FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 2000
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: 0-24484
Modis Professional Services, Inc.
(Exact name of Registrant as specified in its charter)
Florida 59-3116655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Independent Drive
Jacksonville, Florida
32202
(Address of principal executive offices) (Zip code)
(904) 360-2000
(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 ____
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. October 31, 2000.
Common Stock, $0.01 par value Outstanding: 96,522,867 (No. of shares)
FORWARD LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements that are subject to
certain risks, uncertainties or assumptions and may be affected by certain other
factors, including but not limited to the specific factors discussed under
'Factors Which May Impact Future Results and Financial Condition'. In some
cases, you can identify forward-looking statements by terminology such as 'may,'
'should,' 'could,' 'expects,' 'plans,' 'projected,' 'anticipates,' 'believes,'
'estimates,' 'predicts,' 'potential,' or 'continues,' or the negative of these
terms or other comparable terminology. In addition, except for historical facts,
all information provided in Part I, Item 3, under 'Quantitative and Qualitative
Disclosures About Market Risk' should be considered forward-looking statements.
Should one or more of these risks, uncertainties or other factors materialize,
or should underlying assumptions prove incorrect, actual results, performance or
achievements of the Company may vary materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
Forward-looking statements are based on beliefs and assumptions of the Company's
management and on information currently available to such manangement. Forward
looking statements speak only as of the date they are made, and the Company
undertakes no obligation to update publicly any of them in light of new
information or future events. Undue reliance should not be placed on such
forward-looking statements, which are based on current expectations.
Forward-looking statements are not guarantees of performance.
Modis Professional Services, Inc. and Subsidiaries
Index
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999 (unaudited).................................................................. 3
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months
ended September 30, 2000 and 1999 ................................................................. 4
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 2000 and 1999 ................................................................. 5
Notes to Condensed Consolidated Financial Statements................................................... 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 13
Item 3 Quantitative and Qualitative Disclosures About Market Risks............................................ 21
Factors Which May Impact Future Results and Financial Condition........................................ 22
Part II Other Information
Item 1 Legal Proceedings...................................................................................... 23
Item 2 Changes in Securities and Use of Proceeds.............................................................. 23
Item 3 Defaults Upon Senior Securities........................................................................ 23
Item 4 Submission of Matters to a Vote of Security Holders.................................................... 23
Item 5 Other Information...................................................................................... 23
Item 6 Exhibits and Reports on Form 8-K....................................................................... 23
Signatures............................................................................................. 24
Exhibits
2
Part I. Financial Information
Item 1. Financial Statements
Modis Professional Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollar amounts in thousands except per share amounts)
September 30, 2000 December 31, 1999
------------------- -------------------
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $ - $ 8,526
Accounts receivable, net 376,477 330,036
Prepaid expenses 17,120 11,199
Income tax receivable 82,201 9,148
Deferred income taxes 7,613 8,120
Other 6,548 25,740
------------------- -------------------
Total current assets 489,959 392,769
Furniture, equipment and leasehold improvements, net 55,116 45,960
Goodwill, net 1,206,508 1,132,586
Other assets, net 24,463 25,080
------------------- -------------------
Total assets $ 1,776,046 $ 1,596,395
=================== ===================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 29,384 $ 8,662
Accounts payable and accrued expenses 65,283 90,431
Accrued payroll and related taxes 55,698 50,577
------------------- -------------------
Total current liabilities 150,365 149,670
Notes payable, long-term portion 300,393 238,615
Deferred income taxes 28,912 25,595
------------------- -------------------
Total liabilities 479,670 413,880
------------------- -------------------
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized;
no shares issued and outstanding - -
Common stock, $.01 par value; 400,000,000 shares authorized;
96,422,867 and 96,043,270 shares issued and outstanding on
September 30, 2000 and December 31, 1999, respectively 964 960
Additional contributed capital 587,428 582,558
Retained earnings 714,296 601,989
Accumulated other comprehensive loss (6,312) (2,992)
------------------- -------------------
Total stockholders' equity 1,296,376 1,182,515
------------------- -------------------
Total liabilities and stockholders' equity $ 1,776,046 $ 1,596,395
=================== ===================
See accompanying notes to condensed consolidated financial statements.
3
Modis Professional Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
(dollar amounts in thousands except per share amounts)
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- -------------- -------------
Revenue $ 456,265 $ 500,062 $ 1,378,126 $ 1,484,607
Cost of Revenue 318,760 362,229 976,994 1,081,629
------------- ------------- -------------- -------------
Gross Profit 137,505 137,833 401,132 402,978
------------- ------------- -------------- -------------
Operating expenses:
General and administrative 103,562 79,034 289,185 238,232
Depreciation and amortization 13,891 11,403 39,454 33,293
Restructuring charge (753) (3,250) (753) (3,250)
Asset write-down related to sale of
discontinued operations 13,122 25,000 13,122 25,000
------------- ------------- -------------- -------------
Total operating expenses 129,822 112,187 341,008 293,275
------------- ------------- -------------- -------------
Income from operations 7,683 25,646 60,124 109,703
------------- ------------- -------------- -------------
Other income (expense):
Interest expense (6,756) (3,800) (17,987) (7,860)
Interest income and other, net 332 860 1,127 3,784
------------- ------------- -------------- -------------
Total other income (expense) (6,424) (2,940) (16,860) (4,076)
------------- ------------- -------------- -------------
Income from continuing operations before
provision for income taxes 1,259 22,706 43,264 105,627
Provision (benefit) for income taxes (85,635) 6,969 (69,043) 39,701
------------- ------------- -------------- -------------
Income from continuing operations 86,894 15,737 112,307 65,926
Gain on sale of discontinued operations,
net of income taxes - 14,955 - 14,955
------------- ------------- -------------- -------------
Net income $ 86,894 $ 30,692 $ 112,307 $ 80,881
============= ============= ============== =============
Basic income per common share:
from continuing operations $ 0.90 $ 0.16 $ 1.16 $ 0.68
============= ============= ============== =============
from gain on sale of discontinued operations $ - $ 0.16 $ - $ 0.16
============= ============= ============== =============
Basic net income per common share $ 0.90 $ 0.32 $ 1.16 $ 0.84
============= ============= ============== =============
Diluted income per common share:
from continuing operations $ 0.90 $ 0.16 $ 1.15 $ 0.68
============= ============= ============== =============
from gain on sale of discontinued operations $ - $ 0.15 $ - $ 0.15
============= ============= ============== =============
Diluted net income per common share $ 0.90 $ 0.31 $ 1.15 $ 0.83
============= ============= ============== =============
Average common shares outstanding, basic 96,698 96,313 96,650 96,252
============= ============= ============== =============
Average common shares outstanding, diluted 97,041 97,693 97,777 97,090
============= ============= ============== =============
See accompanying notes to condensed consolidated financial statements.
4
Modis Professional Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(dollar amounts in thousands)
Nine Months Ended
-------------------------------
September 30, September 30,
2000 1999
(unaudited) (unaudited)
--------------- ---------------
Cash flows from operating activities:
Income from continuing operations $ 112,307 $ 65,926
Adjustments to income from continuing operations to net
cash provided by operating activities:
Restructuring and impairment charges (753) (3,250)
Depreciation and amortization 39,454 33,293
Asset write down related to sale of discontinued operations 13,122 25,000
Deferred income taxes 3,824 9,450
Changes in certain assets and liabilities:
Accounts receivable (42,076) (42,224)
Income tax receivable (86,327) -
Prepaid expenses and other assets 311 2,311
Accounts payable and accrued expenses 25,459 (55,938)
Accrued payroll and related taxes 3,809 16,710
Other, net 146 1,964
--------------- ---------------
Net cash provided by operating activities 69,276 53,242
--------------- ---------------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold
improvements, net of disposals (19,862) (13,230)
Purchase of businesses, including additional earn-outs on
acquisitions, net of cash acquired (123,435) (147,515)
Income taxes and other cash expenses related to sale of
net assets of discontinued commercial operations - (191,409)
Advances associated with sale of assets of discontinued
health care operations, net of repayments (10) (8,224)
--------------- ---------------
Net cash used in investing activities (143,307) (360,378)
--------------- ---------------
Cash flows from financing activities:
Repurchases of common stock, net of refunds - 11,871
Proceeds from stock options exercised 4,875 3,669
Borrowings on indebtedness, net 59,299 212,804
--------------- ---------------
Net cash provided by financing activities 64,174 228,344
--------------- ---------------
Effect of exchange rate changes on cash and cash equivalents 1,331 (2,083)
Net decrease in cash and cash equivalents (8,526) (80,875)
Cash and cash equivalents, beginning of period 8,526 105,816
--------------- ---------------
Cash and cash equivalents, end of period $ - $ 24,941
=============== ===============
See accompanying notes to condensed consolidated financial statements.
5
Modis Professional Services, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(dollar amounts in thousands except for per share amounts)
1. Basis of Presentation.
The accompanying condensed consolidated financial statements are unaudited
and have been prepared by the Company in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC"). Accordingly,
certain information and footnote disclosures usually found in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. On November 10, 2000, as a result of unfavorable
market conditions, the Board of Directors of the Company cancelled the proposed
plan to spin-off the Information Technology Division which had been approved
December 15, 1999 and decided to withdraw the registration statement of the Idea
Integration unit, filed on August 14, 2000, on Form S-1 to sell up to 18% of its
common stock in an Initial Public Offering. The operations and assets of the
Information Technology division were previously reported as discontinued
operations under Accounting Principles Board Opinion No. 30. As a result, the
accompanying condensed consolidated financial statements of the Company's
business reflects both the results of the Company's Professional Services
('Prolianz') and Information Technology divisions as continuing operations. The
balance sheet as of December 31, 1999 and the statements of operations for the
three months ended September 30, 1999 have been reclassified, from the amounts
presented in the 1999 annual report on Form 10-K, to include the assets,
liabilities and results of operations of the Information Technology division as
part of continuing operations. The financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Form 10-K, as filed with the SEC on March 30, 2000.
The accompanying condensed consolidated financial statements reflect all
adjustments (including only normal recurring adjustments) which, in the opinion
of management, are necessary to present fairly the financial position and
results of operations for the interim periods presented. The results of
operations for an interim period are not necessarily indicative of the results
of operations for a full fiscal year.
2. Acquisitions
For the nine months ended September 30, 2000
On January 1, 2000, the Company acquired Catapult Technology, Inc., Brahma
Software Solutions, Inc., and Brahma Technolutions, Inc. (together 'CATAPULT'),
an Illinois based eBusiness solutions company, for $9,000 in cash and a $1,000
note payable to the former shareholders. The acquisition was accounted for under
the purchase method of accounting.
On January 31, 2000, the Company acquired T1 Design, Inc., a Texas based
eBusiness solutions company, for $30,600 in cash and a $3,400 note payable to
the former shareholders. The acquisition was accounted for under the purchase
method of accounting.
On January 31, 2000, the Company acquired Red Eye Digital Media, LLC, a
California based eBusiness solutions company, for $7,600 in cash and a $900 note
payable to the former shareholders. In addition, the sellers are entitled to
contingent consideration of up to $5,000. Management has estimated that the full
$5,000 will be payable. The acquisition was accounted for under the purchase
method of accounting.
On January 31, 2000, the Company acquired ITIC, Inc., a Colorado based
eBusiness solutions company, for $5,400 in cash and a $600 note payable to the
former shareholders. The acquisition was accounted for under the purchase method
of accounting.
On February 1, 2000, the Company acquired Integral Results, Inc., a
California based eBusiness solutions company, for $7,000 in cash and a $1,000
note payable to the former shareholders. The acquisition was accounted for under
the purchase method of accounting.
6
On May 12, 2000, the Company acquired G.B. Roberts & Assocaites, Inc. d/b/a
Ramworks , a Florida based eBusiness solutions company, for $3,600 in cash and a
$400 note payable to the former shareholders. The acquisition was accounted for
under the purchase method of accounting.
For all of the acquisitions noted above, the excess of the purchase price
over the fair value of the tangible assets (goodwill) is being amortized over a
period of 40 years, including any contingent consideration paid.
3. Restructuring of Operations
In December 1998, the Company's Board of Directors approved an Integration
and Strategic Repositioning Plan (the 'Plan') to strengthen the overall
profitability of the Company by implementing a back office integration program
and branch repositioning plan in an effort to consolidate or close branches
whose financial performance did not meet the Company's expectations. Pursuant to
the Plan, during the fourth quarter of 1998 the Company recorded a restructuring
and impairment charge of $34,759. The $24,823 restructuring component of the
Plan was based, in part, on the evaluation of objective evidence of probable
obligations to be incurred by the Company or impairment of specifically
identified assets.
The Plan called for the consolidation or closing of 23 Prolianz branches,
certain organizational improvements and the consolidation of 15 Information
Technology division back office operations. The Plan was completed in the third
quarter 2000, and based on this completion, management recaptured any balances
remaining relating to the components of the Plan.
The following table summarizes the restructuring activity from the
origination of the reserve through September 30, 2000, including the
restructuring activity of the Information Technology division which was
previously included in discontinued operations (in thousands):
Payments To Write-Down Of Payments On
Employees Certain Property, Cancelled Write-Down Of
Involuntarily Plant and Facility Certain
Terminated (a) Equipment (b) Leases (a) Receivables (b) Total
----------------- ------------------ ---------------- ------------------ ---------------
Balances as of
December 31, 1998 $ 7,494 $ 2,476 $ 8,035 $ 6,818 $ 24,823
1999 charges and
write-downs (7,438) (2,453) (3,028) (4,531) (17,450)
Adjustment to estimated
payments on cancelled
facility leases - - (3,250)(b) - (3,250)
------- ------- ------- ------- -------
Balances as of
December 31, 1999 56 23 1,757 2,287 4,123
------- ------- ------- ------- -------
2000 charges and
write-downs (35) (23) (1,091) (2,221) (3,370)
Recaputure of outstanding
balances (b) (21) (666) (66) (753)
------- ------- ------- ------- -------
Balances as of
September, 30, 2000 $ - $ - $ - $ - $ -
======= ======= ======= ======= =======
(a): Cash; (b): Noncash
7
4. Comprehensive Income
The Company discloses other comprehensive income in accordance with SFAS
No. 130, 'Reporting Comprehensive Income'. A summary of comprehensive income for
the three and nine months ended September 30, 2000 and 1999 is as follows:
Foreign
Currency Total
Net Translation Comprehensive
Three Months Ended, Income Adjustments Income
- ----------------------------------------------------------------------------------------
September 30, 1999 $ 30,692 $ 3,389 $ 34,081
September 30, 2000 $ 86,894 $ (1,876) $ 85,018
Foreign
Currency Total
Net Translation Comprehensive
Nine Months Ended, Income Adjustments Income
- ----------------------------------------------------------------------------------------
September 30, 1999 $ 80,881 $ (791) $ 80,090
September 30, 2000 $ 112,307 $ (3,320) $ 108,987
The currency translation adjustments are not adjusted for income taxes as
they relate to indefinite investments in non-U.S. subsidiaries.
5. Segment Reporting
The Company discloses segment information in accordance with SFAS No. 131,
'Disclosure About Segments of an Enterprise and Related Information,' which
requires companies to report selected segment information on a quarterly basis
and to report certain entity-wide disclosures about products and services, major
customers, and the material countries in which the entity holds assets and
reports revenues.
The Company has three reportable segments: modis, Idea Integration and
Prolianz. The Company's reportable segments are strategic business units that
offer different services and are managed separately as each business unit
requires different resources and marketing strategies. modis provides computer
related consulting services, resource management and e-procurement services.
Idea Integration provides full-service e-business solutions including e-business
strategy consulting, creative design, Web branding, and the implementation of
e-business software applications. Prolianz provides personnel who perform
specialized services such as accounting and finance, legal, technical and
engineering, career management and consulting and scientific.
The accounting policies of the segments are consistent with those described
in the summary of significant accounting policies in Note 2 to the Consolidated
Financial Statements on Form 10-K filed with the SEC on March 30, 2000 and all
intersegment sales and transfers are eliminated.
No one customer represents more than 5% of the Company's overall revenue.
Therefore, the Company does not believe it has a material reliance on any one
customer as the Company is able to provide services to numerous Fortune 1000 and
other leading businesses.
8
The Company evaluates segment performance based on revenues, gross margin
and pre-tax income from continuing operations. The Company does not allocate
income taxes or unusual items to the segments. The following table summarizes
segment and geographic information:
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Revenue
modis $ 226,394 $ 300,704 $ 711,225 $ 917,887
Idea Integration 66,651 44,485 179,986 125,758
------------ ------------ ------------ ------------
Information Technology division 293,045 345,189 891,211 1,043,645
Prolianz 163,220 154,873 486,915 440,962
------------ ------------ ------------ ------------
Total Revenue $ 456,265 $ 500,062 $ 1,378,126 $ 1,484,607
============ ============ ============ ============
Gross Profit
modis $ 52,861 $ 66,671 $ 158,817 $ 203,729
Idea Integration 30,619 19,547 81,339 53,581
------------ ------------ ------------ ------------
Information Technology division 83,480 86,218 240,156 257,310
Prolianz 54,025 51,615 160,976 145,668
------------ ------------ ------------ ------------
Total Gross Profit $ 137,505 $ 137,833 $ 401,132 $ 402,978
============ ============ ============ ============
Pre-tax Income from Continuing Operations
modis $ 6,265 $ 23,489 $ 22,388 $ 68,815
Idea Integration 4,926 8,829 10,537 21,906
Prolianz 16,157 15,078 46,864 40,732
------------ ------------ ------------ ------------
27,348 47,396 79,789 131,453
Charges (a) (19,665) (21,750) (19,665) (21,750)
Corporate interest and other income (6,424) (2,940) (16,860) (4,076)
------------ ------------ ------------ ------------
Total Pre-tax Income from Continuing Operations $ 1,259 $ 22,706 $ 43,264 $ 105,627
============ ============ ============ ============
Geographic Areas
Revenues
United States $ 352,474 $ 375,474 $ 1,051,087 $ 1,137,094
U.K. 100,813 120,283 318,391 331,945
Other 2,978 4,305 8,648 15,568
------------ ------------ ------------ ------------
Total $ 456,265 $ 500,062 $ 1,378,126 $ 1,484,607
============ ============ ============ ============
9
September 30, December 31,
-------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------
Assets
modis $ 888,295 $ 877,675
Idea Integration 340,282 241,873
Prolianz 465,268 448,924
------------ ------------
1,693,845 1,568,472
Corporate 82,201 27,923
------------ ------------
Total Assets $ 1,776,046 $ 1,596,395
============ ============
Geographic Areas
Identifiable Assets
United States $ 1,347,910 $ 1,193,021
U.K. 406,453 380,869
Other 21,683 22,505
------------ ------------
Total $ 1,776,046 $ 1,596,395
============ ============
(a) Charges for the three and nine months ended September 30, 2000 include
(1) $13,122 asset write down related to the sale of discontinued operations, (2)
$7,296 of costs related to the cancelled separation and spin-off of the
Information Technology division and the cancelled Initial Public Offering of
Idea Integration Corp. and (3) $753 restructuring charge recapture. These
charges were recognized in third quarter 2000. Charges for the three and nine
months ended September 30, 1999 include $25,000 asset write down related to the
sale of discontinued operations and $3,250 restructuring charge recapture. Both
of these charges were recognized in third quarter 1999.
10
6. Net Income per Common Share
The calculation of basic net income per common share and diluted net income
per common share from continuing and discontinued operations is presented below:
Three Months Ended Nine Months Ended
-------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
- ----------------------------------------------------------------------------------------- --------------------------------
Basic income per common share computation:
Income available to common stockholders
from continuing operations $ 86,894 $ 15,737 $ 112,307 $ 65,926
------------- ------------- ------------- -------------
Income available to common stockholders from
gain on sale of discontinued operations,
net of tax $ - $ 14,955 $ - 14,955
------------- ------------- ------------- -------------
Average common shares outstanding 96,698 96,313 96,650 96,252
============= ============= ============= =============
Basic income per common share from
continuing operations $ 0.90 $ 0.16 $ 1.16 $ 0.68
============= ============= ============= =============
Basic income per common share from gain on
sale of discontinued operations, net of tax $ - $ 0.16 $ - $ 0.16
============= ============= ============= =============
Basic net income per common share $ 0.90 $ 0.32 $ 1.16 $ 0.84
============= ============= ============= =============
Diluted income per common share computation:
Income available to common stockholders
from continuing operations $ 86,894 $ 15,737 $ 112,307 $ 65,926
------------- ------------- ------------- -------------
Income available to common stockholders from
gain on sale of discontinued operations,
net of tax $ - $ 14,955 $ - 14,955
------------- ------------- ------------- -------------
Average common shares outstanding 96,698 96,313 96,650 96,252
Incremental shares from assumed conversions:
Stock options 343 1,380 1,127 838
------------- ------------- ------------- ------------
Diluted average common shares outstanding 97,041 97,693 97,777 97,090
============= ============= ============= ============
Diluted income per common share from
continuing operations $ 0.90 $ 0.16 $ 1.15 $ 0.68
============== ============= ============= ============
Diluted income per common share from gain on
sale of discontinued operations, net of tax $ - $ 0.15 $ - $ 0.15
============== ============= ============= ============
Diluted net income per common share $ 0.90 $ 0.31 $ 1.15 $ 0.83
============== ============= ============= ===========
Options to purchase 14,966,661 and 12,916,138 shares of common stock that
were outstanding during the three and nine months ended September 30, 2000,
respectively, were not included in the computation of diluted earnings per share
as the exercise prices of these options were greater than the average market
price of the common shares.
11
7. Commitments and Contingencies
Litigation
The Company is a party to a number of lawsuits and claims arising out of
the ordinary conduct of its business. In the opinion of management, based on the
advice of in-house and external legal counsel, the lawsuits and claims pending
are not likely to have a material adverse effect on the Company, its financial
position, its results of operations, or its cash flows.
8. Sale of Healthcare Operations
Effective March 30, 1998, the Company sold the operations and certain
assets of its Health Care division. In connection with the Company's sale of its
health care operations, the Company entered into an agreement with the purchaser
of the health care assets whereby the Company agreed to make advances to the
purchaser to fund its working capital requirements. These advances were
collateralized by the assets of the sold operations, primarily the accounts
receivable. In the third quarter of 1999, the Company was informed by the
purchaser that they would default on their obligation to the Company. The
Company believed it was probable that a portion of the advances would not be
repaid and accordingly, provided an allowance for the advances estimated to be
uncollectible of $25.0 million. At September 30, 2000, the total amount owed to
the Company, net of the $25.0 million reserve, was $13.1 million. The Company
reevaluated the total amount owed to the Company and believed it was probable
that the balance of the purchaser's debt to the Company of $13.1 million would
not be repaid and accordingly, provided an additional allowance for the debt
estimated to be uncollectible. As of September 30, 2000, the purchaser's debt to
the Company, net of the additional $13.1 reserve, is zero.
9. Income Taxes
During the three months ended September 30, 2000, the Company recognized a
tax benefit associated with an investment in a subsidiary. The tax benefit is
subject to review in the normal course of business by the taxing authorities and
the final outcome of such review cannot be reasonably estimated.
10. Subsequent Events
On November 10, 2000, as a result of unfavorable market conditions, the
Board of Directors of the Company cancelled the proposed plan to spin-off the
Information Technology Division which had been approved December 15, 1999 and
decided to withdraw the registration statement of the Idea Integration unit,
filed on August 14, 2000, on Form S-1 to sell up to 18% of its common stock in
an Initial Public Offering. The Company recognized an expense of $7,296 related
to the cancellation of the proposed spin-off and Initial Public Offering which
is included in operating expenses in the quarter ended September 30, 2000.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On November 10, 2000, as a result of unfavorable market conditions, the Board of
Directors of the Company cancelled the proposed plan to spin-off the Information
Technology Division which had been approved December 15, 1999 and decided to
withdraw the registration statement of the Idea Integration unit, filed on
August 14, 2000, on Form S-1 to sell up to 18% of its common stock in an Initial
Public Offering. As a result, the accompanying discussion of the Company's
business reflects both the results of the Company's Professional Services
('Prolianz') and Information Technology divisions as continuing operations.
The following detailed analysis of operations should be read in conjunction with
the 1999 Financial Statements and related notes included in the Company's Form
10-K filed on March 30, 2000.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Revenue. Revenue decreased $43.8 million, or 8.8%, to $456.3 million in the
three months ended September 30, 2000, from $500.1 million in the year earlier
period. The decrease was attibutable to a decrease in revenue of $52.2 million,
or 15.1%, in the Company's Information Technology division to $293.0 million
from $345.2 million in the year earlier period. The revenue for the Company's
Information Technology division is obtained through the modis and Idea
Integration business units. The revenue of the modis unit decreased $74.3
million, or 24.7%, to $226.4 million in the three months ended September 30,
2000, from $300.7 million in the year earlier period. This decrease in revenue
was primarily attibutable to the continuing diminished demand for information
techology services as the Company's customers continue to re-evaluate their
infomation technology infrastructure needs after addressing their year 2000
issues. The revenue of the Idea Integration unit increased $22.2 million, or
49.9%, to $66.7 million in the three months ended September 30, 2000, from $44.5
million in the year earlier period. This increase in revenue is due to a
combination of internal growth and a contribution of revenue from companies
acquired in the first quarter of 2000.
Revenue in Prolianz increased $8.3 million, or 5.4% to $163.2 million in the
three months ended September 30, 2000, from $154.9 million in the year earlier
period. The increase in revenue is due to internal growth. Prolianz consists of
the accounting and finance, legal, technical and engineering, career management
and consulting and scientific units which contributed 39.4%, 13.0%, 36.0%, 7.4%
and 4.2%, respectively, of the Prolianz's revenues by group during the three
months ended September 30, 2000 as compared to 38.9%, 13.2%, 33.5%, 9.5% and
4.9%, respectively, during the year earlier period.
Gross Profit. Gross profit remained relatively constant, decreasing $0.3
million, or 0.2%, to $137.5 million in the three months ended September 30,
2000, from $137.8 million in the year earlier period. Gross margin increased to
30.1% from 27.6% for the same respective periods. The gross margin in the
Information Technology division increased to 28.5% from 25.0% for the three
months ended September 30, 2000 and 1999, respectively. The overall increase in
the gross margin was primarily due to the increased revenue contribution from
the division's Idea Integration unit, which generated a gross margin of 45.9%
for the three months ended September 30, 2000 compared to 43.9% in the year
earlier period. The gross margin in the Professional Services division decreased
slightly to 33.1% in the three months ended September 30, 2000 from 33.3% in the
year earlier period.
13
Operating Expenses. Operating expenses increased $17.6 million, or 15.7%, to
$129.8 million in the three months ended September 30, 2000, from $112.2 million
in the year earlier period. The Company's general and administrative ("G&A")
expenses increased $24.6 million or 31.1% to $103.6 million in the three months
ended September 30, 2000, from $79.0 million in the year earlier period. The
increase in G&A expenses was primarily related to the internal growth of
operating companies, investments made to improve infrastructure and to develop
technical practices and increased expenses at the corporate level to support the
growth of the Company, including sales, marketing and brand recognition. The
Company incurred charges of $13.1 million and $25.0 million during the three
months ended September 30, 2000 and 1999, respectively, related to the
impairment of the note receivable due from the purchaser of the Company's
discontinued health care division. In the three months ended September 30, 2000,
the Company also incurred costs of $7.3 million related to the cancelled
separation and spin-off of the Information Technology division and the cancelled
Initial Public Offering of Idea Integration Corp. Additionally, the Company
completed its restructuring plan during the three months ended September 30,
2000 and as a result, eliminated the remaining restructuring reserve balances,
which amounted in a reduction of operating expenses by $0.8 million. During the
three months ended September 30, 1999, the Company reduced the lease component
of the restructuring and impairment charge $3.3 million as a result of the
Company not experiencing the expected levels of payments on cancelled facility
leases relating to the closing of Prolianz branches and the consolidation of
Information Technology back office operations.
Income from Operations. Income from operations decreased $17.9 million, or
69.9%, to $7.7 million in the three months ended September 30, 2000, from $25.6
million in the year earlier period. The majority of the decrease in operating
income is due to the lower contribution of operating income from the Company's
modis and Idea Integration units. The modis unit's costs remained relatively
constant with a reduction in revenue, while the Company elected to increase
expenditures in the Idea Integration unit to support sales, marketing and brand
recognition. Income from operations as a percentage of revenue decreased to 1.7%
in the three months ended September 30, 2000, from 5.1% in the year earlier
period.
Other Income (Expense). Other income (expense) consists primarily of interest
expense related to borrowings on the Company's credit facility and notes issued
in connection with acquisitions, net of interest income related to (1)
investment income from certain investments owned by the Company and (2) cash on
hand at certain subsidiaries of the Company. Interest expense increased $3.5
million, or 78.9%, to $6.8 million in the three months ended September 30, 2000,
from $3.8 million in the year earlier period. Interest expense in the three
months ended September 30, 1999 was significantly reduced as a result of the net
cash on hand related to the sale of the Company's discontinued Commercial
operations and Teleservices division in fiscal 1998 resulting in less borrowings
on the Company's credit facility. Interest expense was offset by $0.3 million of
interest and other income in the three months ended September 30, 2000 as
compared to $0.9 million in the year earlier period.
Income Taxes. The Company recognized a net income tax benefit for the three
months ended September 30, 2000 of $85.6 million as compared to an income tax
provision of $7.0 million in the year earlier period. The income tax benefit
related primarily to a tax benefit associated with an investment in a
subsidiary.
Income from Continuing Operations. As a result of the foregoing, income from
continuing operations increased $71.2 million, or 453.5%, to $86.9 million in
the three months ended September 30, 2000, from $15.7 million in the year
earlier period. Income from continuing operations as a percentage of revenue
increased to 19.0% in the three months ended September 30, 2000, from 3.1% in
the year earlier period.
14
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
Revenue. Revenue decreased $106.5 million, or 7.2%, to $1,378.1 million in the
nine months ended September 30, 2000, from $1,484.6 million in the year earlier
period. The decrease was attibutable to a decrease in revenue of $152.4 million,
or 14.6%, in the Company's Information Technology division to $891.2 million
from $1,043.6 million in the year earlier period. The revenue for the Company's
Information Technology division is obtained through the modis and Idea
Integration business units. The revenue of the modis unit decreased $206.7
million, or 22.5%, to $711.2 million in the nine months ended September 30,
2000, from $917.9 million in the year earlier period. This decrease in revenue
was primarily attibutable to the continuing diminished demand for information
techology services as the Company's customers continue to re-evaluate their
infomation technology infrastructure needs after addressing their year 2000
issues. The revenue of the Idea Integration unit increased $54.2 million, or
43.1%, to $180.0 million in the nine months ended September 30, 2000, from
$125.8 million in the year earlier period. This increase in revenue is due to a
combination of internal growth and a contribution of revenue from companies
acquired in the first quarter of 2000.
Revenue in Prolianz increased $45.9 million, or 10.4% to $486.9 million in the
nine months ended September 30, 2000, from $441.0 in the year earlier period.
The increase in revenue is due to internal growth. Prolianz consists of the
accounting and finance, legal, technical and engineering, career management and
consulting and scientific units which contributed 40.1%, 12.9%, 34.6%, 8.2% and
4.2%, respectively, of Prolianz's revenues by group during the nine months
ended September 30, 2000 as compared to 38.4%, 13.6%, 32.7%, 10.1% and 5.2%,
respectively, during the year earlier period.
Gross Profit. Gross profit remained relatively constant, decreasing $1.9
million, or 0.5%, to $401.1 million in the nine months ended September 30, 2000,
from $403.0 million in the year earlier period. Gross margin increased to 29.1%
from 27.1% for the same respective periods. The gross margin in the Information
Technology division increased to 26.9% from 24.7% for the nine months ended
September 30, 2000 and 1999, respectively. The overall increase in the gross
margin was primarily due to the increased revenue contribution from the
division's Idea Integration unit, which generated a gross margin of 45.2% for
the nine months ended September 30, 2000. The gross margin in the Professional
Services division remained relatively constant,increasing slightly to 33.1% in
the nine months ended September 30, 1999 from %33.0 in the year earlier period.
Operating Expenses. Operating expenses increased $47.7 million, or 16.3%, to
$341.0 million in the nine months ended September 30, 2000, from $293.3 million
in the year earlier period. The Company's general and administrative ("G&A")
expenses increased $51.0 million or 21.4% to $289.2 million in the three months
ended September 30, 2000, from $238.2 million in the year earlier period. The
increase in G&A expenses was primarily related to the internal growth of
operating companies, investments made to improve infrastructure and to develop
technical practices and increased expenses at the corporate level to support the
growth of the Company, including sales, marketing and brand recognition. The
Company incurred charges of $13.1 million and $25.0 million during the nine
months ended September 30, 2000 and 1999, respectively, related to the
impairment of the note receivable due from the purchaser of the Company's
discontinued health care division. In the nine months ended September 30, 2000,
the Company also incurred costs related to the cancelled spin-off of the
Information Technology division and the cancelled Initial Public Offering of
Idea Integration Corp. Additionally, the Company completed its restructuring
plan during the three months ended September 30, 2000 and as a result,
eliminated the remaining restructuring reserve balances, which amounted in a
reduction of operating expenses by $0.8 million. During the three months ended
September 30, 1999, the Company reduced the lease component of the restructuring
and impairment charge $3.3 million as a result of the Company not experiencing
the expected levels of payments on cancelled facility leases relating to the
closing of Prolianz branches and the consolidation of Information Technology
back office operations.
15
Income from Operations. Income from operations decreased $49.6 million, or
45.2%, to $60.1 million in the nine months ended September 30, 2000, from $109.7
million in the year earlier period. The majority of the decrease in operating
income is due to the lower contribution of operating income from the Company's
modis and Idea Integration units. The modis unit's costs remained relatively
constant with a reduction in revenue, while the Company elected to increase
expenditures in the Idea Integration unit to support sales, marketing and brand
recognition. Income from operations as a percentage of revenue decreased to 4.4%
in the nine months ended September 30, 2000, from 7.4% in the year earlier
period.
Other Income (Expense). Other income (expense) consists primarily of interest
expense related to borrowings on the Company's credit facility and notes issued
in connection with acquisitions, net of interest income related to (1)
investment income from certain investments owned by the Company and (2) cash on
hand at certain subsidiaries of the Company. Interest expense increased $10.1
million, or 127.8%, to $18.0 million in the nine months ended September 30,
2000, from $7.9 million in the year earlier period. Interest expense in the nine
months ended September 30, 1999 was significantly reduced as a result of the net
cash on hand related to the sale of the Company's discontinued Commercial
operations and Teleservices division in fiscal 1998 resulting in less borrowings
on the Company's credit facility. Interest expense was offset by $1.1 million of
interest and other income in the nine months ended September 30, 2000 as
compared to $3.8 million in the year earlier period.
Income Taxes. The Company recognized a net income tax benefit for the nine
months ended September 30, 2000 of $69.0 million as compared to an income tax
provision of $39.7 million in the year earlier period. The income tax benefit
related primarily to a tax benefit associated with an investment in a
subsidiary.
Income from Continuing Operations. As a result of the foregoing, income from
continuing operations increased $46.4 million, or 70.4%, to $112.3 million in
the nine months ended September 30, 2000, from $65.9 million in the year earlier
period. Income from continuing operations as a percentage of revenue increased
to 8.1% in the nine months ended September 30, 2000, from 4.4% in the year
earlier period.
16
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have principally been related to the
acquisition of businesses, working capital needs and capital expenditures. These
requirements have been met through a combination of bank debt, issuances of
Common Stock and internally generated funds. The Company's operating cash flows
and working capital requirements are affected significantly by the timing of
payroll and by the receipt of payment from the customer. Generally, the Company
pays its consultants weekly or semi-monthly, and receives payments from
customers within 30 to 80 days from the date of invoice.
The Company had working capital of $339.6 million and $243.1 million as of
September 30, 2000 and December 31, 1999, respectively. The principal reason for
the increase in the Company's working capital is the increase in income tax
receivable relating to a tax benefit associated with an investment in a
subsidiary. For the nine months ended September 30, 2000 and 1999, the Company
generated $69.3 million and $53.2 million of cash flow from operations,
respectively.
For the nine months ended September 30, 2000, the Company used $143.3 million of
cash for investing activities. The Company used $19.9 million for the purchase
of fixed assets and $123.4 million for the purchases of businesses including
earn-out payments. For the nine months ended September 30, 1999, the Company
used $360.4 million of cash for investing activities, mainly as a result of the
payment of a tax liability, net worth adjustment and certain transaction
expenses of $191.4 million relating to the sale of the Company's Commercial
operations and Teleservices division. Additionally, the Company used $147.5
million for acquisitions and earn-out payments, $13.2 million for the purchase
of fixed assets, and $8.2 million for advances associated with the sale of the
Company's Health Care division in the nine months ended September 30, 1999.
Effective March 30, 1998, the Company sold the operations and certain assets of
its Health Care division. In connection with the Company's sale of its health
care operations, the Company entered into an agreement with the purchaser of the
health care assets whereby the Company agreed to make advances to the purchaser
to fund its working capital requirements. These advances were collateralized by
the assets of the sold operations, primarily the accounts receivable. In the
third quarter of 1999, the Company was informed by the purchaser that they would
default on their obligation to the Company. The Company believed it was probable
that a portion of the advances would not be repaid and accordingly, provided an
allowance for the advances estimated to be uncollectible of $25.0 million. At
September 30, 2000, the total amount owed to the Company, net of the $25.0
million reserve, was $13.1 million. The Company reevaluated the total amount
owed to the Company and believed it was probable that the balance of the
purchaser's debt to the Company of $13.1 million would not be repaid and
accordingly, provided an additional allowance for the debt estimated to be
uncollectible. As of September 30, 2000, the purchaser's debt to the Company,
net of the additional $13.1 reserve, is zero.
For the nine months ended September 30, 2000, the Company generated $64.2
million from financing activities. This amount primarily represented net
borrowings from the Company's credit facility, which were used primarily to pay
for earn out and note payments associated with the Company's acquisitions.
For the nine months ended September 30, 1999, the Company generated $228.3
million from financing activities. This amount primarily represented net
borrowings from the Company's credit facility, which was used primarily to pay
the tax liability and other payments related to the sale of the Company's
Commercial operations and Teleservices division. Additionally, in connection
with the Company's 1998 share buyback program, the Company was refunded a
portion of the purchase price in the first quarter of 1999. A complete
description of the share buyback program is included in the 1999 Consolidated
Financial Statements and related notes included in the Company's Form 10-K filed
March 30, 2000.
17
On November 4, 1999, the Company's Board of Directors authorized the repurchase
of up to $65.0 million of the Company's common stock. As of October 31, 2000, no
shares have been repurchased under this authorization.
The Company is also obligated under various acquisition agreements to make
earn-out payments to former stockholders of acquired companies in fiscal 2001.
The Company estimates that the amount of these payments will total approximately
$15.0 million for fiscal 2001. The Company anticipates that the cash generated
by the operations of the acquired companies will provide a substantial portion
of the capital required to fund these payments.
The Company believes that funds provided by operations, available borrowings
under the credit facility, and current amounts of cash will be sufficient to
meet its presently anticipated needs for working capital, capital expenditures
and acquisitions for at least the next 12 months.
18
Indebtedness of the Company
The Company has a $350 million revolving credit facility which is syndicated to
a group of 13 banks with Bank of America, as the principal agent. This facility
expires on October 27, 2003. In addition, the Company also has a $50 million 364
day credit facility that expires on October 24, 2001. The 364 day credit
facility, which had not been drawn upon, was reduced from $150 million to $50
million to more closely align its borrowing capacity to its anticipated funding
needs. Outstanding amounts under the credit facilities bear interest at certain
floating rates as specified by the applicable credit facility. The credit
facilities contain certain financial and non-financial covenants relating to the
Company's operations, including maintaining certain financial ratios. Repayment
of the credit facilities are guaranteed by the material subsidiaries of the
Company. In addition, approval is required by the majority of the lenders when
the cash consideration of an individual acquisition exceeds 10% of consolidated
stockholders' equity of the Company.
As of October 31, 2000, the Company had a balance of approximately $219.0
million outstanding under the $350 million credit facility. The Company also had
outstanding letters of credit in the amount of $2.0 million, reducing the amount
of funds available under the credit facilities to approximately $179.0 million
as of October 31, 2000. The principal reason for the decrease in the balance
oustanding under the $350 million credit facility from September 30, 2000 to
October 31, 2000 is a repayment to the lenders from the proceeds of a tax refund
related to an investment in a subsidiary.
The Company has certain notes payable to shareholders of acquired companies
which bear interest at rates ranging from 4.7% to 6.5%, all maturing by the end
of November 2001. As of September 30, 2000, the Company owed approximately $29.8
million in such acquisition indebtedness.
19
SEASONALITY
The Company's quarterly operating results are affected primarily by the number
of billing days in the quarter and the seasonality of its customers' businesses.
Demand for professional services is typically lower during the first quarter
until customers' operating budgets are finalized and the profitability of the
Company's consultants is generally lower in the fourth quarter due to fewer
billing days because of the higher number of holidays and vacation days.
20
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The following assessment of the Company's market risks does not include
uncertainties that are either nonfinancial or nonquantifiable, such as
political, economic, tax and credit risks.
Interest Rates. The Company's exposure to market risk for changes in interest
rates relates primarily to the Company's short-term and long-term debt
obligations and to the Company's investments.
The Company's investment portfolio consists of cash and cash equivalents
including deposits in banks, government securities, money market funds, and
short-term investments with maturities, when acquired, of 90 days or less. The
Company is adverse to principal loss and ensures the safety and preservation of
its invested funds by placing these funds with high credit quality issuers. The
Company constantly evaluates its invested funds to respond appropriately to a
reduction in the credit rating of any investment issuer or guarantor.
The Company's short-term and long-term debt obligations totaled $329.8 million
as of September 30, 2000 and the Company had $98.0 million available under its
current credit facility. The debt obligations consist of notes payable to former
shareholders of acquired corporations, are at a fixed rate of interest, and
extend through November 2001. The interest rate risk on these obligations is
thus immaterial due to the dollar amount of these obligations. The interest rate
on the credit facility is variable.
Foreign currency exchange rates. Foreign currency exchange rate changes impact
translations of foreign denominated assets and liabilities into U.S. dollars and
future earnings and cash flows from transactions denominated in different
currencies. The Company generated approximately 24% of its nine months ended
September 30, 2000 consolidated revenues from international operations,
approximately 97% of which were from the United Kingdom. The exchange rate has
decreased approximately 9% in the nine months ended September 30, 2000, from
1.61 at December 31, 1999 to 1.47 at September 30, 2000. The exchange rate
fluctuation has not historically had a material impact on the Company's results
of operations; however, if the British pound sterling continues to weaken,
exchange rates could have a material adverse effect on future results of
operations. The Company did not hold or enter into any foreign currency
derivative instruments as of September 30, 2000.
21
FACTORS WHICH MAY IMPACT FUTURE RESULTS AND FINANCIAL CONDITION
Effect of Fluctuations in the General Economy
Demand for the Company's professional business services is significantly
affected by the general level of economic activity in the markets served by the
Company. During periods of slowing economic activity, companies may reduce the
use of outside consultants and staff augmentation services prior to undertaking
layoffs of full-time employees. As a result, any significant economic downturn
could have a material adverse effect on the Company's results of operations or
financial condition.
The Company may also be adversely effected by consolidations through mergers and
otherwise of main customers or between major customers with non-customers. These
consolidations as well as corporate downsizings may result in redundant
functions or services and a resulting reduction in demand by such customers for
the Company's services. Also, spending for outsourced business services may be
put on hold until the consolidations are completed.
Competition
The Company's industry is intensely competitive and highly fragmented, with few
barriers to entry by potential competitors. The Company faces significant
competition in the markets that it serves and will face significant competition
in any geographic market that it may enter. In each market in which the Company
operates, it competes for both clients and qualified professionals with other
firms offering similar services. Competition creates an aggressive pricing
environment and higher wage costs, which puts pressure on gross margins.
Ability to Recruit and Retain Professional Employees
The Company depends on its ability to recruit and retain employees who possess
the skills, experience and/or professional certifications necessary to meet the
requirements of the Company's clients. Competition for individuals possessing
the requisite criteria is intense, particularly in certain specialized
professional skill areas. The Company often competes with its own clients in
attracting and retaining qualified personnel. There can be no assurance that
qualified personnel will be available and recruited in sufficient numbers on
economic terms acceptable to the Company.
Ability to Continue Acquisition Strategy; Ability to Integrate Acquired
Operations
The Company has experienced significant growth in the past through acquisitions.
Although the Company continues to seek acquisition opportunities, there can be
no assurance that the Company will be able to negotiate acquisitions on economic
terms acceptable to the Company or that the Company will be able to successfully
identify acquisition candidates and integrate all acquired operations into the
Company.
Possible Changes in Governmental Regulations
From time to time, legislation is proposed in the United States Congress, state
legislative bodies and by foreign governments that would have the effect of
requiring employers to provide the same or similar employee benefits to
consultants and other temporary personnel as those provided to full-time
employees. The enactment of such legislation would eliminate one of the key
economic reasons for outsourcing certain human resources and could significantly
adversely impact the Company's staff augmentation business. In addition, the
Company's costs could increase as a result of future laws or regulations that
address insurance, benefits or other employment-related matters. There can be no
assurance that the Company could successfully pass any such increased costs to
its clients.
22
Part II. Other Information
Item 1. Legal Proceedings
No disclosure required.
Item 2. Changes in Securities and Use of Proceeds
No disclosure required.
Item 3. Defaults Upon Senior Securities
No disclosure required.
Item 4. Submission of Matters to a Vote of Security Holders
No disclosure required.
Item 5. Other Information
No disclosure required.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
27 Financial Data Schedule.
B. Reports on Form 8-K
No disclosure required.
23
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
/s/ DEREK E. DEWAN President, Chairman Nocember 14, 2000
- ---------------------- of the Board and Chief
Derek E. Dewan Executive Officer
/s/ MICHAEL D. ABNEY Senior Vice President, November 14, 2000
- ---------------------- Chief Financial Officer,
Michael D. Abney Treasurer, and Director
/s/ ROBERT P. CROUCH Vice President and November 14, 2000
- ---------------------- Chief Accounting Officer
Robert P. Crouch
24