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 June 30, 1999
OR
o 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 0-25372
COTELLIGENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3173918
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 California Street, Suite 2050
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
(415) 439-6400
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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
---------- -----------
At August 13, 1999 there were 13,472,438 shares of common stock
outstanding.
<PAGE>
COTELLIGENT, INC.
INDEX
Part I - Financial Information
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
<S> <C>
Cotelligent, Inc.
Consolidated Balance Sheets at June 30, 1999 (Unaudited)
and March 31, 1999 3
Consolidated Statements of Operations for the Three Months Ended
June 30, 1999 and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
COTELLIGENT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, 1999 March 31, 1999
----------------- ------------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 617 $ 972
Accounts receivable, including unbilled accounts of $16,183
and $9,331 and net of allowance for doubtful accounts of
$1,606 and $1,449, respectively........................... 66,329 62,087
Deferred tax assets.......................................... 960 960
Prepaid expenses and other................................... 4,304 4,971
----------------- ------------------
Total current assets....................................... 72,210 68,990
Property and equipment, net..................................... 12,650 11,405
Goodwill, net of accumulated amortization of $2,508 and $1,861,
respectively................................................. 74,762 95,200
Notes receivable from officers.................................. 895 191
Deferred income taxes........................................... 6,447 -
Other assets.................................................... 1,241 1,094
----------------- ------------------
Total assets............................................... $ 168,205 $ 176,880
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt..... $ 273 $ 236
Accounts payable............................................. 9,060 9,399
Accrued compensation and related payroll liabilities......... 16,593 17,238
Income taxes payable......................................... 2,190 5,702
Other accrued liabilities.................................... 10,985 7,460
----------------- ------------------
Total current liabilities.................................. 39,101 40,035
Long-term debt.................................................. 39,444 28,191
Deferred tax liabilities........................................ - 821
----------------- ------------------
Total liabilities.......................................... 78,545 69,047
----------------- ------------------
Stockholders' equity:
Preferred Stock, $0.01 par value; 500,000 shares authorized,
no shares issued or outstanding............................ - -
Common Stock, $0.01 par value; 100,000,000 shares authorized,
13,453,873 and 13,656,031 shares issued and outstanding,...
respectively............................................... 135 137
Additional paid-in capital................................... 80,680 82,517
Retained earnings............................................ 8,845 25,179
----------------- ------------------
Total stockholders' equity................................. 89,660 107,833
----------------- ------------------
Total liabilities and stockholders' equity................. $ 168,205 $ 176,880
================= ==================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
COTELLIGENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Revenues........................................... $ 88,566 $ 73,049
Cost of services................................... 63,708 52,183
------------------ -----------------
Gross profit............................... 24,858 20,866
Selling, general and administrative expenses....... 22,585 14,756
Depreciation and amortization of goodwill.......... 1,504 674
Impairment of long-lived assets.................... 20,000 -
Restructuring charge............................... 4,920 -
------------------ -----------------
Operating income (loss) ........................... (24,151) 5,436
Other income (expense):
Interest expense................................ (652) (22)
Interest income................................. 120 332
Other........................................... (64) (2)
------------------ -----------------
Total other income (expense).................. (596) 308
------------------ -----------------
Income (loss) before income taxes.................. (24,747) 5,744
Provision (benefit) for income taxes............... (8,413) 2,229
------------------ -----------------
Net income (loss).................................. $ (16,334) $ 3,515
================== =================
Earnings (loss) per share
Basic and diluted .......................... $ (1.21) $ 0.25
================== =================
Weighted average shares outstanding
Basic....................................... 13,461,007 14,084,703
================== =================
Diluted..................................... 13,461,007 14,308,749
================== =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
COTELLIGENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------
1999 1998
-------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ (16,334) $ 3,515
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization of goodwill ........... 1,504 674
Impairment of long-lived assets ..................... 20,000 -
Deferred income taxes, net........................... (7,268) -
Loss on disposal of property and equipment........... 59 16
Provision for doubtful accounts...................... 157 154
Changes in current assets and liabilities:
Accounts receivable............................ (4,399) (1,048)
Prepaid expenses and other current assets...... 667 117
Accounts payable and accrued expenses.......... (984) (1,072)
Income taxes payable........................... (3,512) 850
Other accrued liabilities...................... 3,525 -
Other assets................................... (147) -
-------------------- -------------------
Net cash provided by (used in) operating
activities........................ (6,732) 3,206
-------------------- -------------------
Cash flows from investing activities:
Proceeds from sale of assets ................................... 6 317
Purchase price adjustments for previously acquired companies.... (209) -
Purchases of property and equipment............................. (2,167) (1,473)
-------------------- -------------------
Net cash used in investing activities...... (2,370) (1,156)
-------------------- -------------------
Cash flows from financing activities:
Net proceeds from long-term debt................................ 11,345 -
Payments on capital lease obligations........................... (55) -
Net borrowings on short-term debt............................... - 15
Increase in notes receivable from officers, net ................ (704) -
Net proceeds from issuance of common stock ..................... 394 1,073
Repurchase of common stock ..................................... (2,233) -
-------------------- -------------------
Net cash provided by financing activities. 8,747 1,088
-------------------- -------------------
Net increase (decrease) in cash and cash equivalents............ (355) 3,138
Cash and cash equivalents at beginning of period................ 972 40,528
-------------------- -------------------
Cash and cash equivalents at end of period...................... $ 617 $ 43,666
==================== ===================
Supplemental disclosures of cash flow information:
Interest paid................................................... $ 394 $ 22
Income taxes paid............................................... $ 2,188 $ 1,454
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
COTELLIGENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
(Unaudited)
Note 1 - Business Organization and Basis of Presentation
Cotelligent, Inc. ("Cotelligent" or the "Company") was formed in February
1993 to acquire, own and operate software professional service businesses
specializing in providing information technology ("IT") consultants on a
contract basis and consulting and outsourcing services to businesses with
complex IT operations. The Company commenced operations in February 1996 when it
completed its initial public offering and started acquiring and operating
businesses. Since that date, the Company has acquired 25 IT professional service
businesses. All of the businesses acquired have operations substantially the
same as the Company. These financial statements include the accounts of
Cotelligent, Inc. and its subsidiaries.
The Company is currently organized in five practice groups consisting of
Technology Solutions, Professional Services, Alliance Services, Network Services
and IT Education and operates 32 offices across the United States along with
international consultant recruiting offices in Brazil and the Philippines. At
June 30, 1999, the Company had approximately 3,200 employees, including
technical staff of approximately 2,700 IT professional consultants providing
services to approximately 800 clients across a broad spectrum of industries.
Note 2 - Summary of Significant Accounting Policies
Interim Financial Statement Presentation
The accompanying interim financial statements do not contain all
disclosures included in the financial statements included in Cotelligent's
Annual Report to the Securities and Exchange Commission on Form 10-K for the
fiscal year ended March 31, 1999 ("Form 10-K"), and therefore these Financial
Statements should be read in conjunction with the financial statements included
on Form 10-K.
In the opinion of management, the interim financial statements filed as
part of this Quarterly Report on Form 10-Q reflect all adjustments, consisting
only of normal recurring accruals and other adjustments, necessary for a fair
presentation of the financial position and the results of operations and of cash
flows for the interim periods presented. Certain 1998 balances have been
reclassified to conform with the current presentation.
Note 3 - Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Total
-------------------------- Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
------------ ---------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1999..... 13,656,031 $ 137 $ 82,517 $ 25,179 $ 107,833
Repurchase of Common Stock.... (238,400) (2) (2,231) - (2,233)
Issuance of Common Stock...... 36,242 - 394 - 394
Net loss...................... - - - (16,334) (16,334)
============ ========== ============= ============ ================
Balance at June 30, 1999...... 13,453,873 $ 135 $ 80,680 $ 8,845 $ 89,660
============ ========== ============= ============ ================
</TABLE>
6
<PAGE>
COTELLIGENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
(Unaudited)
Note 4 - Business Combinations
Since inception, the Company has acquired 25 IT professional services
firms. During fiscal 1999, Cotelligent acquired five companies (acquired on
September 16, 1998, October 29, 1998, October 30, 1998, November 30, 1998 and
January 4, 1999) accounted for under the purchase method. The results of these
acquisitions have been included in the Company's results from their respective
acquisition dates. The following pro forma consolidated statement of operations
for the three months ended June 30, 1998 gives effect to the acquisitions of the
companies purchased in fiscal 1999 as if these acquisitions were made on April
1, 1998. The pro forma consolidated financial statement reflects adjustments for
interest expense on cash consideration and amortization of goodwill for the
companies accounted for under the purchase method of accounting.
<TABLE>
<CAPTION>
Pro Forma
Three Months
Ended
June 30, 1998
----------------
<S> <C>
Revenues...................................... $ 86,579
Cost of services.............................. 59,681
----------------
Gross profit........................... 26,898
Selling, general and administrative expenses.. 20,114
----------------
Operating income ............................. 6,784
Other expense ................................ (709)
----------------
Income before provision for income taxes...... 6,075
Provision for income taxes.................... 2,460
----------------
Net income ................................... $ 3,615
================
Earnings per share -
Basic.................................... $ 0.24
================
Diluted.................................. $ 0.23
================
Weighted average shares outstanding -
Basic.................................... 15,300,759
================
Diluted.................................. 15,524,805
================
</TABLE>
Note 5 - Earnings Per Share
Earnings per share were as follows:
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1999
-----------------------------------------------------
Per Share
Loss Shares Amount
---------------- -------------- -------------
<S> <C> <C> <C>
Basic and diluted earnings per share-
Net income (loss) available to common stockholders .... $ (16,334) 13,461,007 $ (1.21)
For the Three Months Ended June 30, 1998
-----------------------------------------------------
Per Share
Income Shares Amount
---------------- -------------- -------------
Basic earnings per share-
Net income available to common stockholders ........... $ 3,515 14,084,703 $ 0.25
Options issued to directors and employees ............. 224,046
--------------
Diluted earnings per share-
Income available to common stockholders
plus assumed conversions .......................... $ 3,515 14,308,749 $ 0.25
==============
</TABLE>
7
<PAGE>
COTELLIGENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
(Unaudited)
Note 6 - Capital Stock
In September 1998, Cotelligent's Board of Directors authorized the
repurchase of up to 2.0 million shares of the Company's Common Stock, or 14% of
the then outstanding shares. During the three months ended June 30, 1999, the
Company completed the share repurchase program with the repurchase of 238,400
shares for a total cost of $2,233.
Note 7 - Goodwill Impairment Charge
In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, the Company considers, among other factors, deterioration of operating
performance or significant loss of client base to be indicators of potential
impairment of long-lived assets. The Company experienced a reduction in demand
for its services, which it believes to be principally related to strategies
being employed by the Company's customers of reducing investment in IT
infrastructures while their Y2K compliance is being ascertained. In particular,
one of the Company's operating locations experienced a significant reduction in
demand. As a result of the reduction in demand for its services, the Company
recognized an impairment of goodwill during the three months ended June 30, 1999
as the future undiscounted cash flows of certain of its long-lived assets were
estimated to be less than the asset's related carrying value. The pre-tax
non-cash charge was $20,000, which represents the excess of the assets' carrying
value over the Company's estimate of its fair value.
Note 8 - Restructuring of Operations
As part of the Company's reorganization into five practice groups, the
Company identified opportunities to align its operating structure by closing
certain of its redundant facilities and rationalizing headcount to conform to
the Company's new operating structure. Accordingly, the Company adopted a
restructuring plan, which resulted in a pre-tax restructuring charge of $4,920
during the three months ended June 30, 1999. The charge includes provisions for
severance of approximately 60 management and operating staff ($3,510) as well as
closure costs related to a plan of consolidating certain operating locations
($1,410). As the Company's reorganization plan proceeds, the amount of the
restructuring charge could change. At June 30, 1999, $4,731 of restructuring
charges remained in accrued liabilities.
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cotelligent, Inc. ("Cotelligent" or the "Company") was formed in February
1993 to acquire, own and operate software professional service businesses
specializing in providing information technology ("IT") consultants to
businesses with complex IT operations. Cotelligent offers services in five
consulting practice groups: Professional Services - including staff
augmentation; Technology Solutions - custom application development; Alliance
Services - national partnerships with many leading enterprise application
software companies; Network Design and Management - intranet and internet
application design and development; and Training and Education.
During fiscal 1999, Cotelligent acquired five companies (acquired on
September 16, 1998, October 29, 1998, October 30, 1998, November 30, 1998 and
January 4, 1999) accounted for under the purchase method. The results of these
acquisitions have been included in the Company's results from their respective
acquisition dates.
The Company derives substantially all of its revenues from IT consulting
and outsourcing service activities. The majority of these activities are
provided under "time and materials" billing arrangements, and revenues are
recorded as work is performed. Revenues are directly related to the total number
of hours billed to clients and the associated hourly billing rates. Hourly
billing rates are established for each service provided and are a function of
the type of work performed and the related skill level of the consultant. The
Company's principal costs are professional compensation directly related to the
performance of services and related expenses. Gross profits (revenues after
professional compensation and related expenses) are primarily a function of
hours billed to clients per professional employee or consultant, hourly billing
rates of those employees or consultants and employee or consultant compensation
relative to those billing rates. Gross profits can be adversely impacted if
services provided cannot be billed, if the Company is not effective in managing
its service activities, if fixed-fee engagements (which historically have not
constituted a significant portion of total revenues) are not properly priced, if
consultant cost increases exceed bill rate increases or if there are high levels
of unutilized time (work activities not chargeable to clients or unrelated to
client services) of full-time salaried service professional employees. Operating
income (gross profit less selling, general and administrative expenses,
depreciation and amortization of goodwill, impairment of long-lived assets and
restructuring charge) can be adversely impacted by increased administrative
staff compensation and expenses related to growing and expanding the Company's
business, which may be incurred before revenues or economies of scale are
generated from such investment. In addition, three of the company's practice
groups: technology solutions, alliance services and network services, require a
higher level of selling, general and administrative infrastructure in order to
generate revenue. If the Company is unable to generate sufficient revenue from
these activities, operating income may be adversely affected.
As part of its strategic plan, the Company intends to acquire other IT
consulting services businesses. Should the Company be successful in acquiring
such businesses, periods subsequent to the completion of an acquisition could be
adversely impacted by costs and activities associated with the assimilation and
integration of the acquired company. In addition, there can be no assurance that
the acquired company will meet its revenue or profit expectations following the
acquisition. If the Company is unsuccessful in its acquisition program, the
period in which such opportunities are written off could be adversely impacted
by costs associated with such opportunity.
As a professional services organization, the Company responds to service
demands from its clients. Accordingly, the Company has limited control over the
timing and circumstances under which its services are provided. Therefore, the
Company can experience volatility in its operating results from quarter to
quarter. The operating results for any quarter are not necessarily indicative of
the results for any future period.
The Company has conducted a comprehensive review of its internal computer
systems to identify the systems that could be affected by the "Year 2000" issue
and has concluded that the Year 2000 problem will not pose any significant
operational issues for the Company. The Company does not expect the expenditures
related to the Year 2000 issue to have a material effect on its financial
position or results of operations in any year.
Except for historical information contained herein, the information
contained in this report includes forward-looking statements that involve
certain risks and uncertainties that could cause actual results to vary
materially from such statements. All forward-looking statements included in this
report are based upon information available to Cotelligent as of the date
thereof, and Cotelligent assumes no obligation to update any such
forward-looking statement. Please refer to the discussion of risk factors and
other factors included in Cotelligent's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year ended March 31, 1999 and
other filings made with the Securities and Exchange Commission.
9
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Revenues
Revenues increased $15.6 million, or 21.2% to $88.6 million in the three
months ended June 30, 1999 from $73.0 million in the three months ended June,
30, 1998. The increase was primarily due to the inclusion of revenues in the
first quarter of fiscal 2000 from the companies acquired under the purchase
method of accounting during fiscal 1999 ("Fiscal Year 1999 Purchases"). Revenues
generated from the Fiscal Year 1999 Purchases aggregated $11.0 million during
the first quarter of fiscal 2000.
Gross Profit
Gross profit increased $4.0 million, or 19.1% to $24.9 million in the
three months ended June 30, 1999 from $20.9 million in the three months ended
June 30, 1998 as a result of the inclusion of the Fiscal Year 1999 Purchases.
Gross profit as a percentage of revenues decreased to 28.1%, from 28.6%,
primarily due to a drop in utilization of salaried employees caused by a general
reduction in demand for IT consulting services.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $7.8 million, or
53.1% to $22.6 million in the three months ended June 30, 1999 from $14.8
million in three months ended June 30, 1998. The increase was primarily due to
the inclusion of selling, general and administrative expenses related to the
Fiscal Year 1999 Purchases, increased compensation to existing staff, new staff
added in advance of anticipated continued growth, additional occupancy costs and
increased marketing and sales activities during the first quarter of fiscal
2000.
Selling, general and administrative expenses as a percent of revenue were
25.5% in the three months ended June 30, 1999 compared to 20.2% in the three
months ended June 30, 1998. The majority of the Fiscal Year 1999 purchases offer
solutions oriented services which require a higher level of selling, general and
administrative infrastructure in order to generate revenue. In addition, the
increased staffing, occupancy, marketing and sales activities occurred in
advance of anticipated continued growth and were in place in the period when the
Company experienced a reduction in demand for its services.
Depreciation and Amortization of Goodwill
Depreciation and amortization of goodwill increased $0.8 million, or
123.1% to $1.5 million in the three months ended June 30, 1999 from $0.7 million
in three months ended June 30, 1998. The increase was primarily due to the
inclusion of amortization of goodwill related to the Fiscal Year 1999 Purchases.
Goodwill Impairment Charge
In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, the Company considers, among other factors, deterioration of operating
performance or significant loss of client base to be indicators of potential
impairment of long-lived assets. The Company experienced a reduction in demand
for its services, which it believes to be principally related to strategies
being employed by the Company's customers of reducing investment in IT
infrastructures while their Y2K compliance is being ascertained. In particular,
one of the Company's operating locations experienced a significant reduction in
demand. As a result of the reduction in demand for its services, the Company
recognized an impairment of goodwill during the three months ended June 30, 1999
as the future undiscounted cash flows of certain of its long-lived assets were
estimated to be less than the asset's related carrying value. The pre-tax
non-cash charge was $20.0 million, which represents the excess of the assets'
carrying value over the Company's estimate of its fair value.
10
<PAGE>
Restructuring of Operations
As part of the Company's reorganization into five practice groups, the
Company identified opportunities to align its operating structure by closing
certain of its redundant facilities and rationalizing headcount to conform to
the Company's new operating structure. Accordingly, the Company adopted a
restructuring plan, which resulted in a pre-tax restructuring charge of $4.9
million during the three months ended June 30, 1999. The charge includes
provisions for severance of approximately 60 management and operating staff
($3.5 million) as well as closure costs related to a plan of consolidating
certain operating locations ($1.4 million). As the Company's reorganization
plan proceeds, the amount of the restructuring charge could change.
Other Income (Expense)
Other income (expense) primarily consists of interest expense, net of
interest income. Interest expense, net of interest income was $0.5 million in
the three months ended June 30, 1999 as compared to interest income, net of
interest expense of $0.3 million in the three months ended June 30, 1998. The
increase is primarily due to interest expense recognized on the Company's line
of credit during the first quarter of fiscal 2000. The net interest income in
the first quarter of fiscal 1999 was the result of interest income earned on
cash proceeds from the common stock offering completed in March 1998.
Provision for Income Taxes
Provision for income taxes was a benefit of $8.4 million, or an effective
tax rate of 34% of pre-tax loss in the three months ended June 30, 1999,
compared to income tax expense of $2.2 million, or an effective rate of 38.8% of
pre-tax income for the three months ended June 30, 1998. The decrease in the
effective tax rate in the first quarter of fiscal 2000, as compared to the same
period of fiscal year 1999, reflects the impact in a net loss situation of
non-deductible items to the effective tax rate.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth principally through cash flows from
operations, periodic borrowing under its credit facilities and the use of the
net proceeds from its public offerings. On March 12, 1999, the Company entered
into a $100 million revolving line of credit facility (the "Credit Line").
Interest rate options include base borrowings at the lead lender's prime rate
and term loans at LIBOR plus an applicable margin. The Company believes the
existing sources of liquidity and funds generated from operations will provide
adequate cash to fund its anticipated cash working capital needs at least
through the next year.
The Company's primary sources of liquidity are cash balances, the Credit
Line and the collection of its accounts receivable. Accounts receivable
increased as the Company's operations have grown. Total receivables were 66 and
61 days of revenue at June 30, 1999 and March 31, 1999 respectively. The
increase was primarily the result of certain customers lengthening the timing of
their payments to Cotelligent. Should the Company be unable to bill and collect
for its services on a timely basis, the Company could draw upon available cash
or existing credit facilities to finance its operations.
Cash used in operating activities was $6.7 million for the three months
ended June 30 1999. The Company used borrowings on its Credit Line to fund cash
needs for its operations. At June 30, 1999, the Company had an outstanding
balance of $39.3 million under the Credit Line.
12
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the quarter ended
June 30, 1999.
Cotelligent, Inc. filed with the Securities and Exchange Commission a
copy of the press release dated June 17, 1999 announcing earnings
expectations for the three months ended June 30, 1999.
13
<PAGE>
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.
COTELLIGENT, INC.
Date: August 16, 1999 /S/ Daniel E. Jackson
-----------------------------
Executive Vice President,
Chief Financial Officer and
Treasurer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COTELLIGENT, INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE
30,1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0001004963
<NAME> COTELLIGENT, INC.
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-1-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 617
<SECURITIES> 0
<RECEIVABLES> 67935
<ALLOWANCES> 1606
<INVENTORY> 0
<CURRENT-ASSETS> 72210
<PP&E> 21109
<DEPRECIATION> 8459
<TOTAL-ASSETS> 168205
<CURRENT-LIABILITIES> 39101
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> 89525
<TOTAL-LIABILITY-AND-EQUITY> 168205
<SALES> 88566
<TOTAL-REVENUES> 88566
<CGS> 63708
<TOTAL-COSTS> 49009
<OTHER-EXPENSES> 596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 652
<INCOME-PRETAX> (24747)
<INCOME-TAX> (8413)
<INCOME-CONTINUING> (16334)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16334)
<EPS-BASIC> (1.21)
<EPS-DILUTED> (1.21)
</TABLE>
