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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File Number: 000-24193
ATLANTIC DATA SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
MASSACHUSETTS 04-2696393
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
ONE BATTERYMARCH PARK
QUINCY, MASSACHUSETTS 02169
(Address of Principal Executive Offices) (Zip Code)
(617) 770 - 3333
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of January 31, 2001, there were 13,009,461 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.
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ATLANTIC DATA SERVICES, INC.
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 2000 (Unaudited)
and March 31, 2000 3
Condensed Consolidated Statement of Operations for the Three and Nine
Months Ended December 31, 2000 and 1999 (Unaudited) 4
Condensed Consolidated Statement of Cash Flows for the Nine
Months Ended December 31, 2000 and 1999 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk 14
PART II - OTHER INFORMATION
ITEM 2: Changes in Securities and Use of Proceeds 15
ITEM 6: Exhibits and Reports on Form 8-K 15
SIGNATURES 16
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PART I
ITEM 1: FINANCIAL INFORMATION
ATLANTIC DATA SERVICES, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
December 31, March 31,
2000 2000
------------ ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 38,957 $ 38,347
Accounts receivable, net of allowances for doubtful accounts of
$376 at December 31, 2000 and $650 at March 31, 2000 2,705 5,514
Prepaid expenses 125 103
Deferred taxes 536 845
-------- --------
Total current assets 42,323 44,809
Long-term investment 3,000 --
Property and equipment, net 772 919
Other assets 337 387
-------- --------
TOTAL ASSETS $ 46,432 $ 46,115
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 871 $ 757
Accrued expenses and other liabilities 2,901 3,997
Billings in excess of costs and estimated earnings 192 42
Income taxes payable 336 343
-------- --------
Total current liabilities 4,300 5,139
-------- --------
Commitments
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 authorized, no shares
issued or outstanding -- --
Common stock, $.01 par value, 60,000,000 shares authorized,
13,121,461 shares issued and 13,009,461 outstanding at
December 31, 2000 and 13,087,599 shares issued and
12,975,599 outstanding at March 31, 2000 131 131
Additional paid-in capital 26,870 26,737
Retained earnings 15,156 14,133
Treasury stock (112,000 shares carried at cost) (25) (25)
-------- --------
Total stockholders' equity 42,132 40,976
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 46,432 $ 46,115
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
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ATLANTIC DATA SERVICES, INC.
Condensed Consolidated Statement of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------- ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenues $ 8,223 $ 8,111 $ 28,218 $ 25,151
Cost of revenues 5,605 5,902 19,081 19,518
-------- -------- -------- --------
Gross profit 2,618 2,209 9,137 5,633
-------- -------- -------- --------
Operating expenses:
Sales and marketing 1,318 888 3,617 2,288
General and administrative 1,607 1,788 5,229 5,639
-------- -------- -------- --------
Total operating expenses 2,925 2,676 8,846 7,927
-------- -------- -------- --------
Income (loss) from operations (307) (467) 291 (2,294)
Interest income, net 545 452 1,652 1,297
-------- -------- -------- --------
Income (loss) before provision (credit)
for income taxes 238 (15) 1,943 (997)
Provision (credit) for income taxes 126 (6) 920 (387)
-------- -------- -------- --------
Net income (loss) $ 112 $ (9) $ 1,023 $ (610)
======== ======== ======== ========
Basic earnings per share $ 0.01 $ -- $ 0.08 $ (0.05)
======== ======== ======== ========
Diluted earnings per share $ 0.01 $ -- $ 0.08 $ (0.05)
======== ======== ======== ========
Shares used in computing earnings per
share (basic) 13,009 12,943 12,981 12,906
======== ======== ======== ========
Shares used in computing earnings per
share (diluted) 13,183 12,943 13,202 12,906
======== ======== ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
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ATLANTIC DATA SERVICES, INC.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
December 31,
-------------------------
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,023 $ (610)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 388 496
Deferred taxes 309 --
Tax benefit from exercise of stock options -- 1
Change in assets and liabilities:
Accounts receivable 2,809 3,744
Prepaid expenses and other assets 28 (952)
Accounts payable 114 (599)
Accrued expenses and other liabilities (1,096) (976)
Billings in excess of costs and estimated earnings 150 --
Federal and state income taxes (7) (417)
-------- --------
Net cash provided by (used in) operating activities 3,718 687
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term investment (3,000) --
Purchase of property and equipment (241) (206)
-------- --------
Net cash provided by (used in) operating activities (3,241) (206)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligation -- (13)
Proceeds from exercise of stock options under stock option and
employee stock purchase plans 133 112
-------- --------
Net cash provided by financing activities 133 99
-------- --------
Net increase (decrease) in cash and cash equivalents 610 580
Cash and cash equivalents, beginning of period 38,347 37,326
-------- --------
Cash and cash equivalents, end of period $ 38,957 $ 37,906
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Taxes $ 750 $ 806
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
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ATLANTIC DATA SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by Atlantic Data Services, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended December 31, 2000
are not necessarily indicative of the results that may be expected for future
periods of the full fiscal year. These Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated Financial
Statements and related notes included in the Company's Annual Report on Form
10-K for the year ended March 31, 2000.
The balance sheet at March 31, 2000 has been derived from the audited financial
statements at that date, but does not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company primarily derives its revenue from consulting services under time
and material billing arrangements. Under these arrangements, revenue is
recognized as the services are provided. Deferred revenue pertains to time and
material billing arrangements and represents cash collected in advance of the
performance of services.
Revenue on fixed price contracts is recognized using the percentage of
completion method of accounting and is adjusted monthly for the cumulative
impact of any revision in estimates. The Company determines the percentage of
its contracts by comparing costs incurred to date to total estimated costs.
Contract costs include all direct labor and expenses related to the contract
performance. An asset, "Costs and estimated earnings in excess of billings,"
represents revenues recognized in excess of amounts billed. The liability,
"Billings in excess of costs and estimated earnings," represents billings in
excess of revenues recognized.
Included in revenues are reimbursable contract-related travel and entertainment
expenses, which are separately billed to clients.
Earnings Per Share
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"). FAS 128 requires the presentation of two
amounts, basic earnings per share and diluted earnings per share.
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3. EARNINGS PER SHARE
The following table sets forth the computation of basic earnings per share and
diluted earnings per share for the three and nine months ended December 31, 2000
and 1999:
Three Months Ended
December 31,
------------------------
2000 1999
-------- --------
(in thousands, except
per share data)
Numerator:
Net income (loss) (numerator for basic earnings per share and
diluted earnings per share) $ 112 $ (9)
-------- --------
Denominator:
Denominator for basic earnings per share - weighted average
shares 13,009 12,943
Effect of dilutive securities:
Employee stock options 174 --
-------- --------
Denominator for diluted earnings per share - adjusted
weighted average and assumed conversions 13,183 12,943
-------- --------
Basic earnings per share $ 0.01 $ --
======== ========
Diluted earnings per share $ 0.01 $ --
======== ========
Nine months Ended
December 31,
------------------------
2000 1999
-------- --------
(in thousands, except
per share data)
Numerator:
Net income (loss) (numerator for basic earnings per share and
diluted earnings per share) $ 1,023 $ (610)
-------- --------
Denominator:
Denominator for basic earnings per share - weighted average
shares 12,981 12,906
Effect of dilutive securities:
Employee stock options 221 --
-------- --------
Denominator for diluted earnings per share - adjusted
weighted average and assumed conversions 13,202 12,906
-------- --------
Basic earnings per share $ 0.08 $ (0.05)
======== ========
Diluted earnings per share $ 0.08 $ (0.05)
======== ========
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In addition, as of December 31, 2000, there were options outstanding to purchase
2,264,875 shares that are potentially dilutive.
4. MAJOR CUSTOMERS
The nature of the Company's services results in the Company deriving significant
amounts of revenue from certain customers in a particular period. For the
quarter ended December 31, 2000, two customers accounted for 22.8% and 12.7% of
the Company's revenues. For the quarter ended December 31, 1999, two customers
accounted for 25.6% and 22.0% of the Company's revenues.
5. LONG-TERM INVESTMENT
On September 8, 2000, the Company made a $3 million preferred stock investment,
representing a minority interest, in S2 Systems, Inc., a software solution
provider in the banking and diversified financial services markets.
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ATLANTIC DATA SERVICES, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Atlantic Data Services, Inc. ("We" or "ADS") provides information technology
("IT") strategy consulting and systems integration services to customers
exclusively in the financial services industry, primarily banks. We offer IT
solutions to the business challenges faced by financial services companies
through our in-depth financial services experience, technological expertise and
project management skills. Our service offerings are organized around four
practice areas: e-Business, Customer Relationship Management ("CRM"), IT
Strategy and Consulting, and Conversions and Consolidations.
Our revenues are derived primarily from professional fees billed to customers on
a time and materials basis or, in certain instances, on a fixed price basis.
Included in revenues are reimbursable contract-related travel and entertainment
expenses which are separately billed to clients. Substantially all of our
contracts, other than fixed price contracts, are terminable by the customer
following limited notice and without significant penalty to the customer.
Revenues from fixed price contracts represented approximately 11.1% and 0.0% of
our revenues for the quarters ended December 31, 2000 and 1999, respectively.
We have derived, and expect to continue to derive, a significant portion of our
revenues from a relatively limited number of customers. Revenues from our five
largest customers for the quarters ended December 31, 2000 and 1999 were 69.3%
and 70.6%, respectively, as a percentage of revenues. For the quarter ended
December 31, 2000, FleetBoston Financial Corporation, Citizens Banking
Corporation, Corillian Corporation, NBT Bancorp, Inc. and Brokat Financial
Systems accounted for approximately 22.8%, 12.7%, 12.2%, 11.3% and 10.4%,
respectively, of revenues. For the quarter ended December 31, 1999, FleetBoston
Financial Corporation, Citizens Banking Corporation, Bank of Hawaii, Hudson
United Bancorp, Inc. and UST Data Services accounted for approximately 25.6%,
22.0%, 8.4%, 8.1% and 6.4%, respectively, of revenues.
Cost of revenues consists primarily of salaries and employee benefits for
personnel dedicated to customer assignments, fees paid to subcontractors for
work performed in connection with customer assignments, and reimbursable
contract-related travel and entertainment expenses incurred by us in connection
with the delivery of our services.
Sales and marketing expenses consist primarily of salaries, employee benefits,
travel expenses and promotional costs. General and administrative expenses
consist primarily of expenses associated with our management, finance and
administrative groups, including recruiting, training, depreciation and
amortization and occupancy costs.
OUTLOOK
Fiscal year 2001 continues to be a transition year for ADS and, in light of that
continuing transition and the general economic uncertainty, we expect revenue in
the fourth quarter of fiscal year 2001 to be in the range of $7 million to $8
million. At these revenue levels, we currently expect that net income (loss)
would be in the range of $.02 to $(.02) per share exclusive of the restructuring
charge discussed below. On January 24, 2001 we reduced our headcount by 26
positions (approximately 14%) across the Company, which will result in a pretax
restructuring charge in our fourth fiscal quarter of approximately $350,000. We
believe this action will better align our capacity with current market demand
and will enable us to better meet our customers' needs.
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CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Report on Form 10-Q includes forward-looking statements which are made
pursuant to the safe-harbor of the Private Securities Litigation Reform Act of
1995. You can identify these forward-looking statements when you see us using
words such as "expect," "anticipate," "believe," "intend," "may," "predict," and
other similar expressions. These forward-looking statements cover, among other
items: events, conditions and financial trends that may effect the Company's
future plans of operation, business strategy, growth of operations and financial
position, including statements relating to our revenue and net income (loss)
projections for the fourth quarter, sources of revenues, timing of revenues,
capital expenditures, levels of professional staff, sufficiency of cash and cash
equivalent balances, and the Year 2000 issue. Forward-looking statements are not
guarantees of future performance and are necessarily subject to a number of
risks and uncertainties, some of which are beyond our control. Actual results
could differ materially from those anticipated as a result of any of the
following factors:
* variations in our revenues and operating results which could cause our
results of operations to be below the expectations of public market
analysts and investors;
* our dependence on the financial services industry;
* the concentration of our revenues from a relatively limited number of
customers;
* the loss of a significant customer;
* our dependence on key personnel;
* the availability of professional staff as our business involves the
delivery of professional services which is labor-intensive;
* competition from other companies in the information technology and systems
integration market;
* rapid technological change and our ability to develop information
technology solutions that keep pace with such changes;
* our potential for contract liability;
* the risks associated with fixed price contracts; and
* equity control by management.
Because of these risks and uncertainties, the forward-looking events discussed
in this Report might not transpire.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in our revenues and operating results have occurred from quarter to
quarter and may continue to occur as a result of a number of factors. Quarterly
revenues and operating results can depend on:
* the number, size and scope of customer projects commenced and completed
during a quarter;
* changes in employee utilization rates;
* changes in average billing rates;
* the number of working days in a quarter;
* the timing of introduction of new service offerings, both by us and our
competitors;
* changes in pricing, both by us and our competitors;
* loss of a significant customer;
* loss of key personnel;
* other factors that adversely impact the financial services industry; and
* general economic conditions.
The timing of revenues is difficult to forecast because our sales cycle is
relatively long, ranging from one to six months for new projects with existing
customers and three to six months for new customers, and may depend on factors
such as the size and scope of projects or other factors that adversely impact
the
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financial services industry and general economic conditions. In addition, the
relatively long length of our sales cycle may negatively impact the operating
results for any particular quarter as a result of increased sales and marketing
expenses without associated increases in revenues in the particular quarter.
Furthermore, many of our projects are, and may be in the future, terminable
without customer penalty. An unanticipated termination of a major project or
loss of a major customer could require us to maintain or terminate underutilized
employees, resulting in a higher than expected number of unassigned persons or
higher than expected severance expenses.
QUARTER ENDED DECEMBER 31, 2000 COMPARED TO QUARTER ENDED DECEMBER 31, 1999
Revenues
Revenues increased 1.4% for the quarter ended December 31, 2000 over the quarter
ended December 31, 1999, from $8.1 million to $8.2 million. This increase was
due to a 10% increase in the average billing rate from $114 for the quarter
ended December 31, 1999 to $128 for the quarter ended December 31, 2000, offset
by an approximate 10% decrease in the number of billable hours for the quarter
ended December 31, 2000 versus the quarter ended December 31, 1999.
Cost of Revenues
Cost of revenues decreased 5.0% to $5.6 million from $5.9 million for the
quarter ended December 31, 2000 compared to the quarter ended December 31, 1999,
representing 68.2% and 72.8%, respectively, of revenues in each quarter. The
dollar decrease in cost of revenues was primarily due to a decrease in the
average number of billable personnel from 174 for the quarter ended December 31,
1999 to 150 for the quarter ended December 31, 2000. The decrease in cost of
revenues as a percentage of revenues is due to the aforementioned increase in
the average billing rate and increased utilization rates.
Sales and Marketing
Sales and marketing expenses increased 48.4% to $1.3 million from $0.9 million
for the quarter ended December 31, 2000 compared to the quarter ended December
31, 1999, representing 16.1% and 10.9% of revenues, respectively. This increase
resulted primarily from an increase in our sales and marketing group from 15
employees at December 31, 1999 to 28 employees at December 31, 2000, increased
investments in marketing initiatives and travel related expenses for the group.
General and Administrative
General and administrative expenses decreased 10.1% to $1.6 million from $1.8
million for the quarter ended December 31, 2000 and 1999, representing 19.5% and
22.0% of revenues, respectively. The dollar and percentage decreases are
principally due to decreased compensation expense.
Interest Income, Net
Interest income, net increased $93,000 from $452,000 for the quarter ended
December 31, 1999 to $545,000 for the quarter ended December 31, 2000. This
increase was principally due to interest rate increases.
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Provision (Credit) for Income Taxes
The provision (credit) for income taxes increased $132,000 to $126,000 from a
credit of $(6,000) for the quarter ended December 31, 2000 compared to the
quarter ended December 31, 1999, resulting in effective tax rates of 52.9% and
(40.0)%, respectively. The increase in the effective tax rate percentage is
primarily due to permanent differences relating to meals and entertainment
expenses. Our effective tax rate may vary from period to period depending on
states in which we do business due to varying state and local statutory income
tax rates and depending on our levels of profitability.
NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
Revenues
Revenues increased 12.2% for the nine months ended December 31, 2000 over the
nine months ended December 31, 1999, from $25.2 million to $28.2 million. This
increase was predominately due to a 3% increase in the volume of services
delivered to customers, a 6% increase in the average billing rate from $112 for
the nine months ended December 31, 1999 to $119 for the nine months ended
December 31, 2000, and an increase in revenue related to reimbursable expenses
of approximately $1.0 million.
Cost of Revenues
Cost of revenues decreased 2.2% to $19.1 million from $19.5 million for the nine
months ended December 31, 2000 compared to the nine months ended December 31,
1999, representing 67.7% and 77.6%, respectively, of revenues in each period.
The dollar decrease in cost of revenues was primarily due to a decrease in the
average number of billable personnel from 195 for the nine months ended December
31, 1999 to 160 for the nine months ended December 31, 2000, partially offset by
an increase in travel expenses related to additional business activity. The
decrease in cost of revenues as a percentage of revenues is due to the
aforementioned increase in the average billing rate and an increase in
utilization rates.
Sales and Marketing
Sales and marketing expenses increased 58.1% to $3.6 million from $2.3 million
for the nine months ended December 31, 2000 compared to the nine months ended
December 31, 1999, representing 12.8% and 9.1% of revenues, respectively. This
increase resulted primarily from an increase in the average number of people in
our sales and marketing group from 10 employees for the nine months ended
December 31, 1999 to 17 employees for the nine months ended December 31, 2000,
increased investments in marketing initiatives and travel related expenses for
the group.
General and Administrative
General and administrative expenses decreased 7.3% to $5.2 million from $5.6
million for the nine months ended December 31, 2000 compared to the nine months
ended December 31, 1999, representing 18.5% and 22.4% of revenues, respectively.
The dollar decrease is primarily due to decreases in compensation expense; the
percentage decrease is primarily due to increased revenues.
Interest Income, Net
Interest income, net increased $355,000 from $1.3 million for the nine months
ended December 31, 1999 to $1.7 million for the nine months ended December 31,
2000. This increase was principally due to the interest rate increases.
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Provision (Credit) for Income Taxes
The provision (credit) for income taxes increased $1.3 million to $920,000 from
$(387,000) for the nine months ended December 31, 2000 compared to the nine
months ended December 31, 1999, resulting in effective tax rates of 47.3% and
(38.8)%, respectively. The increase in the effective tax rate percentage is
primarily due to permanent differences relating to meals and entertainment
expenses. Our effective tax rate may vary from period to period depending on the
states in which we do business due to varying state and local statutory income
tax rates and depending on our levels of profitability.
LIQUIDITY AND CAPITAL RESOURCES
We have no long-term debt and continue to operate debt-free. Working capital was
$38.0 million at December 31, 2000. Our days sales in accounts receivable at
December 31, 2000 was 30 compared to 37 days at December 31, 1999. While we
believe that the risk with respect to collection of accounts receivable is
minimized by the creditworthiness of our customers, primarily banks and other
financial institutions, and our credit and collection policies, there can be no
assurance that we will not encounter collection problems in the future. We
attempt to further minimize this risk by performing ongoing credit valuations of
our customers and maintaining an allowance for potential credit losses. We
believe that our allowance for doubtful accounts and collection policies are
adequate.
Capital expenditures for the nine months ended December 31, 2000 of $241,000
were primarily to support our existing employees. Capital expenditures for the
remainder of fiscal 2001 are expected to be approximately $150,000 and will be
used principally for the purchase of computers and other equipment.
We expect that existing cash and cash equivalent balances, together with cash
provided from operations, will be sufficient to meet the Company's working
capital and capital expenditure requirements for at least the next twelve
months.
To date, inflation has not had a material impact on the Company's financial
results.
LONG-TERM INVESTMENT
On September 8, 2000, we made a $3 million preferred stock investment,
representing a minority interest, in S2 Systems, Inc., a software solution
provider in the banking and diversified financial services markets.
IMPACT OF YEAR 2000
To date, we have not experienced any significant problems with our service
offerings and products or internal information systems as it relates to the Year
2000 date change. We are not presently aware of any significant exposure arising
from potential third party failures. However, there can be no assurance that the
systems of other companies on which our systems or operations rely have been
successfully converted or that any failure of such parties to achieve Year 2000
compliance could not have an adverse effect on our results of operations.
We have expensed all costs to address the Year 2000 date change, which were not
material.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. As of December 31, 2000, we did not
use derivative financial instruments for speculative or trading purposes.
Interest Rate Risk
We invest our cash in corporate money market accounts and collateralized
repurchase agreements. These securities are not subject to interest rate risk
and will not fall in value if market interest rates increase.
Foreign Currency Exchange Risk
The majority of our sales are denominated in U.S. dollars and take place in
North America. We do not believe foreign currency exchange rates or the
introduction of the Euro will have an impact on us.
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PART II
OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) Use of Proceeds
On May 22, 1998, we commenced an initial public offering of 2,500,000 shares of
common stock pursuant to our final prospectus dated May 22, 1998. As part of the
initial public offering, certain stockholders of ADS granted the several
underwriters, for whom BancAmerica Robertson Stephens, BT Alex Brown and Adams,
Harkness & Hill, Inc., acted as representatives, an overallotment option to
purchase up to an additional 375,000 shares of common stock, which was exercised
on June 22, 1998.
The aggregate amount of expenses incurred by us through March 31, 2000 in
connection with the issuance and distribution of the shares of common stock
offered and sold in the initial public offering were approximately $3,084,000,
including $2,275,000 in underwriting discounts and approximately $809,000 in
other expenses. Since March 31, 2000, no further expenses have been incurred.
None of the expenses paid by us in connection with the initial public offering
or the exercise of the underwriters' overallotment option were paid, directly or
indirectly, to directors, officers, persons owning ten percent or more of the
our equity securities, or affiliates of ADS.
The net proceeds to us from the initial public offering, after deducting
underwriting discounts and commissions and other expenses, were approximately
$23,371,000.
From May 21, 1998 through December 31, 2000, we have applied approximately
$4,509,000 of the net proceeds from the initial public offering to working
capital. We invested the balance of such net proceeds primarily in money market
accounts.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirement 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.
ATLANTIC DATA SERVICES, INC.
Date: February 12, 2001 By: /s/ Robert W. Howe
-----------------------------------------
Robert W. Howe
Chairman and Chief Executive Officer
Date: February 12, 2001 By: /s/ Paul K. McGrath
-----------------------------------------
Paul K. McGrath
Senior Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
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