29, 2001 include 2,147,399 shares of unvested common stock issued under employment agreements and 901,539 shares issuable upon the exercise of stock options and warrants assuming the treasury stock method. For the six months ended June 30, 2000, potentially dilutive securities included 4,603,154 shares of unvested common stock issued under employment agreements and 1,395,730 shares of common stock issuable upon the exercise of stock options and warrants assuming the treasury stock method. 3. NON-CASH TRANSACTIONS During 2000, the Company recorded a liability of $5.2 million for an earned contingent consideration to be paid in the Company's common stock in March 2001. This amount was included in accrued expenses and other liabilities in the consolidated balance sheet as of December 29, 2000. In March 2001, the Company issued 755,374 shares of the Company's common stock for the earned contingent consideration. 6 ANSWERTHINK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) 4. STOCK COMPENSATION EXPENSE In 2001, the Company granted stock options to participants in the Company's Employee Stock Purchase Plan. These options were granted in replacement of the Employee Stock Purchase Plan shares that could not be issued because the plan was oversubscribed for the purchase periods ending December 31, 2000 and June 30, 2001. The Company recorded a non-cash compensation charge of $1.4 million and $4.2 million in the quarter and first six months ended June 29, 2001, respectively, based on the vesting provision of the options for the difference between the fair market value of the stock on the option grant date and the exercise price. The options fully vested on June 30, 2001. Therefore, operating results in future periods will not be impacted by this special grant. 5. STOCK OPTIONS On June 27, 2001 the Company filed with the Securities and Exchange Commission a Schedule TO describing a program offering a voluntary stock option exchange for the Company's employees. The offering period for the stock option exchange ended on August 8, 2001. Under the program, employees holding nonqualified options to purchase the Company's common stock or incentive stock options to purchase the Company's common stock with an exercise price of $10.00 per share or more were given the opportunity to exchange their existing options for new options to purchase shares of the Company's common stock equal in number to 66 2/3% of the number of options tendered and accepted for exchange. The new options will not be granted until at least six months and one day after acceptance of the old options for exchange and cancellation. The exercise price of the new options will be the last reported sale price of the Company's common stock on the Nasdaq Stock Market's National Market on their grant date. As of June 27, 2001, options for 12,331,757 shares of the Company's common stock would have been eligible for participation in the program. 6. INCOME TAXES Our effective tax rate for the first six months of 2001 was 82% compared to an effective tax rate of 41% for the comparable period of 2000. The higher effective tax rate for 2001 was the result of an increase in the impact of permanent differences on the tax rate as a result of lower pretax income. 7. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations, and No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. SFAS 141 eliminates the pooling-of- interest method for business combinations and requires application of the purchase method. Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their useful lives. The Company has not yet determined what effect these statements will have on the Company's consolidated results of operations and financial position. 7 ANSWERTHINK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) 8. LITIGATION THINK New Ideas, Inc. ("THINK New Ideas") and three of its former officers are defendants in a consolidated class action filed in federal court in New York. Think New Ideas merged with Answerthink on November 5, 1999. This suit was previously described in Answerthink's Annual Report on Form 10-K for the year ended December 29, 2000. In February 1999, a Consolidated and Amended Class Action Complaint ("Consolidated Complaint") was filed seeking to assert claims on behalf of all individuals who purchased THINK New Ideas' common stock from November 5, 1997 through September 21, 1998. The defendants filed a motion to dismiss the Consolidated Complaint and the plaintiffs opposed the motion. On March 15, 2000, the court granted the defendants' motion to dismiss the Consolidated Complaint. The plaintiffs filed a Second Consolidated and Amended Class Action Complaint ("Second Amended Complaint") on April 14, 2000. The defendants filed a motion to dismiss the Second Amended Complaint on May 1, 2000. On September 14, 2000, the Court denied the motion. The defendants filed an answer to the Second Amended Complaint on November 10, 2000. The parties are engaged in discovery. A scheduling order has been entered and the deadline for discovery is October 26, 2001. No trial date has been set. The Company believes there are meritorious defenses to the claims made in the Second Amended Complaint and intends to contest those claims vigorously. Although there can be no assurance as to the outcome of these matters, an unfavorable resolution could have a material adverse effect on the results of operations and/or financial condition of the Company in the future. The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such other matters will not have a material adverse effect on the financial position or results of operations of the Company. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report and the information incorporated by reference in it include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that impact such forward looking statements include, among others, our ability to attract additional business, the potential for contract cancellation by our customers, changes in expectations regarding the information technology industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, changes in general economic conditions and interest rates. An additional description of our risk factors is set forth in our Registration Statement on Form S-3 (Registration Form 333-32342). We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. OVERVIEW Answerthink is a leading provider of technology-enabled business transformation solutions. We bring together multi-disciplinary expertise in benchmarking and research, business transformation, interactive marketing, business applications and technology integration to serve the needs of Global 2000 clients. Answerthink's solutions span all functional areas of a company including finance, human resources, information technology, sales, marketing, customer service, and supply-chain, as well as across a variety of industry sectors. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, our results of operations and the percentage relationship to net revenues of such results:
QUARTER ENDED SIX MONTHS ENDED ---------------------------------------- --------------------------------------- (dollars in thousands) JUNE 29, 2001 JUNE 30, 2000 JUNE 29, 2001 JUNE 30, 2000 -------------------- -------------------- -------------------- ------------------- Net revenues $ 65,276 100.0% $ 81,729 100.0% $137,291 100.0% $158,026 100.0% Costs and expenses: Project personnel and expenses 40,668 62.3% 46,738 57.2% 86,049 62.7% 91,479 57.9% Selling, general and administrative expenses 23,600 36.2% 24,980 30.5% 48,001 34.9% 47,518 30.1% Stock compensation expense 1,613 2.4% 213 0.3% 4,644 3.4% 426 0.3% -------------------- -------------------- -------------------- ------------------- Total costs and operating expenses 65,881 100.9% 71,931 88.0% 138,694 101.0% 139,423 88.3% -------------------- -------------------- -------------------- ------------------- Income (loss) from operations (605) (0.9%) 9,798 12.0% (1,403) (1.0%) 18,603 11.7% Other income (expense): Litigation settlement -- -- 1,850 2.2% -- -- 1,850 1.2% Interest income, net 217 0.3% 167 0.2% 651 0.5% 439 0.3% -------------------- -------------------- -------------------- ------------------- Income (loss) before income taxes (388) (0.6%) 11,815 14.4% (752) (0.5%) 20,892 13.2% Income taxes (453) (0.7%) 4,844 5.9% (617) (0.4%) 8,566 5.4% -------------------- -------------------- -------------------- ------------------- Net income (loss) $ 65 0.1% $ 6,971 8.5% $ (135) (0.1%) $ 12,326 7.8% ==================== ==================== ==================== ===================
9 Net Revenues. Net revenues for the quarter ended June 29, 2001 decreased by $16.5 million or 20.1% compared to the quarter ended June 30, 2000. For the first six months of fiscal 2001, net revenues decreased $20.7 million or 13.1% over the comparable period of 2000. These decreases in net revenues were primarily attributable to a decrease in the number of customers and the average size of our projects resulting from reduced demand for information technology services. Project Personnel and Expenses. Project personnel costs and expenses consist primarily of salaries, benefits and bonuses for consultants. Project personnel costs and expenses for the quarter ended June 29, 2001 decreased by 13.0% to $40.7 million compared to $46.7 million in the quarter ended June 30, 2000. For the first six months of fiscal 2001, project personnel costs and expenses decreased 5.9% over the comparable period of 2000. These decreases in project personnel and expenses were the result of a decrease in the number of consultants, partially offset by an increase in average salaries. Billable headcount was 1,230 as of June 29, 2001 compared to 1,483 as of June 30, 2000. Project personnel and expenses as a percentage of net revenues increased to 62.3% in the quarter June 29, 2001 from 57.2% in the comparable quarter of 2000. For the first six months of fiscal 2001, project personnel and expenses as a percentage of net revenues increased to 62.7% from 57.9% in the comparable six months of 2000. These increases in project personnel costs and expenses as a percentage of net revenues were due to lower consultant utilization, partially offset by higher billing rates. Selling, General and Administrative. Selling, general and administrative expenses decreased 5.5% to $23.6 million in the quarter ended June 29, 2001 from $25.0 million in the quarter ended June 30, 2000. The decrease in selling, general and administrative expenses was primarily a result of lower salary and benefit expenses associated with a decrease in functional headcount, partially offset by an increase in bad debt expense. Functional headcount was 226 as of June 29, 2001 compared to 275 as of June 30, 2000. For the first six months of fiscal 2001, selling, general and administrative expenses increased slightly by 1.0% to $48.0 million from $47.5 million in the comparable period of 2000. This increase in selling, general and administrative expenses primarily related to an increase in bad debt expense, partially offset by a decrease in salary and benefit expense. Selling, general and administrative expenses as a percentage of net revenues increased to 36.2% in the quarter ended June 29, 2001 from 30.5% in the comparable quarter of 2000. For the six months ended June 29, 2001, selling, general and administrative expenses as a percentage of net revenues also increased to 34.9% from 30.1% in the comparable six months of 2000. The increases in selling, general and administrative expenses as a percentage of net revenues were attributable to an increase in bad debt expense as well as the lower revenue levels during 2001. Stock Compensation Expense. Stock compensation expense in 2001 primarily related to the granting of stock options to participants in our Employee Stock Purchase Pan. These stock options were granted in replacement of the Employee Stock Purchase Plan shares that could not be issued because the plan was oversubscribed for the purchase periods ending on December 31, 2000 and June 30, 2001. We recorded a non-cash compensation charge of $1.4 million and $4.2 million in the quarter and six months ended June 29, 2001, respectively, based on the vesting provision of the options for the difference between the fair market value of the stock on the option grant date and the exercise price. The options fully vested on June 30, 2001. Therefore, operating results in future periods will not be impacted by this special grant. Income Taxes. Our effective tax rate for the first six months of 2001 was 82% compared to an effective tax rate of 41% for the comparable period of 2000. The higher effective tax rate for 2001 was the result of an increase in the impact of permanent differences on the tax rate as a result of lower pretax income. LIQUIDITY AND CAPITAL RESOURCES We have funded our operations primarily with cash flow generated from operations and the proceeds from our initial public offering. In addition, we have a revolving credit facility for $25.0 million. The credit facility is unsecured and contains, among other things, the maintenance of certain financial covenants such as a maximum leverage ratio, minimum level of tangible net worth, minimum ratio of earnings to interest expense and minimum quick ratio. At June 29, 2001, we had no borrowings under this credit facility. At June 29, 2001, we had approximately $43.5 million in cash and cash equivalents compared to $51.7 million at December 29, 2000. 10 Net cash used in operating activities was $3.4 million for the six months ended June 29, 2001 compared to $8.4 million used during the comparable period of 2000. During the six months ended June 29, 2001, net cash used in operating activities was primarily attributable to a $12.6 million decrease in accrued expenses and other liabilities, a $5.8 million decrease in media payable and a $4.1 million decrease in accounts payable, partially offset by non-cash expenses of $13.4 million, a $4.7 million decrease in accounts receivable and unbilled revenue and a $2.6 million decrease in other receivables. During the six months ended June 30, 2000, net cash used in operating activities was primarily attributable to a $10.3 million increase in accounts receivable and unbilled revenue, a $6.2 million decrease in media payable, a $3.3 million decrease in accrued expenses and other liabilities and a $2.6 million increase in other receivables, partially offset by our net income of $12.3 million and non-cash expenses of $6.4 million. Media payables represent media placement costs owed to media providers on behalf of our customers. Amounts in media payables which have been billed to our customers are included in other receivables. The level of media payables and the related receivables will vary with the timing of our customers' media campaigns. Net cash used in investing activities was $6.5 million for the six months ended June 29, 2001 compared to $5.8 million used during the comparative period of 2000. The use of cash for investing activities in 2001 was attributable to purchases of property and equipment. During 2000, the uses of cash in investing activities were $4.3 million of additional contingent consideration paid for certain prior acquisitions and $4.0 million of purchases of property and equipment, partially offset by net sales and redemptions of short-term investments of $2.4 million. Net cash provided by financing activities was $1.8 million for the six months ended June 29, 2001 compared to $10.5 million provided during the comparable period of 2000. The source of cash from financing activities during 2001 was $1.8 million of proceeds from the sale of common stock as a result of exercises of stock options as well as the sale of stock through our Employee Stock Purchase Plan. During 2000, the primary source of cash from financing activities was $11.5 million of proceeds from the sale of common stock as a result of exercises of stock options and warrants as well as the sale of stock through our Employee Stock Purchase Plan, partially offset by $1.0 million repayment of notes payable. We currently believe that available funds and cash flows generated by operations, if any, will be sufficient to fund our working capital and capital expenditures requirements for at least the next 12 months. Thereafter, we may need to raise additional funds. We may decide to raise additional funds sooner in order to fund more rapid expansion, to develop new or enhanced products and services, to respond to competitive pressures or to acquire complementary businesses or technologies. We cannot assure you, however, that additional financing will be available when needed or desired on terms favorable to us or at all. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations, and No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. SFAS 141 eliminates the pooling-of- interest method for business combinations and requires application of the purchase method. Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their useful lives. We have not yet determined the effect these statements will have on our consolidated results of operations and financial position. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We do not believe that there is any material market risk exposure with respect to derivative or other financial instruments, which would require disclosure under this item. 11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS THINK New Ideas and three of its former officers are defendants in a consolidated class action filed in federal court in New York. Think New Ideas merged with Answerthink on November 5, 1999. This suit was previously described in Answerthink's Annual Report on Form 10-K for the year ended December 29, 2000. In February 1999, a Consolidated and Amended Class Action Complaint ("Consolidated Complaint") was filed seeking to assert claims on behalf of all individuals who purchased THINK New Ideas' common stock from November 5, 1997 through September 21, 1998. The defendants filed a motion to dismiss the Consolidated Complaint and the plaintiffs opposed the motion. On March 15, 2000, the Court granted the defendants' motion to dismiss the Consolidated Complaint. The plaintiffs filed a Second Consolidated and Amended Class Action Complaint ("Second Amended Complaint") on April 14, 2000. The defendants filed a motion to dismiss the Second Amended Complaint on May 1, 2000. On September 14, 2000, the Court denied the motion. The defendants filed an answer to the Second Amended Complaint on November 10, 2000. The parties are engaged in discovery. A scheduling order has been entered and the deadline for discovery is October 26, 2001. No trial date has been set. We believe there are meritorious defenses to the claims made in the Second Amended Complaint and we intend to contest those claims vigorously. Although there can be no assurance as to the outcome of these matters, an unfavorable resolution could have a material adverse effect on our results of operations and/or our financial condition in the future. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our Annual Meeting of Stockholders held on May 9, 2001, the following proposals were adopted by the votes specified below: (i) The election of two Class I Directors (Ted A. Fernandez and Alan T. G. Wix) to serve until the year 2004 and the election of one Class III Director (Edwin A. Huston) to serve until the year 2002. The security holders elected the Directors with votes cast as follows: Mr. Fernandez: 33,390,169 shares for and 2,398,478 against; Mr. Wix: 35,044,103 shares for and 744,544 against; Mr. Huston: 35,041,758 shares for and 746,889 against. There were no abstentions or broker non-votes applicable to the election of directors. In addition to the directors listed above whom were elected at the meeting, the terms of the following directors continued after the meeting: Robert J. Bahash, David N. Dungan, Allan R. Frank, William C. Kessinger, Ulysses S. Knotts, III and Jeffrey E. Keisling. (ii) The approval of an amendment to the Company's 1998 Stock Option and Incentive Plan increasing the number of shares of Common Stock available for issuance thereunder from 15,000,000 to 20,000,000. The approval passed with votes cast as follows: 15,410,013 shares for; 6,683,750 shares against; 276,852 shares abstained; and 13,418,032 broker non-votes. (iii) The approval of an amendment to and reinstatement of the Company's Employee Stock Purchase Plan. The approval passed with votes cast as follows: 21,681,166 shares for; 410,955 shares against; 278,494 shares abstained; and 13,418,032 broker non-votes. (iv) The ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors of the Company for the current fiscal year ending December 28, 2001. The appointment was ratified with votes cast as follows: 35,421,280 shares for; 352,290 shares against; and 15,077 shares abstained. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS None. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed by Answerthink during the quarter ended June 29, 2001. 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. ANSWERTHINK, INC. Date: August 10, 2001 By: /s/ John F. Brennan ------------------------------------- John F. Brennan Executive Vice President and Chief Financial Officer 13