-----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, IkfNz8ezhlfD2RB5OJee6H1MOACs6uWh8p+Q8OBUW0/R8Y9A//j8mrGWfb0Uugqy 6vkCZBe6jvPQmaCw0G+0TA== 0000912057-00-006465.txt : 20000215 0000912057-00-006465.hdr.sgml : 20000215 ACCESSION NUMBER: 0000912057-00-006465 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANALYSTS INTERNATIONAL CORP CENTRAL INDEX KEY: 0000006292 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 410905498 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-04090 FILM NUMBER: 540911 BUSINESS ADDRESS: STREET 1: 7615 METRO BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55439 BUSINESS PHONE: 6128974506 MAIL ADDRESS: STREET 1: 7615 METRO BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55439 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1999 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-4090 ANALYSTS INTERNATIONAL CORPORATION Minnesota 41-0905408 3601 West 76th Street Minneapolis, MN 55435 (612) 835-5900 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of January 28, 2000, 22,596,210 shares of the Registrant's Common Stock were outstanding. ANALYSTS INTERNATIONAL CORPORATION INDEX
Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Condensed Consolidated Balance Sheets December 31, 1999 (Unaudited) and June 30, 1999 1 Condensed Consolidated Statements of Income Three and six month periods ended December 31, 1999 and 1998 (Unaudited) 2 Condensed Consolidated Statements of Cash Flows Six months ended December 31, 1999 and 1998 (Unaudited) 3 Notes to Condensed Consolidated Financial Statements (Unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-6
ANALYSTS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
(In thousands) December 31, June 30, 1999 1999 ----------- -------- (Unaudited) Current assets: Cash and cash equivalents $ 35,081 $ 33,870 Accounts receivable, less allowance for doubtful accounts 87,295 101,523 Prepaid expenses and other current assets 3,815 4,499 -------- -------- Total current assets 126,191 139,892 Property and equipment, net 28,422 29,644 Intangible assets, net of accumulated amortization 6,699 7,029 Other assets 10,253 9,651 -------- -------- $171,565 $186,216 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 30,520 $ 30,791 Dividend payable 2,258 2,255 Salaries and vacations 7,864 23,227 Other, primarily self-insured health care reserves 3,325 3,311 Income taxes payable -- 1,084 -------- -------- Total current liabilities 43,967 60,668 Long-term debt 20,000 20,000 Other long-term liabilities 7,848 7,534 Shareholders' equity 99,750 98,014 -------- -------- $171,565 $186,216 ======== ========
Note: The balance sheet at June 30, 1999 has been taken from the audited financial statements at that date, and condensed. See notes to condensed consolidated financial statements. 1 ANALYSTS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended (In thousands except per share amounts) December 31 December 31 ------------------------------ ----------------------------- 1999 1998 1999 1998 --------- --------- --------- ---------- Professional services revenues: Provided directly $ 103,648 $ 118,391 $ 216,633 $ 241,764 Provided through sub-suppliers 35,221 34,595 71,281 69,686 --------- --------- --------- ---------- Total revenues 138,869 152,986 287,914 311,450 Expenses: Salaries, contracted services and direct charges 112,634 120,434 231,322 244,055 Selling, administrative and other operating costs 22,440 24,681 47,001 49,640 --------- --------- --------- ---------- Total expenses 135,074 145,115 278,323 293,695 --------- --------- --------- ---------- Operating income 3,795 7,871 9,591 17,755 Non-operating income 385 265 1,129 574 Interest expense (352) -- (702) -- --------- --------- --------- ---------- Income before income taxes 3,828 8,136 10,018 18,329 Income taxes 1,494 3,175 3,908 7,242 --------- --------- --------- ---------- Net income $ 2,334 $ 4,961 $ 6,110 $ 11,087 ========= ========= ========= ========= PER COMMON SHARE: Net income (basic) $ .10 $ .22 $ .27 $ .49 ========= ========= ========= ========= Net income (diluted) $ .10 $ .22 $ .27 $ .49 ========= ========= ========= ========= Dividends paid $ .10 $ .10 $ .20 $ .18 ========= ========= ========= ========= Average common shares outstanding 22,571 22,524 22,563 22,503 ========= ========= ========= ========= Average common and common equivalent shares outstanding 22,606 22,664 22,625 22,769 ========= ========= ========= =========
See notes to condensed consolidated financial statements. 2 ANALYSTS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended December 31 (In thousands) --------------------------- 1999 1998 -------- -------- Net cash provided by operating activities $ 6,150 $ 17,080 Cash flows from investing activities: Property and equipment additions (2,129) (11,751) Proceeds from property and equipment sales 1,561 -- Payments for acquisitions -- (183) -------- -------- Net cash used in investing activities (568) (11,934) Cash flows from financing activities: Cash dividends (4,510) (4,050) Proceeds from borrowings -- 20,000 Proceeds from exercise of stock options 139 977 -------- -------- Net cash (used in) provided by financing activities (4,371) 16,927 -------- -------- Net change in cash and equivalents 1,211 22,073 Cash and equivalents at beginning of period 33,870 11,868 -------- -------- Cash and equivalents at end of period $ 35,081 $ 33,941 ======== ========
See notes to condensed consolidated financial statements. 3 ANALYSTS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Condensed Consolidated Financial Statements - The condensed consolidated balance sheet as of December 31, 1999, the condensed consolidated statements of income for the three month and six month periods ended December 31, 1999 and 1998 and the condensed consolidated statements of cash flows for the six month periods then ended have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, at December 31, 1999 and the results of operations and the cash flows for the periods ended December 31, 1999 and 1998 have been made. The results of operations for the periods ended December 31, 1999 are not necessarily indicative of the results to be expected for the full fiscal year. The Company did not have any items of other comprehensive income in any of the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 1999 annual report to shareholders. 2. LONG-TERM DEBT In December 1998 the Company entered into a Notes Purchase Agreement whereby it sold $20,000,000 of 7% Senior Notes due December 30, 2006. Minimum future maturities on these Notes is as follows: 2000, $0; 2001, $5,250,000; 2002, $4,000,000; 2003, $3,000,000; 2004, $3,000,000 thereafter, $4,750,000. The agreement contains, among other things, provisions regarding maintenance of working capital and net worth and restrictions on payments of dividends on common stock. The Company's working capital and net worth are in excess of the minimum net requirements and current dividend payments will not exceed the $18,000,000 maximum allowed under the agreement. 3. SHAREHOLDERS' EQUITY
Six Months Ended December 31, 1999 ---------------- (In thousands) Balance at beginning of period $98,014 Cash dividends declared: August 19, 1999 at $.10 per share (2,255) December 15, 1999 at $.l0 per share (2,258) Proceeds upon exercise of stock options 139 Net income 6,110 ------- Balance at end of period $99,750 =======
4. NET INCOME PER COMMON SHARE Basic and diluted earnings per share are presented in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." The difference between average common shares and average common and common equivalent shares is the result of outstanding stock options. 4 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six Months Ended December 31, 1999 and 1998 CHANGES IN FINANCIAL CONDITION Working capital at December 31, 1999 was $82.2 million, up 3.8% from the $79.2 million at June 30, 1999. This includes cash and cash equivalents of $35.1 million compared to $33.9 million at June 30, 1999 and accounts receivable of $87.3 million compared to $101.5 million at June 30, 1999. Ratios of current assets to current liabilities and total assets to total liabilities have increased since June 30, 1999. Accounts receivable has decreased due to the decrease in revenues. The Company's primary need for working capital is to support accounts receivable and to fund the time lag between payroll disbursement and receipt of fees billed to clients. Over the past years, the Company has been able to support the growth in its business with internally generated funds. The Company's sub-supplier contracts are not expected to burden working capital. On August 19, 1999 the Board of Directors declared the regular quarterly dividend of $.10 per share payable November 12, 1999 to shareholders of record on October 29, 1999. On December 15, 1999 the Board of Directors declared the regular quarterly dividend of $.10 per share payable February 15, 2000 to shareholders of record on January 31, 2000. The Company believes funds generated from its business and current cash balances are adequate to meet demands placed upon its resources by its operations, capital investments and the payment of quarterly dividends. The Company achieved Y2K readiness by replacing its computer systems with new, Y2K compliant hardware and software. The new hardware/software system was put into production February 1, 1999. The cost of the new system was approximately $3,000,000. The Company depends on its computer system for critical business functions, including time record keeping, billing, payroll, and accounts payable and receivable. The loss of these capabilities would have a material adverse impact on the Company. The Company has not experienced any Y2K-related interuptions to its computer processing, and believes its new computer system has successfully handled the millennium date change. The Company's business does not depend on raw materials, parts or other goods supplied by third parties and the Company is not aware of any Y2K related failures on the part of any of its vendors, including utility services (electricity, telecommunication, natural gas and the like) for its offices. The inability of the Company's clients to achieve Y2K compliance could have an impact on the clients ability to pay the Company, with consequent adverse impact on the Company's cash flow. The Company is not aware of any cases where its clients have encountered Y2K compliance issues and considers it unlikely that its cash flow will be materially affected by Y2K related problems. The Company's services addressing the Year 2000 problem involved key aspects of its clients' computer systems. While the Company is not aware of any failures in a client's system, such a failure, were one to occur, could result in a claim for substantial damages against the Company, regardless of the Company's responsibility for such failure. Litigation, regardless of its outcome, could result in substantial cost to the Company. Accordingly, any contract liability claim or litigation against the Company could have an adverse effect on the Company's business, operations and financial results. 5 The Company does not believe any reasonably likely worst-case Y2K scenario would have a material effect on its results of operations, liquidity or financial condition. RESULTS OF OPERATIONS Revenues provided directly for the six months ended December 31, 1999 were $216.6 million, a decrease of 10.4% from the same period a year ago. For the three months ended December 31,1999 revenues provided directly were $103.6 million, a decrease of 12.5% over the same period a year ago. These decreases are a result of a decrease in billable hours, which is a result of the industry-wide slowdown. This slowdown is expected to continue through the third fiscal quarter. During the quarter ended December 31, 1999, the decrease in billable hours was partially offset by an increase in hourly rates. While the Company has been able to increase rates over the prior year, there can be no assurance the Company will be able to continue this as competitive conditions in the industry make it difficult for the Company to continually increase the hourly rates it charges for services. Revenues provided through sub-suppliers for the six month period and quarter ended December 31, 1999 were $71.3 and $35.2 million, respectively. This represents increases of 2.3% and 1.8% over the same periods a year ago. This increase in sub-supplier revenues resulted almost exclusively from an increase in billable hours of service rendered to clients. Personnel totalled 4,350 at December 31, 1999, compared to 5,000 at December 31, 1998, a decrease of 13.0%. Substantially all of the decrease consists of billable technical staff. Salaries, contracted services and direct charges, which represent primarily the Company's direct labor cost, were 80.3% of revenues for the six months ended December 31, 1999 compared to 78.4% for the same period a year ago. These costs were 81.1% of revenues for the three months ended December 31, 1999 and 78.7% of revenues for the three months ended December 31, 1998. By comparison, these costs were 79.6% of revenues for the first quarter of fiscal 2000 and 78.0% of revenues for the first quarter of fiscal 1999. The increase in this expense category as a percentage of revenues is mostly a consequence of (i) normal increases in labor rates and (ii) unusually high idle time as the Company elected to retain higher than needed staff levels in anticipation of recovery from the industry-wide slowdown. The Company's efforts to control these costs involve controlling labor costs, passing on labor cost increases through increased billing rates where possible, and maintaining productivity levels of its billable technical staff. Labor costs, however, are difficult to control because the highly skilled technical personnel the Company seeks to hire and retain are in great demand. It is also difficult to pass on labor costs increases to customers due to intense competition in the industry, and as a result of the industry-wide slowdown, it is expected to be difficult to return to normal levels of productivity at least through our third fiscal quarter. Although the Company continuously attempts to control the factors which effect this category of expense, there can be no assurance the Company will be able to maintain or improve this level. Selling, administrative and other operating costs, which include commissions, employee fringe benefits and location costs, represented 16.3% of revenues for the six months ended December 31, 1999 compared to 15.9% for the same period a year ago. These costs were 16.2% of revenues for the three months ended December 31, 1999 and 16.1% of revenues for the three months ended December 31, 1998. While the Company is committed to careful management of these costs, there can be no assurance the Company will be able to maintain these costs at their current relationship to revenues. Net income for the six months ended December 31, 1999 decreased 44.9% over the same period a year ago. As a percentage of revenue, net income has decreased to 2.1% for the six months ended December 31, 1999 from 3.6% for the six months ended December 31, 1998. Net income for the quarter, as a percentage of revenues, also decreased to 1.7% for the three months ended December 31, 1999 from 3.2% for the three months ended December 31, 1998. The Company's net income as a percentage of revenues provided directly for the three months ended December 31, 1999 and 1998 was 2.3% and 4.2%, respectively. 6 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the annual meeting of shareholders held October 17, 1999, the following action was taken: (a) Election of directors. The following nominees, all of whom were listed in the company's proxy statement prepared in accordance with Regulation 14(a), were elected:
Nominee Votes for Authority withheld ------- --------- ------------------ V. C. Benda 20,607,945 346,496 M. A. Loftus 20,619,077 335,364 W. K. Drake 20,630,033 324,408 E. M. Mahoney 20,624,951 329,490 F. W. Lang 20,635,564 318,877 R. L. Prince 20,621,239 333,202
(b) Ratification of auditors. The shareholders voted their shares to ratify the appointment of Deloitte & Touche LLP by the following vote: In favor 20,684,117 Against 180,050 Abstain 90,274
(c) Approve the 1999 Stock Option Plan The shareholders voted their shares to approve the 1999 Stock Option Plan by the following vote: In favor 18,986,637 Against 1,686,963 Abstain 196,285 Del N-Vote 84,556
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 27 - Financial Data Schedule. (b) There were no reports on Form 8-K filed for the six months ended December 31, 1999. 7 CAUTIONARY STATEMENT UNDER THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements included in this document may be "forward-looking statements" within the meaning of the term in Section 27A of the Securities Act of 1933 as amended, and of Section 21F of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents that are filed with the Securities and Exchange Commission. Words such as "believes," "intends," "possible," "expects," "estimates" "anticipates," or "plans" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on expectations and assumptions, and they involve risks and uncertainties which could cause results or outcomes to differ materially from expectations. Among the risks and uncertainties important to the Company's business are (i) the continued need of current and prospective customers for the Company's services, (ii) the revewal of contracts with customers, especially major customers, (iii) the cancellation of contracts by customers, especially major customers, (iv), competition, (v) the availability of qualified professional staff, (vi) the Company's ability to increase hourly billing rates as labor and operating costs increase and (vii) the Company's ability to continue to operate its business and support growth with internally generated funds. There may be other factors, such as general economic conditions which affect businesses generally, which may cause results to vary from expectations. A specific risk is the Y2K-related slowdown in the software services industry. The software services industry has experienced a slowdown in activity as clients have deferred new development projects to concentrate their resources and budgets on making their computer systems Y2K compliant. The Company's revenues have been adversely affected by this slowdown. Ordinarily the Company would reduce its labor costs by reducing its idle technical staff. However, the Company believes that revenue growth will resume after Y2K. To be prepared for the anticipated resumption in growth, the Company may elect to retain some or all of its idle technical staff because there is a long term shortage of skilled technical personnel and such personnel are difficult to find. The Company may also elect to retain its administrative/support staff during the slowdown for similar reasons. The cost of carrying such staff during the slowdown will have an adverse impact on the Company's net income. The extent and duration of the slowdown, the timing and strength of the recovery and the impact of the slowdown on the Company's revenues and net earnings cannot be predicted or estimated. 8 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 there unto duly authorized. ANALYSTS INTERNATIONAL CORPORATION (Registrant) Date February 14, 2000 By /s/ Marti R. Charpentier ----------------- ------------------------------ Marti R. Charpentier Vice President and Treasurer Date February 14, 2000 By /s/ David J. Steichen ----------------- ------------------------------ David J. Steichen Controller and Assistant Treasurer (Chief Accounting Officer) 9 EXHIBIT INDEX
Exhibit Number Exhibit - -------------- ------- 27 Financial Data Schedule
EX-27 2 EXHIBIT 27
5 1,000 6-MOS JUN-30-2000 JUL-01-1999 DEC-31-1999 35,081 0 89,165 1,870 0 126,191 44,853 16,431 171,565 43,967 20,000 0 0 2,257 97,493 171,565 287,914 287,914 231,322 231,322 47,001 1,050 702 10,018 3,908 6,110 0 0 0 6,110 .27 .27
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