-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NzsoZsPUiRgH5U6FFJfPdkxnRQosPGz5V4ORLVRpuwJ3Uq78bwqOT4W0bxlUPGck VV7ZThgNzQifU8BMGCSMCg== 0000912057-96-012386.txt : 19960617 0000912057-96-012386.hdr.sgml : 19960617 ACCESSION NUMBER: 0000912057-96-012386 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960614 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHITTMAN HART INC CENTRAL INDEX KEY: 0001009403 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 363797833 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28166 FILM NUMBER: 96581208 BUSINESS ADDRESS: STREET 1: 311 SOUTH WACKER DR STREET 2: STE 3500 CITY: CHICAGO STATE: IL ZIP: 60606-6618 BUSINESS PHONE: 3129229200 MAIL ADDRESS: STREET 1: 311 S WACKER DR STE3500 CITY: CHICAGO STATE: IL ZIP: 60606-6618 10-Q 1 10-Q 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, 1996 -------------- 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: 0-28166 ------- WHITTMAN-HART, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 36-3797833 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 311 South Wacker Drive, Suite 3500, Chicago, Illinois 60606-6618 - ----------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (312) 922-9200 -------------- 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 June 1, 1996, there were 8,951,514 shares of common stock of the registrant outstanding. WHITTMAN-HART, INC. FORM 10-Q For the quarterly period ended March 31, 1996 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Item 1. Financial statements Balance Sheets as of March 31, 1996 and December 31, 1995 3 Statements of Earnings for the three months ended March 31, 1996 and 1995 4 Statements of Cash Flows for the three months ended March 31, 1996 and 1995 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 7 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 9 INDEX TO EXHIBITS 10 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. WHITTMAN-HART, INC. BALANCE SHEETS
MARCH 31, DECEMBER 31, 1996 1995 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 174,271 $ 4,083,178 Trade accounts receivable, net of allowance for doubtful accounts of $229,750 and $100,000 in 1996 and 1995, respectively 10,373,613 8,785,240 Other receivables 33,059 63,060 Prepaid expenses and other 946,438 481,831 Notes and interest receivable - stockholder - 326,356 Notes and interest receivable - executives 86,355 106,355 Deferred income taxes 50,000 50,000 ------------ ------------ Total current assets 11,663,736 13,896,020 Property and equipment, net 4,272,406 3,197,330 Notes receivable - executives 71,107 51,500 Other 144,075 84,117 ------------ ------------ $ 16,151,324 $ 17,228,967 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt 506,321 550,363 Notes payable - stockholder - 317,413 Accounts payable 688,377 1,264,048 Accrued compensation and related costs 4,283,007 5,843,859 Income taxes payable 444,344 - Other accrued liabilities 736,907 542,541 Distributions payable 860,646 860,646 Other current liabilities 331,887 321,375 ------------ ------------ Total current liabilities 7,851,489 9,700,245 Long-term debt, less current maturities 1,083,306 1,134,729 Deferred rent 636,728 538,934 ------------ ------------ Total liabilities 9,571,523 11,373,908 Redeemable convertible preferred stock, 10%, $.001 par value, 239,019 shares authorized, issued and outstanding (redemption value $5,820,834 and $5,683,334 in 1996 and 1995, respectively) 5,726,770 5,583,843 Stockholders' equity: Preferred stock, $.001 par value, 3,000,000 shares authorized, none issued and outstanding - - Common stock, $.001 par value, 15,000,000 authorized, 5,388,136 and 5,371,372 shares issued in 1996 and 1995, respectively 5,388 5,371 Additional paid-in capital 361,005 289,943 Retained earnings 524,705 - Deferred compensation (13,969) - ------------ ------------ 877,129 295,314 Common stock held in treasury, at cost, 7,698 shares in 1996 and 1995 (24,098) (24,098) ------------ ------------ Total stockholders' equity 853,031 271,216 ------------ ------------ $ 16,151,324 $ 17,228,967 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. 3 WHITTMAN-HART, INC. STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 1995 -------------- ------------- Revenues $ 17,793,710 $ 9,671,840 Cost of services 10,675,120 5,946,290 ------------ ----------- Gross profit 7,118,590 3,725,550 Costs and expenses: Selling 799,230 528,010 Recruiting 733,830 479,010 General and administrative 4,467,488 2,329,584 ------------ ----------- Total costs and expenses 6,000,548 3,336,604 ------------ ----------- Operating income 1,118,042 388,946 Other income (expense): Interest expense (31,210) (57,770) Interest income 31,380 6,520 Other, net (5,460) (6,990) ------------ ----------- Total other income (expense) (5,290) (58,240) ------------ ----------- Income before income taxes 1,112,752 330,706 Income taxes 445,120 - ------------ ----------- Net income $ 667,632 $ 330,706 ------------ ----------- ------------ ----------- Net income per share $ 0.10 ------------ ------------ Shares used in computing net income per share 6,904,589 ------------ ------------ Pro forma income data: Net income as reported $ 330,706 Pro forma adjustment to provision for income taxes 128,000 ----------- Pro forma net income $ 202,706 ----------- ----------- Pro forma net income per share $ 0.03 ----------- ----------- Shares used in computing pro forma net income per share 7,139,950 ----------- -----------
See accompanying notes to financial statements. 4 WHITTMAN-HART, INC. STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 1995 ------------- ------------- Cash flows from operating activities: Net income $ 667,632 $ 330,706 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 209,370 98,510 Gain on disposition of property and equipment (12,607) - Executive stock expense 6,866 62,498 Changes in assets and liabilities: Receivables (1,558,372) (1,134,641) Prepaid expenses and other (464,607) 35,251 Notes receivable 326,749 (6,519) Other assets (59,958) (5,370) Accounts payable (575,671) 379,300 Accrued compensation and related costs (1,511,539) (436,037) Income taxes payable 444,344 - Other accrued liabilities 194,366 (327,453) Deferred rent 97,794 79,241 Other current liabilities 10,512 15,444 ----------- ----------- Net cash used in operating activities (2,225,121) (909,070) ----------- ----------- Cash flows from investing activities: Purchase of property and equipment (1,314,030) (477,789) Proceeds from disposition of property and equipment 43,122 - ----------- ----------- Net cash used in investing activities (1,270,908) (477,789) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of bank debt 48,775 500,000 Payments on bank debt (144,240) (153,954) Borrowings from revolving credit agreement - 550,000 Payments on related party debt (317,413) - Checks issued in excess of bank balance - 490,813 ----------- ----------- Net cash provided by (used in) financing activities (412,878) 1,386,859 ----------- ----------- Net decrease in cash and cash equivalents (3,908,907) - ----------- ----------- Cash and cash equivalents at beginning of period 4,083,178 - ----------- ----------- Cash and cash equivalents at end of period $ 174,271 $ - ----------- ----------- ----------- ----------- Supplemental disclosures of cash flow information: Interest paid $ 31,455 $ 57,474 ----------- ----------- ----------- -----------
See accompanying notes to financial statements. 5 NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim financial statements of Whittman-Hart, Inc. (the Company) have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. The information furnished herein includes all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three months ended March 31, 1996 are not necessarily indicative of the results to be expected for the year ending December 31, 1996. These financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 1995, included in the registration statement (No. 333-1778) on Form S-1 filed by the Company with the Securities and Exchange Commission on February 29, 1996, as amended. NOTE 2 - COMPUTATION OF NET INCOME PER SHARE Net income per common and common equivalent share is computed based on the weighted average of common and common equivalent shares (redeemable convertible preferred stock, 10%, $.001 par value and stock options) outstanding during the period. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, common and common equivalent shares issued during the twelve months immediately preceding the offering date (using the treasury stock method and the initial public offering price per share) have been included in the calculation of common and common equivalent shares as if they were outstanding for the entire period presented. NOTE 3 - INCOME TAXES Prior to December 31, 1995, the Company's business was owned and operated by Whittman-Hart, L.P., a Delaware limited partnership, therefore, federal and certain state income tax liabilities were the responsibility of the partners. The pro forma tax adjustment for the three months ended March 31, 1995 represents federal and state income tax expense that would have been required had the Company operated as a C corporation during that period. NOTE 4 - SUBSEQUENT EVENTS The Company's Board of Directors approved a 4 for 1 split of the common stock in the form of a stock dividend effective April 3, 1996. All common share and per share amounts have been adjusted retroactively to give effect to the stock split. Additionally, on April 3, 1996, the Company filed an Amendment to its Certificate of Incorporation effecting an increase in the number of authorized shares of common stock to 15,000,000 and authorizing 3,000,000 shares of preferred stock. The authorized numbers of shares have been adjusted to give effect to these increases. On May 8, 1996, the Company completed an initial public offering of its common stock in which 2,600,000 shares were sold by the Company, resulting in net proceeds of approximately $38.7 million. Upon the closing of the offering, 239,019 shares of redeemable convertible preferred stock were converted into 956,076 shares of common stock. Proceeds from the offering were used to retire two promissory notes totaling approximately $1.5 million at March 31, 1996. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS REVENUES. Revenues increased 84% to $17.8 million in the first quarter of 1996 from $9.7 million for the comparable 1995 quarter. Each of the Company's five branch offices experienced revenue growth in excess of 75%. Revenues from the Company's ten most significant clients grew 81%, but as a percentage of revenues remained constant at approximately 34%. GROSS PROFIT. Gross profit increased 91% to $7.1 million in the first quarter of 1996 from $3.7 million in the first quarter of 1995. Gross profit as a percentage of revenues increased to 40% in the current quarter from 39% in the comparable 1995 quarter. The Company continued to benefit from prior investments made in newer branches and business units. SELLING EXPENSES. Selling expenses increased 51% to $0.8 million in the first quarter of 1996 from $0.5 million in the comparable first quarter of 1995. As a percentage of revenues, selling expenses decreased to 4% in the current quarter from 5% in the first quarter of 1995. The decrease is attributable to a change in the structure of the sales commission plan. RECRUITING EXPENSES. Recruiting expenses increased 53% to $0.7 million in the first quarter of 1996 from $0.5 million in the first quarter of 1995. The number of consultants increased 69% to 618 from 366 in the prior year's first quarter. As a percentage of revenues, recruiting expenses decreased to 4% in the current quarter from 5% in the first quarter of 1995. The decrease is attributable to a reduction in total recruiting costs per hire to approximately $5,400 in the first quarter of 1996 from $6,100 in the comparable first quarter of 1995. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased 92% to $4.5 million in the current quarter from $2.3 million in the first quarter of 1995. The increase is primarily attributable to a general increase in corporate costs, increased branch management personnel to support the growth of new business units and newer branch locations, increased personal computer leasing due to the rollout of laptop computers for all personnel and the establishment of a new Dallas branch office. As a percentage of revenues, general and administrative costs increased to 25% in the current quarter from 24% in the first quarter of 1995. INCOME TAXES. Income tax expense was $0.4 million in the first quarter of 1996 as compared to $0.1 million provided on a pro forma basis in the first quarter of 1995. Prior to December 31, 1995, the Company operated as a partnership. The pro forma tax adjustment for the first quarter of 1995 represents federal and state income tax expense that would have been required had the Company operated as a C corporation during that period. NET INCOME. Net income improved by 229% to $0.7 million or $0.10 per share in the current quarter from $0.2 million or $0.03 per share (based upon pro forma net income) in the first quarter of 1995. The increase in net income is primarily the result of significant revenue growth combined with improved gross margins. Net income as a percentage of revenues improved to 4% in the first quarter of 1996 from 2% in the comparable quarter of 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's primary source of liquidity has been operating cash flow, periodically supplemented by borrowings under the Company's revolving credit and term facilities with a commercial bank. The Company's revolving credit facility permits advances equal to the lesser of $2.0 million or 80% of qualified accounts receivable. Any borrowings against the Company's revolving credit facility bear 7 interest, at the Company's option, at LIBOR plus 1.5% or the lender's prime rate, are due on demand and are secured by a lien on all of the Company's accounts receivable. There were no borrowings against this revolving credit facility as of June 1, 1996. The Company's revolving credit facility expires on July 31, 1996. Based upon the Company's current trade accounts receivable balance, the Company believes it could renegotiate and substantially increase its revolving credit facility if necessary. On May 8, 1996, the Company completed an initial public offering of its common stock which resulted in net proceeds to the Company of approximately $38.7 million. The Company believes the net proceeds from this offering, together with existing sources of liquidity and funds generated from operations, will provide adequate cash to fund its anticipated cash needs, including funding the Company's growth strategy, at least through the next twelve months. A portion of the proceeds from the offering were used to retire the Company's term facilities. 8 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. (11) Statement Regarding Computation of Per Share Earnings (27) Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company during the quarter ended March 31, 1996. 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. Whittman-Hart, Inc. Date: June 13, 1996 By: /s/ Robert F. Bernard -------------------- ------------------------------- Robert F. Bernard Chairman of the Board, President and Chief Executive Officer Date: June 13, 1996 By: /s/ Kevin M. Gaskey -------------------- ------------------------------- Kevin M. Gaskey Chief Financial Officer and Treasurer 9 INDEX TO EXHIBITS Exhibit No. Description - ----------- ----------- 11 Statement Regarding Computation of Per Share Earnings 27 Financial Data Schedule 10 EX-11 2 EXHIBIT 11 EXHIBIT 11 WHITTMAN-HART, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 1995 ------------ ------------- Net income $ 667,632 $ 330,706 Pro forma adjustment to provision for income taxes - 128,000 ---------- ---------- Net income attributable to common stock (pro forma in 1995) $ 667,632 $ 202,706 ---------- ---------- ---------- ---------- Weighted average common shares outstanding 5,395,438 5,636,484 Effect of stock options calculated according to the treasury stock method 553,075 547,390 Conversion of redeemable preferred stock 956,076 956,076 ---------- ---------- Weighted average common and common equivalent shares outstanding 6,904,589 7,139,950 ---------- ---------- ---------- ---------- Net income per share (pro forma in 1995) $ 0.10 $ 0.03 ---------- ---------- ---------- ----------
11 EX-27 3 EXHIBIT 27
5 This schedule contains summary financial information extracted from the balance sheet as of March 31, 1996 and the statement of earnings for the three months ended March 31, 1996, and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1996 MAR-31-1996 174,000 0 10,636,000 230,000 0 11,664,000 5,978,000 1,706,000 16,151,000 7,851,000 0 5,727,000 0 5,000 848,000 16,151,000 0 17,794,000 0 10,675,000 6,001,000 130,000 31,000 1,113,000 445,000 668,000 0 0 0 668,000 .10 .10
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