-----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, AdFFJ+ubZ2lE9R8xafuvq8Lw10aWZbvVSAutGUi4CxXNkOW/mEcHkppG8W1IFFHr 8vK1XUO35D42ZaLsDcfJ2A== 0000912057-96-016707.txt : 19960812 0000912057-96-016707.hdr.sgml : 19960812 ACCESSION NUMBER: 0000912057-96-016707 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 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: 96606348 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 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 June 30, 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 August 2, 1996, there were 8,952,472 shares of common stock of the registrant outstanding. WHITTMAN-HART, INC. FORM 10-Q For the quarterly period ended June 30, 1996 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995 3 Statements of Earnings for the three and six months ended June 30, 1996 and 1995 (unaudited) 4 Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 PART II - OTHER INFORMATION 10 SIGNATURES 10 INDEX TO EXHIBITS 11 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. WHITTMAN-HART, INC. BALANCE SHEETS
JUNE 30, DECEMBER 31, 1996 1995 ------------- ------------- ASSETS (UNAUDITED) Current assets: Cash and cash equivalents $ 26,101,651 $ 4,083,178 Short-term investments 7,006,924 - Trade accounts receivable, net of allowance for doubtful accounts of $211,533 and $100,000 in 1996 and 1995, respectively 14,099,238 8,785,240 Other receivables 138,892 63,060 Prepaid expenses and other 1,106,444 481,831 Notes and interest receivable - stockholder - 326,356 Notes and interest receivable - executives 69,756 106,355 Deferred income taxes 50,000 50,000 ------------- ------------- Total current assets 48,572,905 13,896,020 Property and equipment, net 5,276,875 3,197,330 Notes receivable - executives 163,367 51,500 Other 139,147 84,117 ------------- ------------- Total assets $ 54,152,294 $ 17,228,967 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt - 550,363 Notes payable - stockholder - 317,413 Accounts payable 446,888 1,264,048 Accrued compensation and related costs 6,587,362 5,843,859 Income taxes payable 112,608 - Other accrued liabilities 637,069 542,541 Distributions payable - 860,646 Other current liabilities 139,751 321,375 ------------- ------------- Total current liabilities 7,923,678 9,700,245 Long-term debt, less current maturities - 1,134,729 Deferred rent 704,973 538,934 ------------- ------------- Total liabilities 8,628,651 11,373,908 Redeemable convertible preferred stock, 10%, $.001 par value; 239,019 shares authorized, issued and outstanding (redemption value $5,683,334) - 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, 8,959,210 and 5,371,372 shares issued in 1996 and 1995, respectively 8,959 5,371 Additional paid-in capital 43,757,131 289,943 Retained earnings 1,794,688 - Deferred compensation (13,037) - ------------- ------------- 45,547,741 295,314 Common stock held in treasury, at cost, 7,698 shares in 1996 and 1995 (24,098) (24,098) ------------- ------------- Total stockholders' equity 45,523,643 271,216 ------------- ------------- Total liabilities and stockholders' equity $ 54,152,294 $ 17,228,967 ------------- ------------- ------------- -------------
See accompanying notes to financial statements. 3 WHITTMAN-HART, INC. STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Revenues $ 21,069,040 $ 11,740,090 $ 38,862,750 $ 21,411,930 Cost of services 12,686,860 7,183,750 23,361,980 13,130,040 ------------ ------------ ------------ ------------ Gross profit 8,382,180 4,556,340 15,500,770 8,281,890 Costs and expenses: Selling 910,310 576,310 1,709,540 1,104,320 Recruiting 873,200 535,310 1,607,030 1,014,320 General and administrative 5,177,734 2,929,190 9,645,222 5,258,774 ------------ ------------ ------------ ------------ Total costs and expenses 6,961,244 4,040,810 12,961,792 7,377,414 ------------ ------------ ------------ ------------ Operating income 1,420,936 515,530 2,538,978 904,476 Other income (expense): Interest expense (16,190) (45,010) (47,400) (102,780) Interest income 237,340 10,880 268,720 17,400 Other, net 88,540 (6,400) 83,080 (13,390) ------------ ------------ ------------ ------------ Total other income (expense) 309,690 (40,530) 304,400 (98,770) ------------ ------------ ------------ ------------ Income before income taxes 1,730,626 475,000 2,843,378 805,706 Income taxes 653,570 - 1,098,690 - ------------ ------------ ------------ ------------ Net income $ 1,077,056 $ 475,000 $ 1,744,688 $ 805,706 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income per share $ 0.12 $ 0.22 ------------ ------------ ------------ ------------ Shares used in computing net income per share 8,706,888 7,805,738 ------------ ------------ ------------ ------------ Pro forma income data: Net income as reported $ 475,000 $ 805,706 Pro forma adjustment to provision for income taxes 173,701 301,701 ------------ ------------ Pro forma net income $ 301,299 $ 504,005 ------------ ------------ ------------ ------------ Pro forma net income per share $ 0.04 $ 0.07 ------------ ------------ ------------ ------------ Shares used in computing pro forma net income per share 7,157,886 7,148,917 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. 4 WHITTMAN-HART, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 1995 ------------- ----------- Cash flows from operating activities: Net income $ 1,744,688 $ 805,706 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 488,975 227,178 Gain on disposition of property and equipment (12,607) - Executive stock expense 29,213 180,656 Changes in assets and liabilities: receivables (5,389,830) (2,040,749) Prepaid expenses and other (624,613) 91,252 Notes receivable 251,088 (14,704) Other assets (55,030) (75,300) Accounts payable (817,160) (438,532) Accrued compensation and related costs 816,420 986,643 Income taxes payable 112,608 - Other accrued liabilities 94,528 (327,273) Deferred rent 166,039 158,481 Other current liabilities (181,624) 99,200 ------------- ----------- Net cash used in operating activities (3,377,305) (347,442) ------------- ----------- Cash flows from investing activities: Purchase of short-term investments (7,006,924) - Purchase of property and equipment (2,597,172) (567,807) Proceeds from disposition of property and equipment 43,122 - ------------- ----------- Net cash used in investing activities (9,560,974) (567,807) ------------- ----------- Cash flows from financing activities: Proceeds from issuance of bank debt 48,775 500,000 Payments on bank debt (1,733,867) (239,457) Payments on related party debt (317,413) - Proceeds from issuance of common stock, net of issuance costs 37,819,903 - Purchase of common stock - (19,868) Partnership capital distributions (860,646) (81,022) Checks issued in excess of bank balance - 755,596 ------------- ----------- Net cash provided by financing activities 34,956,752 915,249 ------------- ----------- Net increase in cash and cash equivalents 22,018,473 - ------------- ----------- Cash and cash equivalents at beginning of period 4,083,178 - ------------- ----------- Cash and cash equivalents at end of period $ 26,101,651 $ - ------------- ----------- ------------- -----------
See accompanying notes to financial statements. 5 NOTES TO FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited interim financial statements of Whittman- Hart, Inc. (the "Company") have been prepared pursuant to the rules and regulations 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 which are, in the opinion of management, necessary for a fair presentation of results for these interim periods, and all such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 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. 2. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents are comprised of certain highly liquid investments with maturities of less than three months. Short-term investments consist of debt securities with maturities beyond three months but less than twelve months. The short-term investments are classified as available-for-sale under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Accordingly, these investments are stated at fair value. 3. COMPUTATION OF NET INCOME AND PRO FORMA NET INCOME PER SHARE Net income and pro forma net income per common and common equivalent share are computed based on the weighted average of common and common equivalent shares (redeemable convertible preferred stock 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 initial public 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 all periods presented. 4. 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 adjustments for the three and six months ended June 30, 1995 represent federal and additional state income tax expense that would have been required had the Company operated as a C corporation during those periods. 6 5. STOCKHOLDERS' EQUITY 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 $37.8 million. In connection with such offering, 239,019 shares of redeemable convertible preferred stock were converted into 956,074 shares of common stock. All accrued and unpaid dividends related to the redeemable convertible preferred stock were canceled upon the conversion to common stock. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS REVENUES. Revenues increased 79% to $21.1 million in the second quarter of 1996 from $11.7 million for the comparable 1995 quarter. Revenues in the first six months of 1996 increased 82% to $38.9 million from $21.4 million for the first six months of 1995. Each of the company's five established branch offices experienced revenue growth in excess of 70% in both the second quarter and first six months of 1996 as compared to the same periods in 1995. Revenues from the company's ten most significant clients grew 61% and 76% for the second quarter and first six months of 1996, respectively, versus the comparable 1995 periods, but as a percentage of revenues remained constant at approximately 33%. GROSS PROFIT. Gross profit increased 84% to $8.4 million in the second quarter of 1996 from $4.6 million in the second quarter of 1995. Gross profit in the first six months of 1996 increased 87% to $15.5 million from $8.3 million in the first six months of 1995. Gross profit as a percentage of revenues increased to 40% in both the second quarter and first six months of 1996 from 39% in the comparable 1995 periods. The Company continued to benefit from prior investments made in newer branches and business units. SELLING EXPENSES. Selling expenses increased 58% to $0.9 million in the second quarter of 1996 from $0.6 million in the comparable 1995 quarter. Selling expenses in the first six months of 1996 increased 55% to $1.7 million from $1.1 million in the first six months of 1995. As a percentage of revenues, selling expenses decreased to 4% in both the second quarter and first six months of 1996 from 5% in the comparable periods in 1995. The decrease is attributable to a change in the structure of the sales commission plan. RECRUITING EXPENSES. Recruiting expenses increased 63% to $0.9 million in the second quarter of 1996 from $0.5 million in the second quarter of 1995. Recruiting expenses for the first six months of 1996 increased 58% to $1.6 million from $1.0 million in the first six months of 1995. As a percentage of revenues, recruiting expenses decreased to 4% in both the second quarter and first six months of 1996 from 5% in the comparable periods in 1995. The number of consultants increased 69% to 718 as of June 30, 1996 from 425 as of June 30, 1995, while total recruiting costs per hire for the first six months of each year remained constant at approximately $5,700. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased 77% to $5.2 million in the second quarter of 1996 from $2.9 million in the second quarter of 1995. General and administrative expenses for the first six months of 1996 increased 83% to $9.6 million from $5.3 million in the first six months of 1995. The increase is primarily attributable to a general increase in corporate costs, increased numbers of 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 consultants and the establishment of a new Dallas branch office. General and administrative costs as a percentage of revenues was 25% for both the second quarter and first six months of 1996 and 1995. OTHER INCOME (EXPENSE). Other income (expense) increased $0.4 million in both the second quarter and first six months of 1996 as compared to the same periods in 1995. The increase is primarily attributable to interest earned on investments of available net proceeds from the Company's initial public offering. 8 INCOME TAXES. The effective tax rate was 38% and 39% for the second quarter and first six months of 1996, respectively, as compared to 37% on a pro forma basis for the same periods of 1995. Prior to December 31, 1995, the Company operated as a partnership. The pro forma tax adjustments for the three and six months ended June 30, 1996 represent federal and additional state income tax expense that would have been required had the Company operated as a C corporation during those periods. LIQUIDITY AND CAPITAL RESOURCES Prior to its initial public offering in May 1996, the Company's primary source of liquidity had been operating cash flow, periodically supplemented by borrowings under the Company's revolving credit and term facilities with a commercial bank. The Company has a Loan Agreement under which it may apply for up to $5.0 million of credit with interest, at the Company's option, at LIBOR plus 1.5% or the lender's prime rate. There were no borrowings under this Loan Agreement as of July 31, 1996. The Company's Loan Agreement expires on April 30, 1997. On May 8, 1996, the Company completed an initial public offering of its common stock which resulted in net proceeds to the Company of $37.8 million. A portion of the proceeds from the offering were used to retire the Company's term facilities. The Company believes the net proceeds from such 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. 9 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On April 3, 1996, prior to the Company's initial public offering, the Company's twenty stockholders unanimously consented to, approved and adopted the form, terms and provisions of an Amendment to the Company's Certificate of Incorporation. This Amendment, among other things, increased the number of authorized shares of the Company's Common Stock, established a class of "blank-check" Preferred Stock, established a staggered Board of Directors and added indemnification coverage for directors, officers, employees and agents. On April 22, 1996, prior to the Company's initial public offering, the Company's twenty stockholders unanimously consented to, approved and adopted the form of an Amended and Restated Certificate of Incorporation and determined that the current directors of the Company should be divided into the following classes established by the Amendment: Lawrence P. Roches and Robert F. Steel to serve in the class with a term expiring at the 1997 annual meeting of stockholders, Paul D. Carbery and Edward V. Szofer to serve in the class with the term expiring at the 1998 annual meeting of stockholders, and Robert F. Bernard to serve in the class with the term expiring at the 1999 annual meeting of stockholders. 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 June 30, 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: August 9, 1996 By: /s/ Robert F. Bernard --------------------------- --------------------------- Robert F. Bernard Chairman of the Board, President and Chief Executive Officer Date: August 9, 1996 By: /s/ Kevin M. Gaskey --------------------------- --------------------------- Kevin M. Gaskey Chief Financial Officer and Treasurer 10 INDEX TO EXHIBITS Exhibit No. Description - ----------- ----------- 11 Statement Regarding Computation of Per Share Earnings 27 Financial Data Schedule 11 EX-11 2 EXHIBIT 11 EXHIBIT 11 WHITTMAN-HART, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1996 1995 1996 1995 ------------- ----------- ------------ ----------- Net income $ 1,077,056 $ 475,000 $ 1,744,688 $ 805,706 Pro forma adjustment to provision for income taxes - 173,701 - 301,701 ------------- ----------- ------------ ----------- Net income attributable to common stock (pro forma in 1995) $ 1,077,056 $ 301,299 $ 1,744,688 $ 504,005 ------------- ----------- ------------ ----------- ------------- ----------- ------------ ----------- Weighted average common shares outstanding 7,701,024 5,654,422 6,548,231 5,645,453 Effect of stock options calculated according to the treasury stock method 669,662 547,390 611,369 547,390 Conversion of redeemable preferred stock 336,202 956,074 646,138 956,074 ------------- ----------- ------------ ----------- Weighted average common and common equivalent shares outstanding 8,706,888 7,157,886 7,805,738 7,148,917 ------------- ----------- ------------ ----------- ------------- ----------- ------------ ----------- Net income per share (pro forma in 1995) $ 0.12 $ 0.04 $ 0.22 $ 0.07 ------------- ----------- ------------ ----------- ------------- ----------- ------------ -----------
EX-27 3 EXHIBIT 27 - FDS
5 This schedule contains summary financial information extracted form the balance sheet as of June 30, 1996 and the statement of earnings for the six months ended June 30, 1996, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1996 JUN-30-1996 26,102 7,007 14,311 212 0 48,573 7,261 1,984 54,152 7,924 0 0 0 9 45,515 54,152 0 38,863 0 23,362 12,962 237 47 2,843 1,099 1,745 0 0 0 1,745 0.22 0.22
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