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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 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 0-24343
ANSWERTHINK, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0750100
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1001 BRICKELL BAY DRIVE, SUITE 3000
MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
(305) 375-8005
(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 requirement for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of June 29, 2001, there were 45,359,344 shares of common stock outstanding.
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ANSWERTHINK, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 29, 2001 and December 29, 2000........3
Consolidated Statements of Operations for the Quarter ended June 29, 2001
and June 30, 2000 and for the Six Months Ended June 29, 2001 and
June 30, 2000..............................................................4
Consolidated Statements of Cash Flows for the Six Months Ended
June 29, 2001 and June 30, 2000............................................5
Notes to 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...........11
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS....................................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................12
SIGNATURES....................................................................13
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANSWERTHINK, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
JUNE 29, DECEMBER 29,
2001 2000
-------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 43,526 $ 51,662
Accounts receivable and unbilled revenue, net of allowance of $12,700 and
$11,122 in 2001 and 2000, respectively 52,280 59,706
Other receivables 962 3,547
Prepaid expenses and other current assets 16,352 15,044
-------------- --------------
Total current assets 113,120 129,959
Property and equipment, net 18,526 14,655
Other assets 1,436 1,450
Goodwill, net 79,275 82,612
-------------- --------------
Total assets $ 212,357 $ 228,676
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,952 $ 10,006
Accrued expenses and other liabilities 21,422 39,270
Media payable 1,537 7,346
-------------- --------------
Total current liabilities 28,911 56,622
Commitments and contingencies
Shareholders' equity
Preferred stock, $.001 par value, 1,250,000 authorized, none issued and
outstanding -- --
Common stock, $.001 par value, authorized 125,000,000 shares; issued and
outstanding: 45,359,344 shares at June 29, 2001; 44,234,837 shares at
December 29, 2000 45 44
Additional paid-in capital 254,592 243,299
Unearned compensation (115) (348)
Accumulated deficit (71,076) (70,941)
-------------- --------------
Total shareholders' equity 183,446 172,054
-------------- --------------
Total liabilities and shareholders' equity $ 212,357 $ 228,676
============== ==============
The accompanying notes are an integral part of the consolidated financial
statements.
3
ANSWERTHINK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
QUARTER ENDED SIX MONTHS ENDED
------------------------------- -------------------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Net revenues $ 65,276 $ 81,729 $ 137,291 $ 158,026
Costs and expenses:
Project personnel and expenses 40,668 46,738 86,049 91,479
Selling, general and administrative expenses 23,600 24,980 48,001 47,518
Stock compensation expense 1,613 213 4,644 426
------------- ------------- ------------- -------------
Total costs and operating expenses 65,881 71,931 138,694 139,423
------------- ------------- ------------- -------------
Income (loss) from operations (605) 9,798 (1,403) 18,603
Other income (expense):
Litigation settlement -- 1,850 -- 1,850
Interest income 259 237 735 596
Interest expense (42) (70) (84) (157)
------------- ------------- ------------- -------------
Income (loss) before income taxes (388) 11,815 (752) 20,892
Income taxes (453) 4,844 (617) 8,566
------------- ------------- ------------- -------------
Net income (loss) $ 65 $ 6,971 $ (135) $ 12,326
============= ============= ============= =============
Basic net income (loss) per common share $ -- $ 0.17 $ -- $ 0.32
Weighted average common shares outstanding 44,030 39,982 43,106 38,900
Diluted net income (loss) per common share $ -- $ 0.16 $ -- $ 0.27
Weighted average common and common equivalent shares
outstanding 46,214 44,742 43,106 44,899
The accompanying notes are an integral part of the consolidated financial
statements.
4
ANSWERTHINK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
SIX MONTHS ENDED
----------------------------------
JUNE 29, JUNE 30,
2001 2000
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (135) $ 12,326
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Non-cash compensation expense 4,644 426
Depreciation and amortization 6,035 5,580
Provision for doubtful accounts 2,732 380
Gain on litigation settlement -- (1,850)
Deferred income taxes (83) 1,045
Changes in assets and liabilities, net of effects from acquisitions:
Decrease (increase) in accounts receivable and unbilled revenue 4,694 (10,304)
Decrease (increase) in other receivables 2,585 (2,662)
Increase in prepaid expenses and other assets (1,440) (1,906)
Decrease in accounts payable (4,054) (2,020)
Decrease in accrued expenses and other liabilities (12,616) (3,250)
Decrease in media payable (5,809) (6,164)
-------------- --------------
Net cash used in operating activities (3,447) (8,399)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (6,532) (3,957)
Purchases of short-term investments -- (500)
Sales and redemptions of short-term investments -- 2,932
Cash used in acquisition of businesses, net of cash acquired -- (4,317)
-------------- --------------
Net cash used in investing activities (6,532) (5,842)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,843 11,459
Repayment of notes payable -- (1,000)
-------------- --------------
Net cash provided by financing activities 1,843 10,459
-------------- --------------
Net decrease in cash and cash equivalents (8,136) (3,782)
Cash and cash equivalents at beginning of period 51,662 27,124
-------------- --------------
Cash and cash equivalents at end of period $ 43,526 $ 23,342
============== ==============
The accompanying notes are an integral part of the consolidated financial
statements.
5
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements of Answerthink, Inc. ("Answerthink"
or the "Company") include the accounts of the Company and all of its wholly
owned subsidiaries. All intercompany transactions and balances have been
eliminated in consolidation.
In the opinion of management, the accompanying consolidated financial
statements reflect all normal and recurring adjustments which are necessary for
a fair presentation of the Company's financial position, results of operations,
and cash flows as of the dates and for the periods presented. The consolidated
financial statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission regarding interim financial reporting.
Accordingly, these statements do not include all the disclosures normally
required by accounting principles generally accepted in the United States of
America for annual financial statements and should be read in conjunction with
the consolidated financial statements and notes thereto for the year ended
December 29, 2000 included in the Form 10-K filed by the Company with the
Securities and Exchange Commission. The consolidated results of operations for
the quarter and six months ended June 29, 2001 are not necessarily indicative of
the results to be expected for any future period or for the full fiscal year.
Certain prior period amounts have been reclassified to conform to current period
presentation.
2. NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. With regard to common shares issued to employees under employment
agreements, the calculation includes only the vested portion of such shares.
Accordingly, common shares outstanding for the basic net income (loss) per share
computation are lower than actual shares issued and outstanding.
Income (loss) per common share assuming dilution is computed by dividing
net income (loss) by the weighted average number of common shares outstanding,
increased by the assumed conversion of other potentially dilutive securities
during the period. For the quarters ended June 29, 2001 and June 30, 2000,
potentially dilutive securities included 1,232,300 and 3,861,178 shares,
respectively, of unvested common stock issued under employment agreements and
951,157 and 899,243 shares, respectively, of common stock issuable upon the
exercise of stock options and warrants assuming the treasury stock method.
Potentially dilutive shares were excluded from the diluted loss per share
calculation for the six months ended June 29, 2001 because their effects would
have been anti-dilutive to the loss incurred by the Company. Therefore, the
amounts reported for basic and diluted net loss per share were the same for the
six months ended June 29, 2001. Potentially dilutive shares which were not
included in the diluted loss per share calculation for the six months ended
June 29, 2001 include 2,147,399 shares of unvested common stock issued under
employment agreements and 901,539 shares issuable upon the exercise of stock
options and warrants assuming the treasury stock method. For the six months
ended June 30, 2000, potentially dilutive securities included 4,603,154 shares
of unvested common stock issued under employment agreements and 1,395,730 shares
of common stock issuable upon the exercise of stock options and warrants
assuming the treasury stock method.
3. NON-CASH TRANSACTIONS
During 2000, the Company recorded a liability of $5.2 million for an earned
contingent consideration to be paid in the Company's common stock in March 2001.
This amount was included in accrued expenses and other liabilities in the
consolidated balance sheet as of December 29, 2000. In March 2001, the Company
issued 755,374 shares of the Company's common stock for the earned contingent
consideration.
6
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
4. STOCK COMPENSATION EXPENSE
In 2001, the Company granted stock options to participants in the Company's
Employee Stock Purchase Plan. These options were granted in replacement of the
Employee Stock Purchase Plan shares that could not be issued because the plan
was oversubscribed for the purchase periods ending December 31, 2000 and
June 30, 2001. The Company recorded a non-cash compensation charge of $1.4
million and $4.2 million in the quarter and first six months ended June 29,
2001, respectively, based on the vesting provision of the options for the
difference between the fair market value of the stock on the option grant date
and the exercise price. The options fully vested on June 30, 2001. Therefore,
operating results in future periods will not be impacted by this special grant.
5. STOCK OPTIONS
On June 27, 2001 the Company filed with the Securities and Exchange
Commission a Schedule TO describing a program offering a voluntary stock option
exchange for the Company's employees. The offering period for the stock option
exchange ended on August 8, 2001. Under the program, employees holding
nonqualified options to purchase the Company's common stock or incentive stock
options to purchase the Company's common stock with an exercise price of $10.00
per share or more were given the opportunity to exchange their existing options
for new options to purchase shares of the Company's common stock equal in number
to 66 2/3% of the number of options tendered and accepted for exchange. The new
options will not be granted until at least six months and one day after
acceptance of the old options for exchange and cancellation. The exercise price
of the new options will be the last reported sale price of the Company's common
stock on the Nasdaq Stock Market's National Market on their grant date. As of
June 27, 2001, options for 12,331,757 shares of the Company's common stock would
have been eligible for participation in the program.
6. INCOME TAXES
Our effective tax rate for the first six months of 2001 was 82% compared to
an effective tax rate of 41% for the comparable period of 2000. The higher
effective tax rate for 2001 was the result of an increase in the impact of
permanent differences on the tax rate as a result of lower pretax income.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations, and
No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, effective for fiscal
years beginning after December 15, 2001. SFAS 141 eliminates the pooling-of-
interest method for business combinations and requires application of the
purchase method. Under SFAS 142, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives. The Company has not yet determined what effect these
statements will have on the Company's consolidated results of operations and
financial position.
7
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
8. LITIGATION
THINK New Ideas, Inc. ("THINK New Ideas") and three of its former officers
are defendants in a consolidated class action filed in federal court in New
York. Think New Ideas merged with Answerthink on November 5, 1999. This suit was
previously described in Answerthink's Annual Report on Form 10-K for the year
ended December 29, 2000. In February 1999, a Consolidated and Amended Class
Action Complaint ("Consolidated Complaint") was filed seeking to assert claims
on behalf of all individuals who purchased THINK New Ideas' common stock from
November 5, 1997 through September 21, 1998. The defendants filed a motion to
dismiss the Consolidated Complaint and the plaintiffs opposed the motion. On
March 15, 2000, the court granted the defendants' motion to dismiss the
Consolidated Complaint. The plaintiffs filed a Second Consolidated and Amended
Class Action Complaint ("Second Amended Complaint") on April 14, 2000. The
defendants filed a motion to dismiss the Second Amended Complaint on May 1,
2000. On September 14, 2000, the Court denied the motion. The defendants filed
an answer to the Second Amended Complaint on November 10, 2000. The parties are
engaged in discovery. A scheduling order has been entered and the deadline for
discovery is October 26, 2001. No trial date has been set. The Company believes
there are meritorious defenses to the claims made in the Second Amended
Complaint and intends to contest those claims vigorously. Although there can be
no assurance as to the outcome of these matters, an unfavorable resolution could
have a material adverse effect on the results of operations and/or financial
condition of the Company in the future.
The Company is involved in legal proceedings, claims, and litigation
arising in the ordinary course of business not specifically discussed herein. In
the opinion of management, the final disposition of such other matters will not
have a material adverse effect on the financial position or results of
operations of the Company.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and the information incorporated by reference in it include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend
the forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. All statements regarding our
expected financial position and operating results, our business strategy, our
financing plans and forecasted demographic and economic trends relating to our
industry are forward-looking statements. These statements can sometimes be
identified by our use of forward-looking words such as "may," "will,"
"anticipate," "estimate," "expect," or "intend." These statements involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from the
results, performance or achievements expressed or implied by the forward looking
statements. We cannot promise you that our expectations in such forward-looking
statements will turn out to be correct. Factors that impact such forward looking
statements include, among others, our ability to attract additional business,
the potential for contract cancellation by our customers, changes in
expectations regarding the information technology industry, our ability to
attract and retain skilled employees, possible changes in collections of
accounts receivable, risks of competition, price and margin trends, changes in
general economic conditions and interest rates. An additional description of our
risk factors is set forth in our Registration Statement on Form S-3
(Registration Form 333-32342). We undertake no obligation to update or revise
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
OVERVIEW
Answerthink is a leading provider of technology-enabled business
transformation solutions. We bring together multi-disciplinary expertise in
benchmarking and research, business transformation, interactive marketing,
business applications and technology integration to serve the needs of Global
2000 clients. Answerthink's solutions span all functional areas of a company
including finance, human resources, information technology, sales, marketing,
customer service, and supply-chain, as well as across a variety of industry
sectors.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our results of
operations and the percentage relationship to net revenues of such results:
QUARTER ENDED SIX MONTHS ENDED
---------------------------------------- ---------------------------------------
(dollars in thousands) JUNE 29, 2001 JUNE 30, 2000 JUNE 29, 2001 JUNE 30, 2000
-------------------- -------------------- -------------------- -------------------
Net revenues $ 65,276 100.0% $ 81,729 100.0% $137,291 100.0% $158,026 100.0%
Costs and expenses:
Project personnel and expenses 40,668 62.3% 46,738 57.2% 86,049 62.7% 91,479 57.9%
Selling, general and administrative expenses 23,600 36.2% 24,980 30.5% 48,001 34.9% 47,518 30.1%
Stock compensation expense 1,613 2.4% 213 0.3% 4,644 3.4% 426 0.3%
-------------------- -------------------- -------------------- -------------------
Total costs and operating expenses 65,881 100.9% 71,931 88.0% 138,694 101.0% 139,423 88.3%
-------------------- -------------------- -------------------- -------------------
Income (loss) from operations (605) (0.9%) 9,798 12.0% (1,403) (1.0%) 18,603 11.7%
Other income (expense):
Litigation settlement -- -- 1,850 2.2% -- -- 1,850 1.2%
Interest income, net 217 0.3% 167 0.2% 651 0.5% 439 0.3%
-------------------- -------------------- -------------------- -------------------
Income (loss) before income taxes (388) (0.6%) 11,815 14.4% (752) (0.5%) 20,892 13.2%
Income taxes (453) (0.7%) 4,844 5.9% (617) (0.4%) 8,566 5.4%
-------------------- -------------------- -------------------- -------------------
Net income (loss) $ 65 0.1% $ 6,971 8.5% $ (135) (0.1%) $ 12,326 7.8%
==================== ==================== ==================== ===================
9
Net Revenues. Net revenues for the quarter ended June 29, 2001 decreased
by $16.5 million or 20.1% compared to the quarter ended June 30, 2000. For the
first six months of fiscal 2001, net revenues decreased $20.7 million or 13.1%
over the comparable period of 2000. These decreases in net revenues were
primarily attributable to a decrease in the number of customers and the average
size of our projects resulting from reduced demand for information technology
services.
Project Personnel and Expenses. Project personnel costs and expenses
consist primarily of salaries, benefits and bonuses for consultants. Project
personnel costs and expenses for the quarter ended June 29, 2001 decreased by
13.0% to $40.7 million compared to $46.7 million in the quarter ended June 30,
2000. For the first six months of fiscal 2001, project personnel costs and
expenses decreased 5.9% over the comparable period of 2000. These decreases in
project personnel and expenses were the result of a decrease in the number of
consultants, partially offset by an increase in average salaries. Billable
headcount was 1,230 as of June 29, 2001 compared to 1,483 as of June 30, 2000.
Project personnel and expenses as a percentage of net revenues increased to
62.3% in the quarter June 29, 2001 from 57.2% in the comparable quarter of 2000.
For the first six months of fiscal 2001, project personnel and expenses as a
percentage of net revenues increased to 62.7% from 57.9% in the comparable six
months of 2000. These increases in project personnel costs and expenses as a
percentage of net revenues were due to lower consultant utilization, partially
offset by higher billing rates.
Selling, General and Administrative. Selling, general and administrative
expenses decreased 5.5% to $23.6 million in the quarter ended June 29, 2001 from
$25.0 million in the quarter ended June 30, 2000. The decrease in selling,
general and administrative expenses was primarily a result of lower salary and
benefit expenses associated with a decrease in functional headcount, partially
offset by an increase in bad debt expense. Functional headcount was 226 as of
June 29, 2001 compared to 275 as of June 30, 2000. For the first six months of
fiscal 2001, selling, general and administrative expenses increased slightly by
1.0% to $48.0 million from $47.5 million in the comparable period of 2000. This
increase in selling, general and administrative expenses primarily related to an
increase in bad debt expense, partially offset by a decrease in salary and
benefit expense. Selling, general and administrative expenses as a percentage of
net revenues increased to 36.2% in the quarter ended June 29, 2001 from 30.5% in
the comparable quarter of 2000. For the six months ended June 29, 2001, selling,
general and administrative expenses as a percentage of net revenues also
increased to 34.9% from 30.1% in the comparable six months of 2000. The
increases in selling, general and administrative expenses as a percentage of net
revenues were attributable to an increase in bad debt expense as well as the
lower revenue levels during 2001.
Stock Compensation Expense. Stock compensation expense in 2001 primarily
related to the granting of stock options to participants in our Employee Stock
Purchase Pan. These stock options were granted in replacement of the Employee
Stock Purchase Plan shares that could not be issued because the plan was
oversubscribed for the purchase periods ending on December 31, 2000 and June 30,
2001. We recorded a non-cash compensation charge of $1.4 million and $4.2
million in the quarter and six months ended June 29, 2001, respectively, based
on the vesting provision of the options for the difference between the fair
market value of the stock on the option grant date and the exercise price. The
options fully vested on June 30, 2001. Therefore, operating results in future
periods will not be impacted by this special grant.
Income Taxes. Our effective tax rate for the first six months of 2001 was
82% compared to an effective tax rate of 41% for the comparable period of 2000.
The higher effective tax rate for 2001 was the result of an increase in the
impact of permanent differences on the tax rate as a result of lower pretax
income.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily with cash flow generated from
operations and the proceeds from our initial public offering. In addition, we
have a revolving credit facility for $25.0 million. The credit facility is
unsecured and contains, among other things, the maintenance of certain financial
covenants such as a maximum leverage ratio, minimum level of tangible net worth,
minimum ratio of earnings to interest expense and minimum quick ratio. At June
29, 2001, we had no borrowings under this credit facility. At June 29, 2001, we
had approximately $43.5 million in cash and cash equivalents compared to $51.7
million at December 29, 2000.
10
Net cash used in operating activities was $3.4 million for the six months
ended June 29, 2001 compared to $8.4 million used during the comparable period
of 2000. During the six months ended June 29, 2001, net cash used in operating
activities was primarily attributable to a $12.6 million decrease in accrued
expenses and other liabilities, a $5.8 million decrease in media payable and a
$4.1 million decrease in accounts payable, partially offset by non-cash expenses
of $13.4 million, a $4.7 million decrease in accounts receivable and unbilled
revenue and a $2.6 million decrease in other receivables. During the six months
ended June 30, 2000, net cash used in operating activities was primarily
attributable to a $10.3 million increase in accounts receivable and unbilled
revenue, a $6.2 million decrease in media payable, a $3.3 million decrease in
accrued expenses and other liabilities and a $2.6 million increase in other
receivables, partially offset by our net income of $12.3 million and non-cash
expenses of $6.4 million. Media payables represent media placement costs owed to
media providers on behalf of our customers. Amounts in media payables which have
been billed to our customers are included in other receivables. The level of
media payables and the related receivables will vary with the timing of our
customers' media campaigns.
Net cash used in investing activities was $6.5 million for the six months
ended June 29, 2001 compared to $5.8 million used during the comparative period
of 2000. The use of cash for investing activities in 2001 was attributable to
purchases of property and equipment. During 2000, the uses of cash in investing
activities were $4.3 million of additional contingent consideration paid for
certain prior acquisitions and $4.0 million of purchases of property and
equipment, partially offset by net sales and redemptions of short-term
investments of $2.4 million.
Net cash provided by financing activities was $1.8 million for the six
months ended June 29, 2001 compared to $10.5 million provided during the
comparable period of 2000. The source of cash from financing activities during
2001 was $1.8 million of proceeds from the sale of common stock as a result of
exercises of stock options as well as the sale of stock through our Employee
Stock Purchase Plan. During 2000, the primary source of cash from financing
activities was $11.5 million of proceeds from the sale of common stock as a
result of exercises of stock options and warrants as well as the sale of stock
through our Employee Stock Purchase Plan, partially offset by $1.0 million
repayment of notes payable.
We currently believe that available funds and cash flows generated by
operations, if any, will be sufficient to fund our working capital and capital
expenditures requirements for at least the next 12 months. Thereafter, we may
need to raise additional funds. We may decide to raise additional funds sooner
in order to fund more rapid expansion, to develop new or enhanced products and
services, to respond to competitive pressures or to acquire complementary
businesses or technologies. We cannot assure you, however, that additional
financing will be available when needed or desired on terms favorable to us or
at all.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations, and
No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, effective for fiscal
years beginning after December 15, 2001. SFAS 141 eliminates the pooling-of-
interest method for business combinations and requires application of the
purchase method. Under SFAS 142, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives. We have not yet determined the effect these statements will
have on our consolidated results of operations and financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not believe that there is any material market risk exposure with
respect to derivative or other financial instruments, which would require
disclosure under this item.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
THINK New Ideas and three of its former officers are defendants in a
consolidated class action filed in federal court in New York. Think New Ideas
merged with Answerthink on November 5, 1999. This suit was previously described
in Answerthink's Annual Report on Form 10-K for the year ended December 29,
2000. In February 1999, a Consolidated and Amended Class Action Complaint
("Consolidated Complaint") was filed seeking to assert claims on behalf of all
individuals who purchased THINK New Ideas' common stock from November 5, 1997
through September 21, 1998. The defendants filed a motion to dismiss the
Consolidated Complaint and the plaintiffs opposed the motion. On March 15, 2000,
the Court granted the defendants' motion to dismiss the Consolidated Complaint.
The plaintiffs filed a Second Consolidated and Amended Class Action Complaint
("Second Amended Complaint") on April 14, 2000. The defendants filed a motion to
dismiss the Second Amended Complaint on May 1, 2000. On September 14, 2000, the
Court denied the motion. The defendants filed an answer to the Second Amended
Complaint on November 10, 2000. The parties are engaged in discovery. A
scheduling order has been entered and the deadline for discovery is October 26,
2001. No trial date has been set. We believe there are meritorious defenses to
the claims made in the Second Amended Complaint and we intend to contest those
claims vigorously. Although there can be no assurance as to the outcome of these
matters, an unfavorable resolution could have a material adverse effect on our
results of operations and/or our financial condition in the future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At our Annual Meeting of Stockholders held on May 9, 2001, the following
proposals were adopted by the votes specified below:
(i) The election of two Class I Directors (Ted A. Fernandez and
Alan T. G. Wix) to serve until the year 2004 and the election of one
Class III Director (Edwin A. Huston) to serve until the year 2002.
The security holders elected the Directors with votes cast as
follows: Mr. Fernandez: 33,390,169 shares for and 2,398,478 against;
Mr. Wix: 35,044,103 shares for and 744,544 against; Mr. Huston:
35,041,758 shares for and 746,889 against. There were no abstentions
or broker non-votes applicable to the election of directors. In
addition to the directors listed above whom were elected at the
meeting, the terms of the following directors continued after the
meeting: Robert J. Bahash, David N. Dungan, Allan R. Frank,
William C. Kessinger, Ulysses S. Knotts, III and Jeffrey E. Keisling.
(ii) The approval of an amendment to the Company's 1998 Stock Option and
Incentive Plan increasing the number of shares of Common Stock
available for issuance thereunder from 15,000,000 to 20,000,000. The
approval passed with votes cast as follows: 15,410,013 shares for;
6,683,750 shares against; 276,852 shares abstained; and 13,418,032
broker non-votes.
(iii) The approval of an amendment to and reinstatement of the Company's
Employee Stock Purchase Plan. The approval passed with votes cast as
follows: 21,681,166 shares for; 410,955 shares against; 278,494
shares abstained; and 13,418,032 broker non-votes.
(iv) The ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors of the Company for the current fiscal year
ending December 28, 2001. The appointment was ratified with votes
cast as follows: 35,421,280 shares for; 352,290 shares against; and
15,077 shares abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by Answerthink during the quarter ended
June 29, 2001.
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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.
ANSWERTHINK, INC.
Date: August 10, 2001 By: /s/ John F. Brennan
-------------------------------------
John F. Brennan
Executive Vice President and Chief
Financial Officer
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