UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2001
[_] 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: 0-20971
Edgewater Technology, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 71-0788538
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
20 Harvard Mill Square
Wakefield, MA 01880
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (781) 246-3343
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_____
----
The number of shares of Common Stock of the Registrant, par value $.01 per
share, outstanding at July 27, 2001 was 11,649,211.
1
EDGEWATER TECHNOLOGY, INC.
--------------------------
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001
---------------------------------------------
INDEX
-----
PART I -- FINANCIAL INFORMATION Page
----
Item 1 -- Financial Statements
Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations
Business Overview 12
Discontinued Operations 13
Background 14
Financial Information 14
Results for the Three and Six Months Ended June 30, 2001
Compared to Results for the Three and Six Months Ended June 30, 2000 14
Liquidity and Capital Resources 16
Special Note Regarding Forward Looking Statements 17
Item 3 -- Quantitative and Qualitative Disclosures
About Market Risk 18
PART II - OTHER INFORMATION
Item 1 -- Legal Proceedings 18
Item 2 -- Changes in Securities and Use of Proceeds 18
Item 4 -- Submission of Matters to a Vote of Security Holders 18
Item 6 -- Exhibits and Reports on Form 8-K 19
(a) Exhibits
(b) Reports on Form 8-K 19
Signatures
2
EDGEWATER TECHNOLOGY, INC.
--------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In Thousands, Except Shares)
-----------------------------
June 30, December 31,
2001 2000
----------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 34,986 $145,581
Accounts receivable, net 5,632 5,875
Income tax receivable 16,131 16,121
Deferred income taxes 985 900
Prepaid expenses and other current assets 860 6,842
--------- --------
Total current assets 58,594 175,319
Property and equipment, net 2,190 2,174
Intangible assets, net 34,125 36,530
Other assets 83 118
Deferred income taxes 22,857 25,728
Net assets from discontinued operations (Note 4) - 14,831
--------- --------
$ 117,849 $254,700
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,319 $ 3,151
Other liabilities including restructuring and discontinued operations 7,480 10,819
Current portion of capital lease obligations 340 -
Payroll and related liabilities 1,250 3,195
--------- --------
Total current liabilities 10,389 17,165
Long-term liabilities 494 290
Capital lease obligations, net of current portion 181 -
Stockholders' equity:
Preferred stock, $.01 par value; no shares issued or outstanding - -
Common stock, $.01 par value; 11,668,616 and 28,692,766 shares issued and
outstanding as of June 30, 2001 and December 31, 2000, respectively 296 296
Paid-in capital 217,827 217,838
Treasury stock, at cost (140,003) (6,158)
Retained earnings 28,665 25,269
--------- --------
Total stockholders' equity 106,785 237,245
--------- --------
$ 117,849 $254,700
========= ========
The accompanying notes are an integral part
of these consolidated financial statements.
3
EDGEWATER TECHNOLOGY, INC.
--------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
-------- --------- -------- --------
(Unaudited)
Revenues $6,723 $ 7,968 $14,450 $ 15,056
Cost of services 4,075 3,726 8,286 7,096
------ -------- ------- --------
Gross profit 2,648 4,242 6,164 7,960
Operating expenses:
Selling, general and administrative 2,612 3,631 6,052 6,798
Depreciation and amortization 1,386 1,089 2,759 2,157
------ -------- ------- --------
Operating loss (1,350) (478) (2,647) (995)
Interest income (expense) and other, net 441 (274) 1,377 (636)
------ -------- ------- --------
Loss before income taxes and extraordinary item (909) (752) (1,270) (1,631)
Income tax provision (benefit) 92 (256) 402 (536)
------ -------- ------- --------
Net loss from continuing operations before extraordinary item (1,001) (496) (1,672) (1,095)
Discontinued operations (Note 4):
Loss from operations of discontinued divisions (393) (100,106) (1,403) (97,576)
(Loss) gain on sale of division - (6,175) 6,514 (6,175)
Extraordinary item, net of applicable taxes (Note 5) 113 - (43) -
------ -------- ------- --------
Net (loss) income ($1,281) ($106,777) $ 3,396 ($104,846)
====== ======== ======= ========
Basic earnings per share:
Continuing operations ($ 0.09) ($ 0.02) ($ 0.12) ($ 0.04)
====== ======== ======= ========
Discontinued operations ($ 0.03) ($ 3.60) $ 0.36 ($ 3.51)
====== ======== ======= ========
Extraordinary item $ 0.01 $ - $ - $ -
====== ======== ======= ========
Net (loss) income ($ 0.11) ($ 3.62) $ 0.24 ($ 3.55)
====== ======== ======= ========
Diluted earnings per share:
Continuing operations ($ 0.09) ($ 0.02) ($ 0.12) ($ 0.04)
====== ======== ======= ========
Discontinued operations ($ 0.03) ($ 3.59) $ 0.36 ($ 3.51)
====== ======== ======= ========
Extraordinary item $ 0.01 $ - $ - $ -
====== ======== ======= ========
Net (loss) income ($ 0.11) ($ 3.61) $ 0.24 ($ 3.55)
====== ======== ======= ========
The accompanying notes are an integral part
of these consolidated financial statements.
4
EDGEWATER TECHNOLOGY, INC.
--------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
---- ---- --------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($ 1,281) ($106,777) $ 3,396 ($104,846)
Loss from operations of discontinued divisions 393 100,106 1,403 97,576
Loss (gain) on sale of division - 6,175 (6,514) 6,175
Extraordinary item, net of applicable taxes (113) - 43 -
--------- --------- --------- ---------
Net loss from continuing operations (1,001) (496) (1,672) (1,095)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,386 1,089 2,759 2,157
Provision for bad debts 80 - 130 -
Deferred income taxes and other, net 92 - 401 16
Change in operating accounts,
net of effects of dispositions:
Accounts receivable 776 (1,327) 177 (1,933)
Prepaid expenses and other current assets 391 5,051 848 4,730
Other assets - (23) - 99
Accounts payable and accrued liabilities 186 437 336 659
Payroll and related liabilities (786) 1,761 (1,678) 716
Receipt (payment) relating to extraordinary item 37 - (380) -
--------- --------- --------- ---------
Net cash provided by operating activities 1,161 6,492 921 5,349
--------- --------- --------- ---------
Net cash (used in) provided by discontinued operating activities (8,617) (4,390) (10,620) 10,956
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of businesses - 204,121 35,246 204,121
Purchases of businesses, net of cash acquired - (663) (1,200) (1,122)
Capital expenditures (252) (123) (530) (128)
--------- --------- --------- ---------
Net cash (used in) provided by investing activities (252) 203,335 33,516 202,871
--------- --------- --------- ---------
Net cash used in discontinued investing activities - (8,119) (33) (11,208)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 18,411 - 58,996
Payments on borrowings - (212,591) - (259,134)
Proceeds from stock option exercises - 46 143 66
Payments on capital lease obligations (81) - (81) -
Repurchases of stock (1,249) - (134,441) -
--------- --------- --------- ---------
Net cash used in financing activities (1,330) (194,134) (134,379) (200,072)
--------- --------- --------- ---------
Net cash used in discontinued financing activities - (3,087) - (11,289)
--------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents (9,038) 97 (110,595) (3,393)
CASH AND CASH EQUIVALENTS, beginning of period 44,024 228 145,581 3,718
CASH AND CASH EQUIVALENTS, discontinued operations - 829 - 829
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 34,986 $ 1,154 $ 34,986 $ 1,154
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ - $ 3,431 $ - $ 6,836
========= ========= ========= =========
Income taxes paid $ - $ 476 $ 180 $ 834
========= ========= ========= =========
Borrowings on capital leases $ - $ 111 $ 68 $ 259
========= ========= ========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
5
EDGEWATER TECHNOLOGY, INC.
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
1. ORGANIZATION:
------------
We (Edgewater Technology, Inc.) provide business solutions through our
eSolutions subsidiary, which was acquired effective April 1, 1999. As discussed
in Note 4, we have sold our interests in our Commercial staffing segment, Robert
Walters (finance and accounting staffing services), Strategic Legal Resources
(legal staffing), IntelliMark (information technology staffing and solutions)
and ClinForce (clinical trials support services). As a result of these
transactions, the operating results for these non-eSolutions divisions have been
included in discontinued operations in the accompanying consolidated financial
statements.
We are an e-business consulting and systems integration firm that
specializes in providing middle-market companies with tailored solutions for
today's Internet-centric environment. These services primarily include the
design, development and implementation of web-based applications as well as
eCommerce software solutions and consulting services to clients throughout the
United States. We have approximately 220 employees and offices in Massachusetts,
New Hampshire, Arkansas, Minnesota, and North Carolina.
Revenues pursuant to time and materials contracts are generally recognized
as services are provided. Revenues pursuant to fixed-fee contracts are generally
recognized as services are rendered using the percentage-of-completion method of
accounting. Revenues and earnings may fluctuate from quarter to quarter based on
the number, size and scope of projects in which we are engaged, the contractual
terms and degree of completion of such projects, any delays incurred in
connection with a project, employee utilization rates, the adequacy of
provisions for losses, the use of estimates of resources required to complete
ongoing projects, general economic conditions and other factors. Certain
significant estimates include percentage of completion estimates used for fixed
price contracts and the allowance for doubtful accounts. These items are
frequently monitored and analyzed by management for changes in facts and
circumstances and material changes in these estimates could occur in the future.
Gross profit reflects revenues less direct consultant expenses whether or not
the consultant's time is billed to a client. Gross margin is affected by the
number of workdays in a period and consultant utilization. Any significant
decline in fees billed to clients or the loss of a significant client would
adversely affect our revenues, gross margins and net earnings. Selling, general
and administrative expenses consist of sales and marketing, recruiting, human
resources, administration salaries, commissions and related expenses, office
facilities, computer system expenditures, professional fees, promotional
expenses, and other general corporate expenses.
On December 21, 2000, we commenced an issuer tender offer (the "Tender
Offer"), which expired on January 23, 2001. As a result of the Tender Offer, we
acquired (effective January 30, 2001) 16.25 million shares of our common stock
at $8 per share for aggregate consideration of $130 million, and common stock
subject to certain vested in-the-money stock options for aggregate consideration
of $0.2 million. In addition, during the first six months of 2001, we
repurchased 854,200 shares of our common stock for an average price of $4.05 per
share.
2. BASIS OF PRESENTATION:
---------------------
The accompanying interim financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to those rules and regulations, although
we believe that the disclosures made are adequate to ensure the information
presented is not misleading.
6
The accompanying interim financial statements reflect all adjustments
(which were of a normal, recurring nature) that, in the opinion of management,
are necessary to present fairly our financial position, results of operations
and cash flows as of and for the interim periods presented. All significant
intercompany transactions have been eliminated in the accompanying consolidated
financial statements. Additionally, certain reclassifications have been made to
prior period balances in order to conform with the current period presentation.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto included in our 2000 Edgewater
Technology, Inc. Annual Report on Form 10-K as filed with the SEC on March 30,
2001.
The results of operations for the three and six months ended June 30, 2001
are not necessarily indicative of the results to be expected for any future
period or the full fiscal year. Our revenue and earnings may fluctuate from
quarter to quarter based on factors within and outside our control including
variability in demand for Internet and for Internet professional services, the
length of the sales cycle associated with our service offerings, the number,
size and scope of our projects, and the efficiency with which we utilize our
employees.
3. BUSINESS TRANSACTIONS:
---------------------
Effective April 1, 1999, we acquired Edgewater Technology (Delaware), Inc.
("Edgewater"), a full-service provider of eSolutions services located in
Boston's Route 128 technology corridor. Edgewater was acquired in a transaction,
which required $17.1 million to be paid on the closing date and provided for
additional consideration based on certain events. The aggregate consideration
paid with respect to Edgewater was $1.2 million for the six months ended June
30, 2001 and was $0.6 million and $1.1 million for the three and six months
ended June 30, 2000, respectively. No further payments are required under the
purchase agreement.
4. DISCONTINUED OPERATIONS:
-----------------------
On June 28, 2000, pursuant to a Purchase Agreement dated May 16, 2000 with
Stephens Group, Inc., we sold all of our subsidiaries, and the assets and
liabilities of our Commercial staffing segment to affiliate entities of Stephens
Group, Inc. As consideration, we received gross proceeds of $190.1 million in
cash before fees, expenses and taxes. As part of the transaction, we sold the
name "StaffMark" as that was the name used by the Commercial staffing segment.
On July 13, 2000, we sold, through two indirect wholly-owned subsidiaries,
all of our equity interests in Robert Walters through an initial public offering
on the London Stock Exchange. Robert Walters had previously been the finance and
accounting platform within our Professional/Information Technology ("IT")
segment. Our two subsidiaries sold 67.2 million ordinary shares at a price of
170 pence per share (or $2.57 at then current exchange rates). The shares began
trading on a conditional basis on the London Stock Exchange on July 6, 2000. On
July 14, 2000, the underwriters exercised the over-allotment of 10.4 million
ordinary shares. Our share of offering gross proceeds, including the exercise of
the over-allotment option, was $199.2 million prior to offering commissions,
fees and expenses.
During the second quarter of 2000, in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," we recorded a
$150 million non-cash charge for the write-down of the goodwill in our
IntelliMark and Strategic Legal Resources divisions to estimated realizable
values. This write-down was largely due to a decline in the revenues, gross
profit and cash flow of these divisions and the overall decrease in market
values within these industries. Accordingly, the carrying values of these assets
were written down to management's estimates of fair value, which were based on
market comparables for companies operating in similar industries.
On September 22, 2000, we sold all of the outstanding stock of Strategic
Legal Resources, the legal staffing platform within our Professional/IT segment,
to a company owned by a group of investors including MidMark Capital II, L.P.
and Edwardstone & Company for $13.25 million, of which $4.25 million was
represented by a promissory note. The balance of this note was collected in
January 2001.
7
On November 16, 2000, we sold all of the outstanding shares of stock of our
subsidiaries that comprised IntelliMark, our IT staffing and solutions division,
to IM Acquisition, Inc., an affiliate of Charlesbank Equity Fund V Limited
Partnership, for $40.2 million in cash, which consisted of $42.7 million paid at
the closing date less a $2.5 million post-closing working capital adjustment
paid to IM Acquisition, Inc. in April 2001. In connection with this sale, we
recorded a $53.9 million non-cash charge for the write-down of the goodwill in
our IntelliMark division to estimated realizable values.
On December 15, 2000, we entered into a Stock Purchase Agreement to sell
all of our outstanding stock in ClinForce, our clinical trials support services
division, to Cross Country TravCorps, Inc. for $31.0 million in cash, before
fees and expenses and subject to potential upward or downward post-closing
adjustment (the "Transaction"). We held a Special Stockholders' Meeting on March
14, 2001 to approve the Transaction. After receiving approval from stockholders,
the Transaction was closed on March 16, 2001. We recorded an after-tax gain of
$6.5 million related to the Transaction during the first quarter of 2001. On
July 18, 2001, we received approximately $1.4 million from Cross Country
TravCorps, Inc. for the post-closing working capital adjustment.
During the third and fourth quarters of 2000, as a result of the impending
sale of our remaining non-eSolutions divisions, we recorded nonrecurring
expenses totaling approximately $3.8 million relating to our divestiture process
and costs related to the closing of our former corporate headquarters (in
Fayetteville, Arkansas). The move of the corporate headquarters to Wakefield,
Massachusetts, where Edgewater is located, was substantially completed during
the second quarter of 2001. The restructuring expense includes future
contractual obligations to certain employees, which extend through October 2001.
The following is a summary of our restructuring accrual, which has been included
in other liabilities including restructuring and discontinued operations in the
accompanying consolidated balance sheets:
(In Thousands)
Restructuring expenses:
Severance $3,003
Facility 613
Relocation 160
------
3,776
Less cash outlays 1,849
------
Accrual at June 30, 2001 $1,927
======
As a result of the completion of the transactions described above, the
operating results for the Commercial staffing segment, Robert Walters, Strategic
Legal Resources, IntelliMark and ClinForce have been included in discontinued
operations in the accompanying consolidated financial statements. Revenues from
discontinued operations were $7.7 million for the six months ended June 30, 2001
and were $286.8 million and $574.0 million for the three and six months ended
June 30, 2000, respectively. Operating loss from discontinued operations was
$1.6 million for the six months ended June 30, 2001 and was $146.4 million and
$138.1 million for the three and six months ended June 30, 2000, respectively.
8
Net assets from discontinued operations in the accompanying balance sheets
represent the net assets of the discontinued operations for ClinForce as of
December 31, 2000.
(In Thousands)
Accounts receivable, net $ 4,689
Prepaid expenses and other current assets (857)
Property and equipment, net 404
Intangible assets, net 11,779
Other assets 30
Accounts payable and accrued liabilities (67)
Payroll and related liabilities (1,147)
-------
Net assets from discontinued operations $14,831
=======
5. EXTRAORDINARY ITEM - WAKEFIELD TRAGEDY:
--------------------------------------
On December 26, 2000, a tragedy occurred at our Wakefield, Massachusetts
office, where seven employees were murdered. As a result of this tragedy, the
Wakefield office was closed during the last week of December 2000. From December
2000 through June 30, 2001, we have incurred expenses totaling approximately
$0.8 million for items such as legal fees, foundation costs, family and employee
counselors, and property and facility expenses. These costs are presented as an
extraordinary item, net of insurance proceeds of $0.2 million and the applicable
tax effect, in the accompanying consolidated statements of operations.
6. EARNINGS PER COMMON SHARE:
-------------------------
A reconciliation of net (loss) income and weighted average shares used in
computing basic and diluted earnings per share is as follows:
Three Months Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
-------- -------- --------- --------
(In Thousands, Except Per Share Data)
Basic earnings per share:
Net (loss) income applicable to common shares ($ 1,281) ($106,777) $ 3,396 ($104,846)
======= ======== ======= ========
Weighted average common shares outstanding 11,700 29,526 14,098 29,494
======= ======== ======= ========
Basic earnings per share of common stock ($ 0.11) ($ 3.62) $ 0.24 ($ 3.55)
======= ======== ======= ========
Diluted earnings per share:
Net (loss) income applicable to common shares ($ 1,281) ($106,777) $ 3,396 ($104,846)
======= ======== ======= ========
Weighted average common shares outstanding 11,700 29,526 14,098 29,494
Dilutive effect of stock options - 30 - 78
------- -------- ------- --------
Weighted average common shares, assuming
dilutive effect of stock options 11,700 29,556 14,098 29,572
======= ======== ======= ========
Diluted earnings per share of common stock ($ 0.11) ($ 3.61) $ 0.24 ($ 3.55)
======= ======== ======= ========
Options to purchase approximately 4.5 million shares of common stock were
outstanding during the three and six months ended June 30, 2001, but were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of our common shares.
The prices of these options ranging from $4.22 to $39.63 per share for the three
months ended June 30, 2001 and from $4.58 to $39.63 for the six months ended
June 30, 2001. These options were still outstanding as of June 30, 2001.
9
Options to purchase approximately 3.1 million shares of common stock (at
prices ranging from $6.38 to $40.75 per share) and 2.4 million shares of common
stock (at prices ranging from $7.63 to $40.75 per share) were outstanding during
the three and six months ended June 30, 2000, respectively, but were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of our common shares.
Options outstanding under the Amended and Restated 1996 Edgewater Stock
Option Plan (the "Plan") vested 100% upon the closing of the Transaction as this
constituted a "Change in Control" as defined in the Plan, except for 1.1 million
stock options granted under the Plan to officers of our eSolutions subsidiary in
August 2000. Although most options expire ten years from the date of grant,
approximately 1.4 million options held by employees of the Commercial segment
and IntelliMark were terminated on April 16, 2001, which was 30 days following
the "Change in Control." Employees of ClinForce hold approximately 0.1 million
options, which terminated on June 14, 2001, which was 90 days following the
"Change in Control."
7. SEGMENT INFORMATION:
-------------------
As a result of the divestiture transactions described in Note 4, our
eSolutions division now represents our only segment of business, therefore no
segment data has been provided.
8. RELATED PARTY:
-------------
Synapse Group, Inc., one of our significant customers discussed in Note 9,
is considered a related party as their President and Chief Executive Officer
Michael Loeb is also a member of our Board of Directors. As of June 30, 2001, we
maintained an accounts receivable balance of $2.8 million from Synapse Group,
Inc. Subsequent to June 30, 2001, this balance was reduced by payments of $0.9
million and the balance of this account remains on customary business terms.
9. SIGNIFICANT CUSTOMERS:
---------------------
The following table summarizes the revenue and accounts receivable from
customers in excess of 10% of reported amounts for the periods presented:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2001 2000 2001 2000
------- -------- --------- --------
Revenue
Synapse Group, Inc. 40.1% 26.7% 35.6% 27.9%
Robert Walters 12.4% - 12.2% -
Cobb Vantress 10.1% - - -
HomeRuns.com - 22.3% - 20.0%
American Student Assistance - 19.7% - 20.6%
June 30, December 31,
2001 2000
------------------ ------------------
Accounts Receivable
Synapse Group, Inc. 49.3% 36.9%
Robert Walters 15.6% -
HomeRuns.com - 16.5%
American Student Assistance - 10.3%
10
10. NEW ACCOUNTING PRONOUNCEMENTS:
-----------------------------
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations", which improves the transparency of the accounting and reporting
for business combinations by requiring that all business combinations be
accounted for under the purchase method of accounting. This statement is
effective for all business combinations initiated after June 30, 2001.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." This statement applies to intangibles and goodwill acquired after June
30, 2001, as well as goodwill and intangibles previously acquired. Under this
statement, goodwill, as well as other intangibles determined to have an infinite
life, will no longer be amortized; however, these assets will be reviewed for
impairment on a periodic basis. This statement becomes effective January 1,
2002. Accordingly, at the end of our fiscal year December 31, 2001, we will
discontinue amortizing our intangible assets and will periodically review the
assets for impairment.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Business Overview
We are an e-business consulting and systems integration firm that
specializes in providing middle-market companies with tailored solutions for
today's Internet-centric environment. With approximately 220 employees,
Edgewater operates eSolutions centers located in Massachusetts, New Hampshire,
Arkansas, Minnesota and North Carolina. We focus on helping customers increase
market competitiveness, improve customer business productivity, and reduce
operational costs through implementation of business strategies utilizing the
Internet and other technologies. Edgewater custom develops systems that allow
our customers to improve and expedite the processing and delivery of information
to end users, allowing for quicker implementation of business strategies, easier
adaptation to change, and effective delivery of results.
Edgewater offers an end-to-end platform of e-business solutions to help
organizations tackle the barriers of technology transition, including:
(1) Strategy -- consulting services to aid customers in translating
business goals into eSolutions strategies by taking full advantage of
Internet technologies. Strategy services include analyzing a customer's
market, business processes and existing technology infrastructure,
evaluating both packaged and custom alternative solutions and formulating
recommendations for a solution or strategy. Edgewater then provides a
tactical road map that customers can implement immediately.
(2) Solutions -- designing, building, and deploying large-scale
enterprise-wide systems. eSolutions services include developing and
implementing custom applications as well as "blend-in" packaged
applications to create flexible, scalable custom solutions that integrate a
customer's Web presences, customer service and back-office legacy systems
into e-business applications.
(3) Support -- providing a spectrum of post-deployment support services,
including Internet application outsourcing, site maintenance and 7x24 hour
monitoring.
Since its inception in 1992, Edgewater has continually focused on five key
core values:
(1) Excellence in Execution -- successfully developing and deploying
custom solutions that meet customers' needs;
(2) Maintaining Strong Operational Metrics -- building a growing
organization with formal processes to drive operational excellence and
sustain strong metrics;
(3) Middle Market Focus -- positioning Edgewater service offerings to
middle market companies, or divisions of companies, with annual revenues of
between $50 million and $1 billion and organizations in under-served
smaller cities through strategically positioned regional solutions centers;
(4) Vertical Expertise -- integrating our business and technology skills
to create competitive advantages for our customers among a multitude of
industries; and
(5) Technology Excellence -- utilizing innovative technology to build and
deploy complex and scalable high-volume systems.
12
Discontinued Operations
Our restructuring included the following sale transactions:
. On June 28, 2000, pursuant to a Purchase Agreement dated May 16, 2000 with
Stephens Group, Inc., we sold all of our subsidiaries, and the assets and
liabilities of our Commercial segment to affiliate entities of the Stephens
Group, Inc. As consideration, we received gross proceeds of $190.1 million
in cash before fees, expenses and taxes. As part of the transaction, we
sold the name "StaffMark" as that was the name used by the Commercial
segment. As a result of the transaction, we changed our name from
"StaffMark, Inc." to "Edgewater Technology, Inc." and our stock symbol from
"STAF" to "EDGW." The proceeds from this transaction were used to repay a
portion of our outstanding borrowings under our credit facility.
. On July 13, 2000, we sold, through two indirect wholly-owned subsidiaries,
all of our equity interest in Robert Walters through an initial public
offering on the London Stock Exchange. Robert Walters had previously been
the finance and accounting placement and staffing consultancy platform
within our Professional/IT segment. Our two subsidiaries sold 67.2 million
ordinary shares at a price of 170 pence per share (or $2.57 at then current
exchange rates). The shares began trading on a conditional basis on the
London Stock Exchange on July 6, 2000. On July 14, 2000, the underwriters
exercised the over-allotment of 10.4 million ordinary shares. Our share of
offering gross proceeds, including the exercise of the over-allotment
option, was $199.2 million prior to offering commissions, fees and
expenses. After repaying the remaining outstanding borrowings under our
credit facility, approximately $90 million was invested in short-term
securities.
. On September 22, 2000, we sold all of the outstanding stock of Strategic
Legal Resources, the legal staffing division within our Professional/IT
segment, to a company owned by a group of investors including MidMark
Capital II, L.P. and Edwardstone & Company for $13.25 million, of which
$4.25 million was represented by a promissory note that was collected in
January 2001.
. On November 16, 2000, we sold all of the outstanding shares of stock of our
subsidiaries that comprised IntelliMark, our IT staffing and solutions
division, to IM Acquisition, Inc., an affiliate of Charlesbank Equity Fund
V Limited Partnership, for $40.2 million in cash, which consisted of $42.7
million paid at the closing date less a $2.5 million post-closing working
capital adjustment paid to IM Acquisition, Inc. in April 2001.
. On December 15, 2000, we executed a definitive agreement to sell ClinForce,
our clinical trials support services division, to Cross Country TravCorps,
Inc. for approximately $31.0 million in cash, subject to potential upward
or downward post-closing working capital adjustments (the "Transaction").
As the closing of the Transaction was conditioned upon our receipt of
stockholder approval and the satisfaction of other customary conditions to
closing, we held a Special Stockholders' Meeting on March 14, 2001, where
our stockholders approved the Transaction. We consummated the Transaction
and received proceeds on March 16, 2001. On July 18, 2001, we received
approximately $1.4 million from Cross Country TravCorps, Inc. with respect
to the post-closing working capital purchase price adjustment. In
accordance with Emerging Issues Task Force No. 95-18, we have reported
ClinForce's operating results in discontinued operations for the periods
presented. In addition, nonrecurring restructuring charges relating to the
closing of our corporate headquarters (in Fayetteville, Arkansas) have been
included, as a result of the sale of ClinForce and consistent with the
treatment of ClinForce results, as a part of discontinued operations.
As a result of the completion of the above sale transactions, the operating
results for the Commercial segment, Robert Walters, Strategic Legal Resources,
IntelliMark and ClinForce have been included in discontinued operations in the
accompanying financial statements. Revenues from discontinued operations were
$7.7 million for the six months ended June 30, 2001 and were $286.8 million and
$574.0 million for the three and six months ended June 30, 2000, respectively.
Operating loss from discontinued operations was $1.6 million for the six months
ended June 30, 2001 and was $146.4 million and $138.1 million for the three and
six months ended June 30, 2000, respectively.
13
Background
Revenues pursuant to time and materials contracts are generally recognized
as services are provided. Revenues pursuant to fixed-fee contracts are generally
recognized as services are rendered using the percentage-of-completion method of
accounting. Revenues and earnings may fluctuate from quarter to quarter based on
the number, size and scope of projects in which we are engaged, the contractual
terms and degree of completion of such projects, any delays incurred in
connection with a project, employee utilization rates, the adequacy of
provisions for losses, the use of estimates of resources required to complete
ongoing projects, general economic conditions and other factors. Certain
significant estimates include percentage of completion estimates used for fixed
price contracts and the allowance for doubtful accounts. These items are
frequently monitored and analyzed by management for changes in facts and
circumstances and material changes in these estimates could occur in the future.
Gross profit reflects revenues less direct consultant expenses whether or not
the consultant's time is billed to a client. Gross margin is affected by the
number of workdays in a period and consultant utilization. Any significant
decline in fees billed to clients or the loss of a significant client would
adversely affect our revenues, gross margins and net earnings. Selling, general
and administrative expenses consist of sales and marketing, recruiting, human
resources, and administration salaries, commissions and related expenses, office
facilities, computer system expenditures, professional fees, promotional
expenses, and other general corporate expenses.
Financial Information
The financial information provided below has been rounded in order to
simplify its presentation. The amounts and percentages below have been
calculated using the detailed financial information contained in the audited
financial statements, the notes thereto and the other financial data included in
this Quarterly Report on Form 10-Q.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
is included in the following discussion because we believe the year-to-year
change in EBITDA is a meaningful measure since the non-cash expenses of
depreciation and amortization have a significant impact on operating (loss)
income and operating margins. EBITDA should not be construed as an alternative
measure of the amount of our income or cash flows from operating activities as
EBITDA excludes certain significant costs of doing business.
Results For The Three Months Ended June 30, 2001 Compared To Results For The
Three Months Ended June 30, 2000
Revenues. Revenues decreased $1.3 million, or 15.6%, to $6.7 million for
the three months ended June 30, 2001 compared to $8.0 million for the three
months ended June 30, 2000. Revenues decreased $0.6 million, or 4.0%, to $14.5
million for the six months ended June 30, 2001 compared to $15.1 million for the
six months ended June 30, 2000. Revenues decreased primarily due to an economic
slowdown that has affected spending for information technology services
resulting in postponed or delayed projects. Additionally, we estimate that
approximately $0.4 million of revenues were lost during the six months ended
June 30, 2001 as a result of the Wakefield tragedy. Our current project backlog
at June 30, 2001 was $17.9 million, an increase of 14.2% over the same period
last year. This current backlog includes $11.2 million of projects for 2002.
Gross Profit. Gross profit decreased $1.6 million, or 37.6%, to $2.6
million for the three months ended June 30, 2001 compared to $4.2 million for
the three months ended June 30, 2000. Gross profit decreased $1.8 million, or
22.6%, to $6.2 million for the six months ended June 30, 2001 compared to $8.0
million for the six months ended June 30, 2000. Gross profit as a percentage of
revenue decreased from 53.2% in the second quarter of 2000 to 39.4% in the
second quarter 2001. Gross margin was 42.7% and 52.9% for the six months ended
June 30, 2001 and 2000, respectively. Utilization rates have declined from over
80% on a historical basis to 72% during the current quarter, resulting in lower
gross profit and gross margin as compared to previous periods. This decrease is
primarily the result of lower revenues and the planned retention of our non-
utilized consultant base in order to provide for future growth.
14
SG&A. Selling, general and administrative expenses ("SG&A") decreased $1.0
million, or 28.1%, to $2.6 million for the three months ended June 30, 2001
compared to $3.6 million for the three months ended June 30, 2000. SG&A
decreased $0.7 million, or 11.0%, to $6.1 million for the six months ended June
30, 2001 compared to $6.8 million for the six months ended June 30, 2000. SG&A
as a percentage of revenue was 38.9% and 45.6% for the three months ended June
30, 2001 and 2000, respectively, and was 41.9% and 45.2% for the six months
ended June 30, 2001 and 2000, respectively. SG&A decreased primarily as a result
of our corporate downsizing, which was due to the divestiture of our
non-eSolutions businesses and divisions.
EBITDA. EBITDA decreased $0.6 million to $36,000 for the three months ended
June 30, 2001 as compared to $0.6 million for the same period in 2000. EBITDA
decreased $1.1 million to $0.1 million for the six months ended June 30, 2001 as
compared to $1.2 million for the comparable period in 2000. EBITDA as a
percentage of revenues was 0.5% and 7.7% for the three months ended June 30,
2001 and 2000, respectively, and was 0.8% and 7.7% for the six months ended June
30, 2001 and 2000, respectively. The decrease in EBITDA and EBITDA margins is
primarily the result of the economic slowdown, which resulted in lower revenues,
and our planned retention of non-utilized consultant base. EBITDA and EBITDA
margins were also impacted by the revenues lost due to the Wakefield tragedy,
offset by decreased SG&A as described above. As our consultant costs are
relatively fixed, the loss of revenue resulting from the Wakefield tragedy
directly affects our gross profit, EBITDA and operating loss results.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $0.3 million to $1.4 million for the second quarter of 2001 as
compared to $1.1 million for the same period last year. Depreciation and
amortization expense increased $0.6 million to $2.8 million for the six months
ended June 30, 2001 as compared to $2.2 million for the six months ended June
30, 2000. These increases are a result of our reallocation of Edgewater's
purchase price between goodwill and intangible assets during the fall of 2000.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." Under this statement, goodwill, as well as other intangibles determined
to have an infinite life, will no longer be amortized; however, these assets
will be reviewed for impairment on a periodic basis. This statement is effective
beginning January 1, 2002. Accordingly, at the end of our fiscal year December
31, 2001, we will discontinue amortizing our intangible assets and will
periodically review the assets for impairment.
Operating Loss. Operating loss increased $0.9 million to $1.4 million for
the three months ended June 30, 2001 compared to $0.5 million for the same
period last year. Operating loss increased $1.6 million to $2.6 million for the
six months ended June 30, 2001 compared to $1.0 million for the comparable
period in 2000. Operating losses increased from the prior year primarily due to
lower revenues and gross profit affected by the delay in spending for
information technology services, as well as higher amortization expense.
Interest Income (Expense) and Other, Net. We earned net interest income of
$0.4 million and $1.4 million for the three and six months ended June 30, 2001,
respectively, as compared to the incurrence of interest expense of $0.3 million
and $0.6 million for the three and six months ended June 30, 2000, respectively.
Interest expense in 2000 was primarily related to borrowings on our credit
facility to fund working capital requirements, the cash portion of our
acquisitions and additions to property and equipment. Using the proceeds from
the sale of our various divisions, all borrowings were repaid in July 2000 and
excess cash amounts have been placed in short-term investments, used to fund the
Tender Offer, repurchase shares of our common stock under our stock purchase
program and for general corporate purposes. Interest income is primarily related
to interest generated from the investment of excess cash amounts.
Net Loss From Continuing Operations. Net loss from continuing operations
increased $0.5 million, to $1.0 million for the three months ended June 30, 2001
as compared to $0.5 million for the three months ended June 30, 2000. Net loss
from continuing operations increased $0.6 million, or 52.7%, to $1.7 million for
the six months ended June 30, 2001 as compared to $1.1 million for the
comparable period in 2000. Net margin from continuing operations was (14.9%) and
(6.2%) for the three months ended June 30, 2001 and 2000, respectively, and was
(11.6%) and (7.3%) for the six months ended June 30, 2001 and 2000,
respectively. In addition to the matters discussed above, the net losses from
continuing operations in the current year were negatively affected by the tax
provisions of $0.1 million and $0.4 million for the three and six months ended
June 30, 2001, which is the result of
15
non-deductible goodwill amortization. These taxes will not be paid out in cash
as we will utilize net operating loss carryforwards to offset taxable income.
Our tax losses relate to the sale of our non-eSolutions businesses and divisions
and resulted in a deferred tax asset of $23.8 million for use to offset taxable
income in future years and a current tax receivable of approximately $16.1
million relating to carryback claims to recover taxes paid in 1998 and 1999.
Liquidity and Capital Resources
Our primary historical sources of funds are from operations, the proceeds
from securities offerings and borrowings under our former credit facility with a
consortium of banks. Our principal historical uses of cash have been to fund
acquisitions, working capital requirements and capital expenditures. We
generally pay our consultants and associates bi-weekly for their services, while
receiving payments from customers 30 to 60 days from the date of the invoice.
The gross proceeds from the Commercial segment and Robert Walters
transactions were used to repay our outstanding borrowings under the credit
facility of approximately $288 million. The remaining transaction proceeds were
invested in cash and short-term marketable securities and were used to fund the
Tender Offer, repurchase shares of our common stock under our stock purchase
program and for general corporate purposes.
In July 2000, the Board of Directors authorized management, subject to
legal requirements, to use up to $30 million to repurchase our common stock over
the following twelve months (which has been extended by the Board of Directors).
Repurchases have been and will be made from time to time on the open market at
prevailing market prices or in negotiated transactions off the market. Under
this program during 2000, we repurchased 944,000 shares of our common stock for
approximately $6.2 million. From January 1, 2001 through July 27, 2001, we
repurchased 854,200 shares of our common stock for approximately $3.5 million .
The credit facility was secured by all of the issued and outstanding
capital stock of our domestic subsidiaries and 65% of the issued and outstanding
capital stock of our first-tier foreign subsidiaries. Interest on any borrowings
was computed at our option of either the bank group's prime rate or the London
interbank offered rate, incrementally adjusted based on our operating leverage
ratios. We paid a quarterly facility fee determined by multiplying the total
amount of the credit facility by a percentage, which varied based on our
operating leverage ratios. Under the credit facility, we had net payments of
$194.2 million and $200.1 million for the three and six months ended June 30,
2000, respectively. In July 2000, we paid-off all of our outstanding borrowings
under the credit facility and terminated the credit facility.
Net cash provided by continuing operating activities was $1.2 million and
$0.9 million for the three and six months ended June 30, 2001, respectively,
while net cash provided by continuing operating activities was $6.5 million and
$5.3 million for the three and six months ended June 30, 2000, respectively. The
net cash provided by continuing operating activities for the periods presented
was primarily attributable to net (loss) income and changes in operating assets
and liabilities. Excluding the receipt and payment of nonrecurring items (such
as the Wakefield tragedy), net cash provided by continuing operations was $1.2
million and $1.3 million for the three and six months ended June 30, 2001,
respectively.
Net cash (used in) provided by continuing investing activities was ($0.3)
million and $33.5 million for the three and six months ended June 30, 2001,
respectively, while net cash provided by continuing investing activities was
$203.3 million and $202.9 million for the three and six months ended June 30,
2000, respectively. Cash provided by continuing investing activities was
primarily attributable to the proceeds from the sale of our various
non-eSolutions divisions. Cash used in continuing investing activities was
primarily attributable to cash paid for contingent consideration for
acquisitions completed during prior periods as well as capital expenditures.
16
Net cash used in continuing financing activities was $1.3 million and
$134.4 million for the three and six months ended June 30, 2001, respectively,
while net cash used in continuing financing activities was $194.1 million and
$200.1 million for the three and six months ended June 30, 2000, respectively.
For the six months ended June 30, 2001, cash used in continuing financing
activities was primarily related to the Tender Offer in January 2001 to
repurchase 16.25 million shares of common stock. For the three and six months
ended June 30, 2000, cash provided by financing activities was primarily related
to borrowings under our credit facility to finance several of the acquisitions
and contingent consideration payments completed during these periods.
As a result of the above, and as a result of cash flows from discontinued
operations, our combined cash and cash equivalents decreased $9.0 million and
$110.6 million in the three and six months ended June 30, 2001, respectively,
while increasing $0.1 million in the three months ended June 30, 2000 and
decreasing $3.4 million in the six months ended June 30, 2000.
We believe that our cash flows from operations and available cash will
provide sufficient liquidity for our existing operations for the foreseeable
future. We periodically reassess the adequacy of our liquidity position, taking
into consideration current and anticipated operating cash flow, anticipated
capital expenditures, business combinations, and public or private offerings of
debt or equity securities.
Special Note Regarding Forward Looking Statements
Some of the statements in this Quarterly Report on Form 10-Q (this "10-Q")
constitute forward-looking statements under Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements made with respect to the corporate headquarters
move, competitive and strategic initiatives, potential stock repurchases, future
results, tax consequences, liquidity needs and restructuring efforts. These
statements involve known and unknown risks, uncertainties and other factors that
may cause results, levels of activity, growth, performance, tax consequences or
achievements to be materially different from any future results, levels of
activity, growth, performance, tax consequences or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those listed below, as well as those listed under "Business - Factors
Affecting Finances, Business Prospects and Stock Volatility" and elsewhere in
our 2000 Annual Report on Form 10-K as filed with the SEC on March 30, 2001.
The forward-looking statements included in this Form 10-Q relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "continue," "believe,"
"enable" "will," "provide," "anticipate," "future," "could," "growth,"
"increase," "modifying," "reacting," or the negative of such terms or comparable
terminology. These forward-looking statements inherently involve certain risks
and uncertainties, although they are based on our current plans or assessments
which are believed to be reasonable as of the date of this 10-Q. Factors that
may cause actual results, financial statement effects, disposition plans or
proceeds, goals, targets, objectives or repurchases to differ materially from
those contemplated, projected, forecast, estimated, anticipated, planned or
budgeted in such forward-looking statements include, among others, the following
possibilities: (1) potential miscalculations of the capital requirements and
growth of our eSolutions business; (2) inability to execute upon growth
objectives; (3) changes in industry trends, such as decline in the demand for
Solutions, Strategy and Support services; (4) failure to obtain new customers or
retain significant existing customers; (5) loss of key executives; (6) general
economic and business conditions (whether foreign, national, state or local)
which include, but are not limited to, slowdown in information technology
services spending by companies or changes in interest or currently exchange
rates; (7) failure of the middle market and the needs of middle market
enterprises for e-business services to develop as anticipated; (8) inability to
recruit and retain professionals with the high level of information technology
skills and experience needed to provide our services; (9) the inability to
collect the $16.1 million receivable relating to the use of net operating losses
to recover prior years' taxes; and/or (10) any changes in ownership that would
result in a limitation on the use of the net operating loss carry-forward under
applicable tax laws, which is referred to as a deferred tax asset of
approximately $23.8 million in this Form 10-Q. Actual events or results may
differ materially. These factors may cause our actual results to differ
materially from any forward-looking statements.
17
Although we believe that the expectations in the forward-looking statements
are reasonable, we cannot guarantee future results, levels of activity,
performance, growth, earnings per share or achievements. However, neither we nor
any other person assumes responsibility for the accuracy and completeness of
such statements. We are under no duty to update any of the forward-looking
statements after the date of this Form 10-Q to conform such statements to actual
results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
PART II
ITEM 1. LEGAL PROCEEDINGS
We have been subject to a number of stockholder lawsuits alleging that we
and one of our officer/directors violated federal securities laws. Such actions
were consolidated into one action in United States District Court for the
Eastern District of Arkansas (the "Court"). On January 11, 2000, the plaintiffs
amended their complaint, which superseded all other complaints. The amended
complaint named us and one of our officer/directors as defendants. We filed a
motion to dismiss this amended consolidated complaint. On June 29, 2000, the
Court issued a Memorandum Opinion and Order (the "Order") dismissing most of the
allegations in the consolidated complaint. As to the remaining allegations in
the consolidated complaint, following the Order, on July 12, 2000, we filed a
motion for partial reconsideration to dismiss the remaining allegations in the
consolidated complaint. The lead plaintiffs filed a response to our partial
reconsideration motion on July 24, 2000 and we filed a reply motion to the
response by the lead plaintiffs on July 26, 2000. On November 27, 2000, the
Court granted our motion for partial reconsideration and dismissed all of the
remaining allegations in the complaint. The lead plaintiffs filed a motion for
reconsideration on December 11, 2000. We filed a response to the lead
plaintiffs' motion for reconsideration on December 20, 2000. On January 9, 2001,
the Court rejected the lead plaintiffs' request for reconsideration resulting in
the entire consolidated complaint being dismissed by the Court. On February 9,
2001, the lead plaintiffs appealed the dismissal of the consolidated complaint
by the Court to the Eighth Circuit Court of Appeals (the "Eighth Circuit Court")
in St. Louis, Missouri. However, on April 24, 2001, the lead plaintiffs
dismissed their appeal to the Eighth Circuit Court and on May 30, 2001, the
Eighth Circuit Court issued an order dismissing the plaintiffs' appeal. In light
of the order of dismissal by the Eighth Circuit Court and the dismissal of the
consolidated complaint by the Court, this litigation matter has been concluded
without our company or any of our officers or directors having any
responsibility, obligation or liability as to this matter.
We also are a party to litigation incidental to our business. We believe
that these routine legal proceedings will not have a material adverse effect on
the results of operations or financial condition. We maintain insurance in
amounts, with coverages and deductibles, that we believe are reasonable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our 2001 Annual Meeting of Stockholders on June 6, 2001 (the
"Meeting"). Our stockholders elected six (6) directors to serve until the 2002
Annual Meeting or until their successors are duly elected and qualified. Of the
11,660,816 shares of outstanding common stock entitled to vote at the Meeting,
10,105,800 shares, or approximately 86.7% of the shares entitled to vote, were
represented either in person or by proxy at the Meeting. The stockholders voted
on and approved the matter described below, with the voting results therein
noted at the Meeting:
18
Election of Directors
--------------------------------------------------------------
Authority
Name For Withheld
------------------------- ------------- ------------
Clete T. Brewer 9,208,815 896,985
Shirley Singleton 9,302,865 784,935
William J. Lynch 9,377,367 728,433
Charles A. Sanders, M.D. 9,399,754 706,046
Bob L. Martin 9,401,844 703,956
Michael R. Loeb 9,320,865 784,935
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement re: computation of per share earnings,
reference is made to Note 6 of the Edgewater
Technology, Inc. Consolidated Financial Statements
contained in this Form 10-Q.
10.45 Employment Agreement dated as of April 14, 2000 by and
between Shirley Singleton and Edgewater Technology
(Delaware), Inc.
10.46 Employment Agreement dated as of April 14, 2000 by and
between David Clancey and Edgewater Technology
(Delaware), Inc.
99.1 Press Release dated as of May 30, 2001 announcing the
dismissal of the securities litigation matter.
(b) Reports on Form 8-K
1. A Form 8-K was filed with the SEC on April 2, 2001 relating to the
sale of our ClinForce division.
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.
EDGEWATER TECHNOLOGY, INC.
Date: July 27, 2001 /s/ CLETE T. BREWER
------------------------------------
Clete T. Brewer
Chief Executive Officer and Chairman
Date: July 27, 2001 /s/ TERRY C. BELLORA
------------------------------------
Terry C. Bellora
Chief Financial Officer
19