1
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 March 31, 2001
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-22495
PEROT SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2230700
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12404 PARK CENTRAL DRIVE
DALLAS, TEXAS
75251
(Address of principal executive offices)
(Zip Code)
(972) 340-5000
(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. [X]Yes [ ]No
Number of shares of registrant's common stock outstanding as of April 30, 2001:
98,107,482.
2
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2001
INDEX
Page
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000.............................................................1
Condensed Consolidated Statements of Operations for the three months
ended March 31, 2001 and 2000.................................................2
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2001 and 2000.................................................3
Notes to Condensed Consolidated Financial Statements...............................4
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................7
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK..................................................................10
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS...................................................................11
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................11
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K....................................................11
SIGNATURES.....................................................................................12
3
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 AND DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ASSETS
March 31, 2001 December 31, 2000
-------------- -----------------
Current assets:
Cash and cash equivalents ........................... $ 233,738 $ 239,688
Accounts receivable, net ............................ 178,962 176,004
Prepaid expenses and other .......................... 49,628 41,652
-------------- -----------------
Total current assets ............................ 462,328 457,344
Property, equipment and purchased software, net ........ 50,092 48,108
Goodwill, net .......................................... 73,035 83,703
Other non-current assets ............................... 95,459 83,997
-------------- -----------------
Total assets .................................... $ 680,914 $ 673,152
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................... $ 37,962 $ 35,294
Accrued liabilities ................................. 98,430 82,620
Income taxes payable ................................ 5,960 9,148
Other current liabilities ........................... 36,555 36,792
-------------- -----------------
Total current liabilities ....................... 178,907 163,854
Other non-current liabilities .......................... 8,116 8,243
-------------- -----------------
Total liabilities ............................... 187,023 172,097
-------------- -----------------
Stockholders' equity:
Common stock ........................................ 981 981
Additional paid-in-capital .......................... 302,812 305,320
Other stockholders' equity .......................... 199,386 200,637
Accumulated other comprehensive loss ................ (9,288) (5,883)
-------------- -----------------
Total stockholders' equity ...................... 493,891 501,055
-------------- -----------------
Total liabilities and stockholders' equity ...... $ 680,914 $ 673,152
============== =================
The accompanying notes are an integral part of these financial statements.
Page 1
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(SHARES AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three months ended March 31,
2001 2000
------------ ------------
Revenue .................................................... $ 294,732 $ 274,582
Costs and expenses:
Direct cost of services ............................... 228,815 204,188
Selling, general and administrative expenses .......... 82,881 43,386
Compensation charge related to acquisition ............ -- 22,100
------------ ------------
Operating income (loss) .................................... (16,964) 4,908
Interest income, net ....................................... 3,099 4,922
Equity in earnings of unconsolidated affiliates ............ 1,622 3,087
Other income (expense), net ................................ (449) 50,134
------------ ------------
Income (loss) before taxes ................................. (12,692) 63,051
Income tax (benefit) expense ............................... (5,013) 24,905
------------ ------------
Net income (loss) ..................................... $ (7,679) $ 38,146
============ ============
Basic and diluted earnings (loss) per common share:
Basic earnings (loss) per common share ................ $ (0.08) $ 0.41
Weighted average common shares outstanding ............ 97,600 93,381
Diluted earnings (loss) per common share .............. $ (0.08) $ 0.33
Weighted average diluted common shares
outstanding ...................................... 97,600 114,274
The accompanying notes are an integral part of these financial statements.
Page 2
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three months ended March 31,
2001 2000
------------ ------------
Cash flows from operating activities:
Net income (loss) ......................................................... $ (7,679) $ 38,146
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization .......................................... 8,462 6,824
Gain on sale of marketable equity securities ........................... -- (14,952)
Gain on sale of unconsolidated affiliate ............................... -- (38,851)
Other non-cash items ................................................... (709) (8,364)
Change in assets and liabilities:
Accounts receivable ................................................. (5,946) 1,184
Accounts payable and accrued liabilities ............................ 22,732 12,483
Accrued compensation ................................................ (266) (47,659)
Income taxes ........................................................ (79) 40,415
Other current and non-current assets ................................ (12,692) (12,128)
Other current and non-current liabilities ........................... 1,760 (6,450)
------------ ------------
Net cash provided by (used in) operating activities ............. 5,583 (29,352)
------------ ------------
Cash flows from investing activities:
Purchases of property, equipment and purchased software ................... (6,880) (25,428)
Acquisition of businesses, net of cash acquired of
$0 and $8,881, respectively ............................................ (700) (41,119)
Proceeds from sale of unconsolidated affiliate ............................ -- 55,486
Proceeds from sale of marketable equity securities ........................ -- 23,992
Other ..................................................................... (145) (253)
------------ ------------
Net cash (used in) provided by investing activities ............. (7,725) 12,678
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock .................................... 12 3,462
Proceeds from issuance of treasury stock .................................. 2,308 --
Purchases of treasury stock ............................................... (2,363) --
Other ..................................................................... (225) 138
------------ ------------
Net cash (used in) provided by financing activities ............. (268) 3,600
------------ ------------
Effect of exchange rate changes on cash and cash equivalents ................... (3,540) (1,807)
------------ ------------
Net decrease in cash and cash equivalents ...................................... (5,950) (14,881)
Cash and cash equivalents at beginning of period ............................... 239,688 294,645
------------ ------------
Cash and cash equivalents at end of period ..................................... $ 233,738 $ 279,764
============ ============
The accompanying notes are an integral part of these financial statements.
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. GENERAL
The accompanying unaudited interim condensed consolidated financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC"). The interim condensed consolidated
financial statements include the consolidated accounts of Perot Systems
Corporation and its majority-owned subsidiaries (collectively, the "Company")
with all significant intercompany transactions eliminated. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the financial position, results of operations
and cash flows for the interim periods presented have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. These financial
statements should be read in conjunction with the audited financial statements
for the year ended December 31, 2000, as filed in the Company's Annual Report on
Form 10-K filed with the SEC on March 8, 2001. Operating results for the
three-month period ended March 31, 2001 are not necessarily indicative of the
results for the year ending December 31, 2001. Dollar amounts presented are in
thousands, except as otherwise noted.
Certain of the 2000 amounts in the accompanying financial statements have been
reclassified to conform to the current presentation.
NOTE 2. REALIGNED OPERATING STRUCTURE
In the first quarter of 2001, the Company implemented a new operating structure
in order to strengthen the Company's market position and reduce its costs. In
connection with this realigned structure, the Company consolidated and closed
certain facilities, eliminated administrative redundancies and non-billable
positions, and recorded asset basis adjustments, resulting in a charge totaling
$33,713. This charge is classified as Selling, general and administrative
expenses in the condensed consolidated statements of operations and is composed
of the following: $23,812 related to employee work force reductions of
approximately 550 positions in all business functions and in all geographic
areas of the Company, of which substantially all have been terminated as of
March 31, 2001; $5,896 related to the consolidation and closure of facilities;
and $4,005 related to adjustments to reduce the basis of certain leasehold
improvements, software and office equipment, and other assets to their net
realizable value.
The amounts accrued and the related payments and adjustments against the charge
were as follows:
Employee Facility Asset
Related Related Basis
Costs Costs Adjustments Total
----------- ----------- ----------- -----------
Total charges .................................... $ 23,812 $ 5,896 $ 4,005 $ 33,713
Less: cash payments and asset write-downs ....... (8,023) (841) (4,005) (12,869)
----------- ----------- ----------- -----------
Remaining balance at March 31, 2001 .............. $ 15,789 $ 5,055 $ -- $ 20,844
=========== =========== =========== ===========
The remaining balance of $20,844 is included in Accrued liabilities on the
condensed consolidated balance sheets and is expected to be substantially
settled by September 30, 2001.
As a part of the realigned operating structure, the Company exited a separately
identifiable operation. For the quarter ended March 31, 2001, revenue and net
operating losses for this operation were $39 and ($3,138), respectively. For the
quarter ended March 31, 2000, revenue and net operating losses for this
operation were $1,279 and ($4,596), respectively.
Page 4
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. ACQUISITIONS
On December 15, 2000, the Company acquired 100% of the equity interests of the
outstanding shares of Health Systems Design Corporation ("HSD") for $9,274 in
cash (net of $4,271 in cash acquired). The transaction was accounted for as a
purchase and at December 31, 2000, the excess of the purchase price paid over
the net assets acquired (in the amount of $10,762) was recorded in Goodwill,
net, on the consolidated balance sheets, pending completion of the tangible and
intangible asset appraisals. The appraisals were completed during the quarter
ended March 31, 2001, resulting in the reclass of $8,137 from Goodwill, net, to
purchased software and other identifiable intangible assets.
NOTE 4. COMPREHENSIVE INCOME (LOSS)
The Company's total comprehensive income (loss), net of tax, was as follows:
Three Months
Ended March 31,
--------------------
2001 2000
-------- --------
Net income (loss) ....................................... $ (7,679) $ 38,146
Foreign currency translation adjustments ................ (3,388) (1,431)
Unrealized gain (loss) on marketable equity securities,
net of tax of ($11) and $1,624, respectively ....... (17) 2,540
-------- --------
Total comprehensive income (loss) ....................... $(11,084) $ 39,255
======== ========
NOTE 5. STOCKHOLDERS' EQUITY
The components of "Other stockholders' equity" were as follows:
March 31, 2001 December 31, 2000
-------------- -----------------
Retained earnings ...................... $ 202,813 $ 210,492
Deferred compensation .................. (2,190) (2,272)
Treasury stock ......................... (1,164) (7,388)
Other .................................. (73) (195)
-------------- -----------------
Total other stockholders' equity ....... $ 199,386 $ 200,637
============== =================
Additional paid-in-capital decreased by $2,508 during the three months ended
March 31, 2001, resulting primarily from a decrease of $5,239 from the
re-issuance of Class A Common treasury shares for the exercise of options.
Additionally, there was an offsetting increase of $2,685 relating to tax
benefits resulting from the exercise of options to purchase shares of the
Company's Class A Common Stock.
At March 31, 2001, there were 95,998,623 shares of the Company's Class A Common
Stock outstanding and 1,784,320 shares of the Company's Class B Common Stock
outstanding. At December 31, 2000, there were 95,567,228 shares of the Company's
Class A Common Stock outstanding and 1,784,320 shares of the Company's Class B
Common Stock outstanding. The increase in the Company's Class A Common Stock is
due to the exercise of options to purchase 917,792 shares and the issuance of
111,374 shares to participants in the Employee Stock Purchase Plan, less 597,771
shares purchased by the Company.
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6. EARNINGS (LOSS) PER SHARE (SHARES IN THOUSANDS)
The following chart is a reconciliation of the numerators and the denominators
of the basic and diluted per share computations.
Three months ended March 31,
2001 2000
------------ ------------
BASIC EARNINGS (LOSS) PER COMMON SHARE
Net income (loss) .......................................... $ (7,679) $ 38,146
============ ============
Weighted average common shares outstanding ................. 97,600 93,381
============ ============
Basic earnings (loss) per common share ..................... $ (0.08) $ 0.41
============ ============
DILUTED EARNINGS (LOSS) PER COMMON SHARE
Net income (loss) .......................................... $ (7,679) $ 38,146
============ ============
Weighted average common shares outstanding ................. 97,600 93,381
Incremental shares assuming dilution ....................... -- 20,893
------------ ------------
Weighted average diluted common shares outstanding ......... 97,600 114,274
============ ============
Diluted earnings (loss) per common share ................... $ (0.08) $ 0.33
============ ============
At March 31, 2001 and 2000, options to purchase 50,984 and 14,027 shares
respectively, of the Company's common stock, were excluded from the calculation
of diluted earnings (loss) per common share because the impact was antidilutive.
NOTE 7. CONTINGENCIES
Litigation
On October 19, 1998, the Robert Plan Corporation ("Robert Plan") filed a
complaint, which was subsequently amended, in New York state court against the
Company and Ross Perot in connection with a September 1, 1990 contract under
which the Company provides data processing and software development for some of
Robert Plan's operations. The complaint, as amended, alleges breach of the 1990
contract, misappropriation of Robert Plan's proprietary information and business
methods in connection with an imaging system, breach of warranty, and similar
claims relating to the contract. Although the complaint seeks substantial
monetary awards and injunctive relief, the 1990 contract substantially limits
each party's liability except in limited circumstances, including for "wanton or
willful misconduct." Accordingly, Robert Plan has alleged that the Company has
acted in a "wanton" and "willful" fashion, even though Robert Plan has used and
continues to use the services of the Company under the 1990 contract. After
various motions to dismiss and appeals, six of the twelve claims against the
Company have been dismissed, including a claim against Mr. Perot personally and
a claim for punitive damages. The Company intends to continue vigorously
defending the lawsuit. The Company does not believe that the outcome of this
litigation will have a material adverse effect on the Company's consolidated
financial condition, results of operations or cash flows.
Page 6
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 2001 and 2000
Total revenue increased in the three months ended March 31, 2001 by
7.3% to $294.7 million from $274.6 million for the same period in 2000. This
increase was primarily attributable to $26.3 million in revenue from contracts
signed during the past twelve months. Revenue from UBS AG ("UBS") increased
$10.2 million to $79.3 million in 2001 from $69.1 million in 2000. The
acquisitions of Health Systems Design Corporation ("HSD") during the fourth
quarter of 2000 and certain assets of Covation, LLC ("Covation") during the
first quarter of 2001 contributed $4.0 million of the increase in revenue. These
increases were partially offset by a $12.6 million decrease in revenue from
project and consulting offerings and a $2.2 million overall net decrease in
other existing accounts. Revenue in the first quarter of 2000 included a $5.6
million net payment received from the restructuring of a certain customer
contract.
Domestic revenue grew by 3.7% in the first quarter of 2001 to $205.7
million from $198.4 million in the first quarter of 2000, and decreased as a
percentage of total revenue to 69.8% from 72.2% over the same period.
Non-domestic revenue, consisting of European and Asian operations,
increased in the first quarter of 2001 by 16.8% to $89.0 million from $76.2
million in the first quarter of 2000, and increased as a percentage of total
revenue to 30.2% from 27.8%. The largest components of European operations were
the United Kingdom and Switzerland. In the United Kingdom, revenue increased
6.1% to $43.7 million in the first quarter of 2001 from $41.2 million in the
first quarter of 2000. In Switzerland, revenue decreased 5.1% to $11.2 million
in the first quarter of 2001 from $11.8 million in the first quarter of 2000.
Asian operations generated revenue of $5.9 million, or 2.0% of total revenue for
the first quarter of 2001 and $5.0 million, or 1.8% of total revenue for the
first quarter of 2000.
Direct cost of services increased in the first quarter of 2001 by 12.0%
to $228.8 million from $204.2 million in the same period of 2000. Gross margin
decreased to 22.4% of total revenue in the first quarter of 2001 as compared to
25.6% of total revenue in the first quarter of 2000. This decline was due to a
decrease in profitability of existing accounts and an increase in certain
personnel-related expenses. Also, the first quarter of 2000 included a $5.6
million net payment received from the restructuring of a certain customer
contract.
Selling, general and administrative expenses ("SG&A") increased in the
first quarter of 2001 by 91.0% to $82.9 million from $43.4 million in the same
period of 2000, and increased as a percentage of total revenue to 28.1% from
15.8%. This increase resulted primarily from the $33.7 million charge the
Company recorded as a result of its streamlining of operations, as described
below. Excluding this non-recurring charge, the remaining increase is due
primarily to increases in certain personnel-related expenses and an increase in
SG&A resulting from the acquisitions of HSD and Covation. During the three
months ended March 31, 2000, the Company incurred a one-time $22.1 million
compensation charge that was a direct result of the acquisition of Solutions
Consulting, Inc. ("SCI").
In the first quarter of 2001, the Company implemented a new operating
structure in order to strengthen the Company's market position and reduce its
costs. In connection with this realigned structure, the Company consolidated and
closed certain facilities, eliminated administrative redundancies and
non-billable positions, and recorded asset basis adjustments. As a result of
these actions, the Company recorded a charge of $33.7 million.
Page 7
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The $33.7 million charge is composed of the following: $23.8 million
related to employee work force reductions of approximately 550 positions in all
business functions and in all geographic areas of the Company, of which
substantially all have been terminated as of March 31, 2001; $5.9 million for
the consolidation and closure of facilities; and $4.0 million related to
adjustments to reduce the basis of certain leasehold improvements, software and
office equipment, and other assets to their net realizable value. The $33.7
million charge will result in cash expenditures of approximately $28.2 million
which excludes $4.0 million in asset basis adjustments and $1.5 million included
in the consolidation and closure of facilities charge, which represents costs
associated with the write-off of certain deferred facility construction costs.
Of the approximate $28.2 million cash expenditures, $8.9 million has been paid
as of March 31, 2001, with substantially all of the remaining balance of $19.3
million expected to be paid by September 30, 2001.
As a result of the new operating structure, the Company expects to
realize savings for the remainder of 2001 of approximately $55.3 million,
representing $43.9 million in reductions to Direct cost of services and $11.4
million in reductions to SG&A. The Company expects to reinvest these savings
back into the business to expand its people programs, including incentives, to
increase its sales and marketing efforts, and to help the Company achieve its
profit margin expansion objectives.
Equity in earnings of unconsolidated affiliates was $1.6 million in the
three months ended March 31, 2001 compared to $3.1 million in the same period of
2000. Equity in earnings from HCL Perot Systems N.V., a software joint venture
based in India, increased to $2.4 million in the first quarter of 2001 from $1.7
million in the same period of 2000. This increase was offset by a $0.8 million
charge in the first quarter of 2001 to adjust the carrying amount of the
Company's investment in a start-up joint venture. In addition, equity in
earnings from Systor AG ("Systor"), a subsidiary of UBS, was zero compared to
$1.4 million in the first quarter of 2000 due to the sale of this equity
interest which also occurred in the first quarter of 2000.
Other income (expense), net, decreased in the three months ended March
31, 2001 to an expense of $0.4 million from income of $50.1 million in the three
months ended March 31, 2000 primarily due to non-recurring activities.
Non-recurring items during the first quarter of 2001 included an expense of $0.6
million from the impairment of an investment in marketable equity securities.
Non-recurring items during the first quarter of 2000 included a $38.9 million
realized net gain from the sale of a 40% equity interest in Systor and a net
gain of $15.0 million from the partial sale of an investment in marketable
equity securities. These gains in the first quarter of 2000 were partially
offset by a $3.5 million expense, which eliminated the pre-acquisition earnings
of SCI.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2001, cash and cash equivalents
decreased 2.5% to $233.7 million from $239.7 million at December 31, 2000.
Net cash provided by operating activities was $5.6 million for the
three months ended March 31, 2001, compared to net cash used in operating
activities of $29.4 million for the three months ended March 31, 2000. This
change was due primarily to an increase in accounts payable and accrued
liabilities, and decreases in accrued compensation and income taxes. Accounts
payable and accrued
Page 8
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
liabilities increased due to the liabilities related to the refined operating
structure. Accrued compensation decreased as payments in 2001 for bonuses
accrued in 2000 were less than payments in 2000 for bonuses accrued in 1999.
Income taxes decreased primarily as a result of the taxes payable related to the
first quarter 2000 gains from the sale of marketable equity securities and an
equity investment, as discussed below.
Net cash used in investing activities was $7.7 million for the three
months ended March 31, 2001 compared to net cash provided by investing
activities of $12.7 million for the same period in 2000. The significant
decrease in cash provided by investing activities was due to the first quarter
2000 receipt of $24.0 million in proceeds from the sale of 500,000 shares of
TenFold common stock and $55.5 million in proceeds from the sale of Systor.
These proceeds were partially offset by $41.1 million of net cash paid in the
first quarter of 2000 for the acquisition of SCI and a decrease in purchases of
property, equipment and purchased software of $18.5 million over the prior year
period. Prior year purchases included $20.0 million for the purchase of a
software license which in a subsequent quarter of 2000 was returned and all
monies paid by the Company were refunded.
For the three months ended March 31, 2001, net cash used in financing
activities was $0.3 million compared to net cash provided by financing
activities of $3.6 million for the three months ended March 31, 2000. In the
first quarter of 2001, the Company paid $2.4 million to purchase shares of its
Class A Common Stock, which was mostly offset by $2.3 million in proceeds from
the issuance of treasury stock.
The Company routinely maintains cash balances in certain European and
Asian currencies to fund operations in those regions. During the three months
ended March 31, 2001, foreign exchange rate fluctuations adversely impacted the
Company's non-domestic cash balances by $3.5 million, as British pounds and the
Euro weakened against the U.S. dollar. The Company's foreign exchange policy
does not call for hedging foreign exchange exposures that are not likely to
impact net income or working capital.
The Company has no committed line of credit or other borrowings and
anticipates that existing cash and cash equivalents and expected net cash flows
from operating activities will provide sufficient funds to meet its needs for
the foreseeable future.
Page 9
12
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "forecasts," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of such
terms and other comparable terminology. These statements are only predictions.
Actual events or results may differ materially. In evaluating these statements,
you should specifically consider various factors, such as: the loss of major
clients; the Company's ability to achieve future sales; changes in our
relationship and variability of revenue and expense associated with our largest
customer; the loss of key personnel; the highly competitive market in which we
operate; the variability of quarterly operating results; changes in technology;
risks related to international operations; risks related to acquisitions; and
general economic conditions. These and other risks are outlined in our annual
report on Form 10-K, which is on file with the Securities and Exchange
Commission and available at www.sec.gov. These factors may cause our actual
results to differ materially from any forward-looking statement.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
Page 10
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PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2001
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company is, from time to time, involved in various litigation
matters arising in the ordinary course of its business. The Company believes
that the resolution of currently pending legal proceedings, either individually
or taken as a whole, will not have a material adverse effect on the Company's
consolidated financial condition, results of operations or cash flows.
On October 19, 1998, the Robert Plan Corporation ("Robert Plan") filed
a complaint, which was subsequently amended, in New York state court against the
Company and Ross Perot in connection with a September 1, 1990 contract under
which the Company provides data processing and software development for some of
Robert Plan's operations. The complaint, as amended, alleges breach of the 1990
contract, misappropriation of Robert Plan's proprietary information and business
methods in connection with an imaging system, breach of warranty, and similar
claims relating to the contract. Although the complaint seeks substantial
monetary awards and injunctive relief, the 1990 contract substantially limits
each party's liability except in limited circumstances, including for "wanton or
willful misconduct." Accordingly, Robert Plan has alleged that the Company has
acted in a "wanton" and "willful" fashion, even though Robert Plan has used and
continues to use the services of the Company under the 1990 contract. After
various motions to dismiss and appeals, six of the twelve claims against the
Company have been dismissed, including a claim against Mr. Perot personally and
a claim for punitive damages. The Company intends to continue vigorously
defending the lawsuit.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of its security
holders during the period covered by this report.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
None.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the three months ended
March 31, 2001.
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14
PEROT SYSTEMS CORPORATION AND SUBSIDIRIES
FORM 10-Q
For the Quarter Ended March 31, 2001
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.
PEROT SYSTEMS CORPORATION
(Registrant)
Date: May 4, 2001 By /s/ ROBERT J. KELLY
----------------------
Robert J. Kelly
Corporate Controller and Principal
Accounting Officer
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