SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1995 COMMISSION FILE NUMBER 1-7516
KEANE, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2437166
(State or other jurisdictions of (I.R.S. Employer Identification
incorporation or organization) Number)
Ten City Square, Boston, Massachusetts 02129
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including (617) 241-9200
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 reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No _____
-----
As of March 31, 1995, the number of issued and outstanding shares of Common
Stock (excluding 303,313 shares held in treasury) and Class B Common Stock are
15,725,472 and 288,553 shares, respectively.
1
Keane, Inc. and Subsidiaries
TABLE OF CONTENTS
Part I - Financial Information
Consolidated Statements of Income for the
three months ended March 31, 1995 and 1994 (unaudited)........................ 3
Consolidated Balance Sheets as of
March 31, 1995 and December 31, 1994 (unaudited).............................. 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994 (unaudited)........................ 5
Notes to Unaudited Financial Statements....................................... 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations................................................................. 8
Part II. - Other Information................................................. 9
Signature Page............................................................... 10
2
Keane, Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)
(In thousand except per share amounts)
Three Months Ended March 31,
1995 1994
Total revenues $90,452 $86,165
Salaries, wages and other direct costs 58,963 55,884
Selling, general and administrative expenses 19,668 19,709
Amortization of goodwill and other intangible 2,949 2,780
assets
Operating income 8,872 7,792
Investment income 366 33
Interest expense 164 480
Other expenses, net 37 132
Income before income taxes 9,037 7,213
Provision for income taxes 3,886 3,246
Net income $ 5,151 $ 3,967
(1) Net income per share $.32 $.29
(1) Weighted average shares outstanding 16,283 13,787
(1) Net income per share and weighted average share outstanding reflect
the 3 for 2 stock split in the form of a dividend which was
distributed on September 7, 1994 to shareholders of record as of
August 12, 1994. The 1995 share figure reflects the sales of 2.3
million of additional shares as part of a secondary stock offering
completed in November, 1994.
The accompanying notes are an integral part of the consolidated
financial statements.
3
Keane, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)
(In thousands)
March 31, 1995 December 31, 1994
Assets
Current:
Cash and cash equivalents $29,079 $26,288
Accounts receivable, net
Trade 71,398 69,046
Other 876 994
Prepaid expenses and other
current assets 4,679 3,975
Total current assets 106,032 100,303
Property and equipment, net 10,955 11,600
Intangible assets, net (Note 3) 63,062 65,600
Other assets, net 1,611 1,499
181,660 179,002
Liabilities
Current:
Accounts payable 2,127 3,490
Accrued compensation 2,433 6,852
Accrued expenses and other
liabilities 8,877 9,250
Notes payable 4,459 4,400
Income taxes payable 3,585 0
Current capital lease obligations 423 435
Total current liabilities 21,904 24,427
Notes payable 7,055 6,941
Deferred federal and state income
taxes 2,044 2,705
Long-term portion of capital lease
obligations 452 542
Stockholders' Equity:
Preferred Stock -- --
Common Stock 1,603 1,599
Class B Common Stock 29 29
Additional paid-in capital 90,682 90,019
Foreign currency translation (74) (74)
Retained earnings 60,377 55,226
Less treasury stock (2,412) (2,412)
Total stockholders' equity 150,205 144,387
$181,660 $179,002
The accompanying notes are an integral part of the consolidated financial
statements.
4
Keane, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Three Months ended March 31,
Cash flows from operating activities: 1995 1994
Net income $5,151 $3,967
Adjustments to reconcile net income
to net cash used by
operating activities
Depreciation and amortization 4,234 3,815
Accrued interest on long term debt 164 50
Deferred income taxes (652) (128)
Provision for doubtful accounts (200) (242)
Loss on disposal of fixed assets 42 --
Changes in operating assets and
liabilities, net of acquisitions:
(Increase) in accounts receivable (2,034) (15,942)
(Increase) in prepaid expenses and
other current assets (916) (236)
Increase (decrease) in accounts (2,571) (4,801)
payable and accrued expenses
and other current liabilities
and deferred taxes
Net cash provided by [used for]
operating activities 3,218 (13,517)
Cash flows from investing activities:
Sale of short-term investments -- 4,868
Purchase of property and
equipment, net (729) (647)
Proceeds from sales of assets 48 4
Payment for acquisition, net of
cash as acquired (320) (42,003)
Purchase of other assets -- (933)
Net cash used for investing
activities (1,001) (38,711)
Cash flow from financing activities:
Borrowing under notes payable and
long-term debt, net -- 62,002
Payments under long-term debt and
capital lease obligations (92) (25,024)
Proceeds from issuance of common
stock 666 467
Net cash provided by financing
activities 574 37,445
Net increase (decrease) in cash and
cash equivalents 2,791 (14,783)
Cash and cash equivalents, beginning of
period 26,288 19,244
Cash and cash equivalents, end of period $29,079 $4,461
The accompanying notes are an integral part of the consolidated financial
statement.
5
Keane, Inc. and Subsidiaries
Notes to Unaudited Financial Statements
Note 1. The accompanying Unaudited consolidated financial statements have been
prepared in accordance with the accounting policies described in the
1994 Annual Report on Form 10-K and should be read in conjunction with
the disclosures therein. All financial figures are in thousands of
dollars, except per share amounts.
In the opinion of management, these interim financial statements
reflect all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position, results of
operations, and cash flows for the periods presented. Interim results
are not necessarily indicative of results for the full year.
On July 28, 1994, the Company declared a 3 for 2 stock split in the
form of a dividend that was distributed on September 7, 1994 to
shareholders of record as of August 12, 1994. All Common shares and
per share amounts included in these financial statements are given
retroactive effect to the extent required for this stock split. The
1995 share figures reflects the sale of 2.3 million of additional
shares as part of a secondary stock offering completed in November,
1994.
Note 2. Computation of Earnings Per Share for quarters ending March 31, 1995
and 1994.
1995 1994
Primary
Average shares outstanding
Common 15,710 13,145
Class B Common 289 291
Net effect of diluative options-based on the
treasury
stock method using average market price.
Common Stock 284 351
Total 16,283 13,787
Net income $5,151 $3,967
Per share amount $.32 $.29
6
Keane, Inc. and Subsidiaries
Notes to Unaudited Financial Statements
1995 1994
Fully Diluted
Average Share outstanding
Common 15,710 13,145
Class B Common 289 291
Net effect of dilutive stock options-based on the
treasury stock method using higher of average
market price or period ending price.
Common stock 299 367
Total 16,298 13,803
Net income $5,151 $3,967
Per share amount $.32 $.29
Note 3. Intangible assets consist of the following: 3/31/95 12/31/95
Goodwill $19,302 $19,302
Noncompetition agreements 22,135 21,985
Customer-based intangibles 37,634 37,464
Software 5,169 5,169
Other 294 294
--- ---
84,534 84,214
Less accumulated amortization 21,472 18,614
------ ------
$63,062 $65,600
Note 4. During the first quarter of 1995, there has been no material changes
in the contingencies described in Footnote L, Commitments and
Contingencies, of the Company's 1994 Annual Report.
7
Keane, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Revenues were $90,452 for the First Quarter of 1995, an increase of 5.0% from
the same period last year.
Salaries, wages and other direct costs for the First Quarter were $58,963 an
increase of 0.3%, as a percentage of revenue, over the same period last year.
Keane, as well as many other companies, continues to experience client pressure
to deliver high quality service and to reduce costs. Keane responds to these
customer demands by among other things, providing volume discounts, reducing
project cycle time, and partnering with our clients in providing cost effective
solutions for their information system needs.
Selling, general and administrative (SG&A) costs for the First Quarter were
$19,668 a decrease of 1.2%, as a percentage of revenue, over the same period
last year. This decrease is primarily due to costs incurred during the First
Quarter last year in the assimilation of AGS Computers, Inc. into Keane that
were not incurred during the First Quarter of 1995.
Amortization of goodwill and other intangible assets for the First Quarter was
$2,949 an increase of $169 over the same period last year.
The Company's interest expense for the First Quarter was $164 a decrease of $316
over the same period last year. This decrease was primarily attributable to the
repayment of all outstanding bank debt in November, 1994 as a result of a
secondary stock offering. Interest income for the First Quarter was $366 an
increase of $333 from the same period last year. This increase resulted from
interest income generated from investing the excess proceeds from the secondary
stock offering last year.
Net Income
Net income and earnings per share for the First Quarter were $5,151 and $.32 per
share, respectively, as compared to $3,967 and $.29, respectively, for the same
period last year, a 30% increase in net income.
Liquidity and Capital Resources
The Company is in the process of reducing its $40 million line of credit with
two Boston banks to $20 million. The Company currently has no outstanding bank
debt. The Company ended the quarter with cash, cash equivalents and short-term
investments of approximately $29.1 million. The Company believes that it will
generate sufficient cash flow from operations to meet any debt obligations and
working capital requirements.
8
Keane, Inc. and Subsidiaries
Part II - Other Information
- - - - - - --------------------------------------------------------------------------------
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K - The Registrant filed no reports on
Form 8-K during the quarter ended March 31, 1995.
9
Keane, Inc. and Subsidiaries
Signature Page
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.
KEANE, INC.
(Registrant)
Date __________________________ ___________________________________
John F. Keane
President
Date __________________________ ___________________________________
Wallace A. Cataldo
Vice President, Finance
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