THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(D) OF REGULATION
S-T.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File number: 0-28202
WALSH INTERNATIONAL INC.
------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 51-0309207
- ---------------------------------- ----------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
105 Terry Drive, Suite 118, Newtown, Pennsylvania 18940
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 215-860-4949
------------
----------------------------------------------------------
(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 to 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 October 31, 1996 there were outstanding 10,490,435 shares of
Common Stock of Walsh International Inc.
<PAGE>
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
Number
------
PART I FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial statements
Consolidated Statements of Operations (unaudited) for the Three
Months Ended September 30, 1996 and 1995.......................... 3
Consolidated Balance Sheets as of September 30, 1996
(unaudited) and June 30, 1996..................................... 4
Consolidated Statements of Cash Flows (unaudited) for the
Three Months Ended September 30, 1996 and 1995.................... 5
Notes to Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition................................ 8
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K................................. 10
Signatures....................................................... 11
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
Dollars in thousands, except per share amounts, unaudited
<TABLE>
<CAPTION>
----------------------------------------
Three Months Ended
September 30,
----------------------------------------
1996 1995
---------------- ------------------
<S> <C> <C>
Revenue $ 12,758 $ 10,300
---------------- ------------------
Costs and expenses:
Production costs 4,853 4,479
Selling, general and administrative expenses 6,078 4,991
Research and development costs 962 897
Amortization of intangible assets 36 28
---------------- ------------------
Total costs and expenses 11,929 10,395
---------------- ------------------
Operating profit (loss) 829 (95)
Interest income 190 281
Interest expense (54) (596)
Minority Interest 73 -
---------------- ------------------
Income (loss) from continuing operations
before income taxes 1,038 (410)
Income tax provision (236) (23)
---------------- ------------------
Income (loss) from continuing operations 802 (433)
Discontinued operations:
Loss from discontinued operations, net - (797)
---------------- ------------------
Net income (loss) $ 802 $ (1,230)
================ ==================
Income (loss) per share from continuing operations $ 0.08 $ (0.06)
Loss per share from discontinued operations, net 0.00 (0.10)
---------------- ------------------
Net income (loss) per share $ 0.08 $ (0.16)
================ ==================
Shares used in computing income (loss) per share 10,653,821 7,745,173
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
WALSH INTERNATIONAL INC AND SUBSIDIARIES
----------------------------------------
Consolidated Balance Sheets
Dollars in thousands
<TABLE>
<CAPTION>
------------------------------------------------------
September 30, June 30,
------------------------------------------------------
ASSETS 1996 1996
------------------------ ----------------------
<S> <C> <C>
Current Assets: (Unaudited)
Cash and cash equivalents $ 6,468 $ 8,629
Marketable securities 10,236 9,992
Accounts receivable, principally trade 11,993 13,050
Prepaid expenses and other current assets 813 923
------------------------ ----------------------
Total current assets 29,510 32,594
Property and equipment, net 4,642 4,663
Goodwill, net 3,523 3,551
Other assets, net 3,436 3,209
------------------------ ----------------------
Total assets $ 41,111 $ 44,017
======================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 13 $ 12
Current portion of capital lease obligations 467 443
Accounts payable 6,955 7,808
Accrued liabilities 15,203 17,467
Unearned income 4,001 4,541
------------------------ ----------------------
Total current liabilities 26,639 30,271
------------------------ ----------------------
Long-term debt 1,111 1,105
Capital lease obligations 1,601 1,652
Other liabilities 6,171 6,295
Minority interest 75 148
Commitments
Stockholders' equity:
Common stock, $0.01 par value, 20,000,000 shares
authorized and and 10,497,985 10,484,835 shares issued,
respectively. 105 105
Paid-in capital 119,248 119,175
Accumulated deficit (114,146) (114,948)
Cumulative translation adjustment 741 675
Unrealized gain (loss) on available for sale securities, net of
tax 23 (4)
Treasury stock, at cost, 20,750 shares (457) (457)
------------------------ ----------------------
Total stockholders' equity 5,514 4,546
------------------------ ----------------------
Total liabilities and stockholders' equity $ 41,111 $ 44,017
======================== ======================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
WALSH INTERNATIONAL INC AND SUBSIDIARIES
----------------------------------------
Consolidated Statements of Cash Flows
Dollars in thousands, unaudited
<TABLE>
<CAPTION>
---------------------------------------------
Three Months Ended
September 30,
---------------------------------------------
1996 1995
------------------ -------------------
<S> <C> <C>
Net cash flows used in operating activities $ (934) $ (972)
------------------ -------------------
Cash flows used in investing activities:
Purchases of marketable securities (217) -
Capital expenditures (337) (191)
Capitalized software (246) (225)
------------------ -------------------
Net cash used in investing activities (800) (416)
------------------ -------------------
Cash flows (used in) provided by financing activities:
Collateral receipts - 8
Common stock issuance costs (588) -
(Repayment) increase of capital leases (5) 120
Options exercised 73 -
Repayment of long-term debt - (39)
------------------ -------------------
Net cash (used in) provided by financing activities (520) 89
------------------ -------------------
Effect of exchange rate movements 93 (218)
Effect of discontinued operations - (2,166)
Net decrease in cash and cash equivalents (2,161) (3,683)
Cash and cash equivalents at beginning of period 8,629 15,110
------------------ -------------------
Cash and cash equivalents at end of period $ 6,468 $ 11,427
================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
WALSH INTERNATIONAL INC AND SUBSIDIARIES
- ----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
---------------------------------------
The consolidated financial statements include the accounts of Walsh
International Inc. (the "Company") and all of its majority-owned
subsidiaries.
The accompanying consolidated statements of operations and consolidated
statements of cash flows for the three months ended September 30, 1996
and 1995, the consolidated balance sheets as of September 30, 1996 and
the related information of Walsh International Inc. included in these
notes to the consolidated financial statements are unaudited. In the
opinion of management, the interim financial information reflects all
adjustments (consisting only of items of a normal recurring nature
except for discontinued operations) necessary for the fair presentation
of the financial position, results of operations and cash flows for the
periods presented. Results of operations for the three months ended
September 30, 1996 are not necessarily indicative of the results to be
expected for the entire year.
The June 30, 1996 balance sheet was derived from the Company's June 30,
1996 audited consolidated financial statements, but does not include
all disclosures required by generally accepted accounting principles.
These interim financial statements should be read in conjunction with
the audited consolidated financial statements and related notes thereto
included in the Company's Consolidated Financial Statements on Form
10-K for the year ended June 30, 1996.
2. DISCONTINUED OPERATIONS - SOURCE BUSINESS
-----------------------------------------
The Company consummated an Initial Public Offering ("IPO") in April
1996. Immediately prior to the IPO, the Company spun-off the Source
business to its stockholders by the distribution of all of the issued
and outstanding capital stock of Source Informatics Inc., a holding
company formed for that purpose. The results of the Source business are
shown as discontinued operations in the consolidated statements of
operations and cash flows for the three months ended September 30,
1995.
6
<PAGE>
3. EARNINGS (LOSS) PER SHARE
--------------------------
Earnings (loss) per share is computed using the weighted average number
of shares of Common Stock outstanding. Common equivalent shares from
stock options and warrants (using the treasury stock method) have been
included in the computation when dilutive except that, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletin, all stock
options and warrants issued by the Company at an exercise price below
the public offering price during the twelve-month period prior to the
offering have been included in the calculations as if they were
outstanding for all periods presented using the treasury stock method
and the IPO price of $12.00. Common equivalent shares from the
Preferred Stock (using the if-converted method) have been included in
the calculation for the three months ended September 30, 1995.
4. INCOME TAXES
------------
For the three months ended September 30, 1996 the effective tax rate
was 23% compared to a tax provision on a loss for the equivalent period
of fiscal 1995. The effective income tax rate is based on the Company's
projected mix of the profits of its subsidiaries operating in different
countries.
7
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
--------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
-----------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Revenue for the Company's first quarter of fiscal year 1996 was $12.8 million,
an increase of 24% over the comparable period of the prior year. The increase
was principally due to a 27% improvement in the Company's PRECISE and Premiere
revenues. The revenue increases were spread across substantially all markets.
Excluding adverse currency movements revenue increased by 26%.
Production costs in the first quarter were $4.9 million (38% of revenue)
compared with $4.5 million (43% ) in the comparable quarter of fiscal year 1995.
The decline in production costs as a percentage of total revenues reflect the
company's operating leverage.
Selling, general and administrative expenses in the first quarter were $6.0
million (47% of revenue), compared with $5.0 million (48% of revenue) in the
comparable quarter of the prior year. The 22% increase is due to sales and
marketing expenditure associated with the newly launched Premiere product plus
increased investment in senior sales personnel.
Research and development costs were $1.0 million (8% of revenues) for the
quarter compared with $0.9 million (9% of revenues) for the comparable quarter
of fiscal 1995 reflecting the continued investment in research and development.
1995 levels were higher as a percentage of revenue due to external consultancy
for the impending Premiere launch. The percentage of software development costs
capitalized has remained at similar rates in each period.
Net interest income for the quarter ended September 30, 1996 was $0.1 million,
compared to a net interest expense of $0.3 million for the comparable fiscal
1995 period, as a result of the repayment of the debentures following the IPO.
The effective tax rate for the quarter ended September 30, 1996 was 23% which
compares to a provision on a loss for the comparable fiscal 1995 period.
The Company has received a ruling from the IRS that the Spin-Off qualified as a
tax-free distribution pursuant to Section 355 of the Internal Revenue Code of
1986.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company's cash and cash equivalents totalled $6.5
million, a decrease of $2.2 million from the $8.6 million balance at June 30,
1996. The decrease is primarily due to the payment of costs associated with the
IPO plus some adverse timing differences in the settlement of receivables and
payables.
The Company additionally holds $10.2 million in a professionally managed
portfolio of marketable securities. The marketable securities are considered
current assets by the Company as it has both the ability and the intent to
realize these securities in the normal operating cycle of the business.
The Company believes that the anticipated cash flow from operations and existing
cash balances will satisfy the Company's projected working capital and capital
expenditure requirements through at least the end of fiscal 1998.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number
------
3.1 Restated Certificate of Incorporation of Walsh International Inc.,
incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 of the Company (file no. 333-316)
3.2 By-laws of Walsh International Inc., as amended, incorporated by
reference to Exhibit 3.2 to the Registration Statement on Form
S-1 of the Company (file no. 333-316)
11 Computation of Earnings (Loss) per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
10
<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.
Date: Walsh International Inc.
By /s/Martyn D Williams
-------------------------
Martyn D Williams
Chief Financial Officer
On behalf of the registrant and
as principal financial officer.
11
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Walsh International Inc.,
incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 of the Company (file no. 333-316)
3.2 By-laws of Walsh International Inc., as amended, incorporated by
reference to Exhibit 3.2 to the Registration Statement on Form
S-1 of the Company (file no. 333-316)
11 Computation of Earnings (Loss) per Share
27 Financial Data Schedule
</TABLE>
12
EXHIBIT 11
WALSH INTERNATIONAL INC. AND SUBSIDIARIES
Computation of Earnings (Loss) Per Common Share
Dollars in thousands, except per share amounts
<TABLE>
<CAPTION>
Three Months Ended
------------------
PRIMARY EARNINGS PER SHARE September 30, September 30,
1995 1996
----------------- -----------------
<S> <C> <C>
Weighted average common shares outstanding 5,807,891 10,477,325
Assumed exercise of certain stock options and other 1,937,282 176,586
common stock equivalents (1)
----------------- -----------------
7,745,173 10,653,821
================= =================
Income (loss) from continuing operations $ (433) $ 802
Loss from discontinued operations, net (797) --
----------------- -----------------
Net Income (Loss) $ (1,230) $ 802
================= =================
Income (loss) per share from continuing $ (0.06) $ 0.08
operations
Loss per share from discontinued operations, net $ (0.10) --
----------------- -----------------
Net Earnings (Loss) per share $ (0.16) $ 0.08
================= =================
FULLY DILUTED EARNINGS PER SHARE
Weighted average common shares outstanding 5,807,891 10,477,325
Assumed exercise of certain stock options and other 1,937,282 185,614
common stock equivalents (1)
-----------------
-----------------
7,745,173 10,662,849
================= =================
Income (loss) from continuing operations $ (433) $ 802
Loss from discontinued operations, net (797) --
----------------- -----------------
Net Income (Loss) $ (1,230) $ 802
================= =================
Income (loss) per share from continuing operations $ (0.06) $ 0.08
Loss per share from discontinued operations, net $ (0.10) --
----------------- -----------------
Net Earnings (Loss) per Share $ (0.16) $ 0.08
================= =================
</TABLE>
1) The Common Stock equivalents consist of stock options, warrants and
the Series A Convertible Preferred Stock. Common equivalent shares
from convertible preferred stock (using the if- converted method) and
stock options and warrants (using the treasury stock method) have been
included in the computation when dilutive (except that, pursuant to
the Securities and Exchange Commission rules, the Series A Convertible
Preferred Stock which was converted into Common Stock in connection
with the Company's initial public offering is included as if converted
at the original date of issuance even though inclusion may be
anti-dilutive). Pursuant to the Securities and Exchange Commission
Staff Accounting Bulletin all common and common equivalent shares
issued by the Company at an exercise price below the assumed public
offering price during the twelve-month period prior to the offering
have been included in the calculation as if they were outstanding for
the three months ended September 30, 1995, (using the treasury stock
method and the initial public offering price of $12.00 Per share).
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-01-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 6,468
<SECURITIES> 10,236
<RECEIVABLES> 11,993
<ALLOWANCES> 311
<INVENTORY> 56
<CURRENT-ASSETS> 29,510
<PP&E> 14,043
<DEPRECIATION> 9,401
<TOTAL-ASSETS> 41,111
<CURRENT-LIABILITIES> 26,639
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> 5,409
<TOTAL-LIABILITY-AND-EQUITY> 41,111
<SALES> 12,758
<TOTAL-REVENUES> 12,758
<CGS> 0
<TOTAL-COSTS> 11,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 1,038
<INCOME-TAX> 236
<INCOME-CONTINUING> 802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 802
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
