<PAGE>
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, 1998
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, including 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 6, 1998, there were 51,175,878 shares of common stock of the
registrant outstanding.
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WHITTMAN-HART, INC.
FORM 10-Q
For the quarterly period ended June 30, 1998
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 (unaudited) and
December 31, 1997 3
Consolidated Statements of Earnings and Comprehensive Income for
the three and six months ended June 30, 1998 and
June 30, 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and June 30, 1997 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
INDEX TO EXHIBITS 13
SIGNATURES 14
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WHITTMAN-HART, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ----------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 79,989,020 $ 9,050,811
Short-term investments 59,886,584 58,708,379
Trade accounts receivable, net of allowance for
doubtful accounts of $654,690 and $497,746 in
1998 and 1997, respectively 48,839,221 34,077,154
Prepaid expenses and other current assets 4,259,846 3,185,175
Notes and interest receivable 174,197 48,602
Deferred income taxes 785,449 801,315
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Total current assets 193,934,317 105,871,436
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Property and equipment, net 22,223,147 15,081,063
Notes receivable - 149,019
Other assets 1,636,438 699,302
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Total assets $ 217,793,902 $ 121,800,820
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,656,660 $ 2,039,125
Accrued compensation and related costs 20,553,991 15,684,561
Income taxes payable 4,980,835 1,426,632
Accrued expenses and other liabilities 297,965 3,977,585
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Total current liabilities 27,489,451 23,127,903
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Deferred income taxes 322,195 190,562
Deferred rent 1,399,258 1,329,225
Deferred revenue 91,648
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Total liabilities 29,302,552 24,647,690
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Stockholders' equity:
Preferred stock, $.001 par value; 3,000,000
shares authorized, none issued and outstanding - -
Common stock, $.001 par value; 75,000,000 authorized,
50,361,162 and 45,207,254 shares issued and
outstanding in 1998 and 1997, respectfully 50,361 45,207
Additional paid-in capital 164,591,378 81,676,268
Retained earnings 24,880,035 16,644,138
Deferred compensation (1,029,277) (1,209,925)
Accumulated other comprehensive income (1,147) (2,558)
------------ -----------
Total stockholders' equity 188,491,350 97,153,130
------------ -----------
Total liabilities and stockholders' equity $ 217,793,902 $ 121,800,820
------------ -----------
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</TABLE>
See accompanying notes to consolidated financial statements
3
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WHITTMAN-HART, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Revenues $ 68,937,107 $ 41,131,927 $127,597,421 $76,076,569
Cost of services 39,857,106 24,493,944 74,269,990 45,360,356
------------- ------------- ------------- ----------
Gross profit 29,080,001 16,637,983 53,327,431 30,716,213
Costs and expenses:
Selling 2,561,906 1,524,825 4,371,892 2,745,461
Recruiting 2,617,925 1,423,659 4,543,561 2,420,459
General and administrative 17,689,058 9,545,149 32,910,799 17,883,457
Business combination costs - - 383,044 -
------------- ------------- ------------- ----------
Total costs and expenses 22,868,889 12,493,633 42,209,296 23,049,377
------------- ------------- ------------- ----------
Operating income 6,211,112 4,144,350 11,118,135 7,666,836
Other income (expense):
Interest expense - (9,000) (6,206) (13,250)
Interest income 1,401,533 855,353 2,281,945 1,750,697
Other, net 1,298 (51,294) 8,188 (201,914)
------------- ------------- ------------- ----------
Total other income 1,402,831 795,059 2,283,927 1,535,533
Income before income taxes 7,613,943 4,939,409 13,402,062 9,202,369
Income taxes:
Income tax 3,034,374 2,003,183 5,501,543 3,716,674
Initial deferred income tax - - 296,048 -
------------- ------------- ------------- ----------
Total income taxes 3,034,374 2,003,183 5,797,591 3,716,674
------------- ------------- ------------- ----------
Net income $ 4,579,569 $ 2,936,226 $ 7,604,471 $ 5,485,695
Other comprehensive income:
Foreign currency translation
adjustments 622 - 1,411 -
------------- ------------- ------------- ----------
Comprehensive income $ 4,580,191 $ 2,936,226 $ 7,605,882 $ 5,485,695
------------- ------------- ------------- ----------
------------- ------------- ------------- ----------
Basic earnings per share $ 0.09 $ 0.07 $ 0.16 $ 0.13
------------- ------------- ------------- ----------
------------- ------------- ------------- ----------
Diluted earnings per share $ 0.09 $ 0.06 $ 0.15 $ 0.12
------------- ------------- ------------- ----------
------------- ------------- ------------- ----------
Weighted average number of
common shares outstanding 48,682,748 43,818,946 47,290,710 43,673,180
------------- ------------- ------------- ----------
------------- ------------- ------------- ----------
Weighted average number of common
and common equivalent shares
outstanding 53,572,628 46,783,362 51,791,940 46,519,064
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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WHITTMAN-HART, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,604,471 $ 4,532,882
Adjustments to reconcile net income to net cash
provided by (used in ) operating activities:
Depreciation and amortization 1,639,744 689,041
Deferred income taxes 147,499 (223,505)
Loss on sales of short-term investments (9,119) (5,703)
Changes in assets and liabilities, net of acquisition:
Trade accounts receivable, net (13,492,554) (7,305,395)
Prepaid expenses and other current assets (1,044,849) (648,974)
Notes receivable (32,376) (1,904)
Income tax receivable
Other assets (839,440) (933,638)
Accounts payable (394,591) (516,559)
Accrued compensation and related costs 4,869,430 1,710,279
Income taxes payable 2,987,703 1,938,874
Accrued expenses and other liabilities 1,569,185 364,286
Deferred revenue 61,507 -
Deferred rent 70,033 75,084
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Net cash provided by (used in) operating activities 3,136,643 (325,232)
------------ -------------
Cash flows from investing activities:
Purchases of investments (66,687,436) (49,704,989)
Sales and maturities of investments 65,550,074 31,645,742
Cash acquired in business combination 28,378 (605,264)
Purchases of property and equipment (8,033,297) (4,305,723)
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Net cash (used in) investing activities (9,142,281) (22,970,234)
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Cash flows from financing activities:
Proceeds from exercise of stock options 7,361,681 967,981
Proceeds from issuance of common stock, net of issue costs 69,783,402 640,454
Payment of long-term debt (280,869) -
S corporation distributions - QCC (674,670) -
Proceeds from employee stock purchase plan 754,303 -
------------ -------------
Net cash provided by financing activities 76,943,847 1,608,435
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Net increase (decrease) in cash and cash equivalents 70,938,209 (21,687,031)
Cash and cash equivalents at beginning of period 9,050,811 35,898,095
------------ -------------
Cash and cash equivalents at end of period $ 79,989,020 $ 14,211,064
------------ -------------
------------ -------------
Supplemental disclosures of cash flow information:
Interest paid $ - $ -
Income taxes paid 885,180 1,279,578
Supplemental disclosures of noncash financing activities:
Tax benefit related to stock plans 5,008,993 1,376,188
Issuance of restricted stock awards 900,000 900,000
Issuance of common stock for purchase of software - 247,874
Issuance of common stock for business combinations (shares) 300,000 -
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated 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, 1998
are not necessarily indicative of the results to be expected for the year
ending December 31, 1998.
These financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto for the
year ended December 31, 1997, included in the Annual Report on Form 10-K
filed by the Company with the Securities and Exchange Commission.
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" as of January 1, 1998. Required changes
are reported in the Consolidated Statements of Earnings and Comprehensive Income
and Consolidated Balance Sheets.
2. COMPUTATION OF EARNINGS PER SHARE
Net income and earnings per share are computed in accordance with Financial
Accounting Standards No. 128, "Earnings per share" ("Statement 128").
3. BUSINESS COMBINATION
During March 1998, the Company acquired all the outstanding capital stock
of QCC, Inc. ("QCC") for 600,000 shares of its common stock. Headquartered in
the Boston metropolitan area, QCC's approximately 75 professionals provide the
following services: package software evaluation; business process reengineering;
data warehousing; implementation of software packages developed by
SSA-Registered Trademark-, Oracle-Registered Trademark-, and
JDEdwards-Registered Trademark-; application development for AS/400 and client
server applications; and Year 2000 compliance services. This business
combination has been accounted for as a pooling-of-interests combination. The
stockholders' equity and operations of QCC were not material in relation to
those of the Company. As such, the Company has recorded the combination without
restating prior periods' consolidated financial statements to reflect the
pooling-of-interests combination. In connection with the acquisition of QCC,
the Company recorded deferred income tax expense related to the establishment of
deferred income tax assets and liabilities which arose due to the change in tax
status from a S corporation to a C corporation.
4. STOCKHOLDERS' EQUITY
On May 8, 1998, the Company completed a follow-on public offering of its
common stock in which an additional 3,400,000 shares were sold by the Company,
resulting in net proceeds to the Company of $69.8 million.
In July 1998 the Board of Directors approved a 2-for-1 split of its
common shares. Shareholders will receive one additional common share for
every share held on the record date of July 12, 1998. All of the per share
data, as appropriate, reflect this split. The effect of the split is
presented retroactively within
6
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stockholders' equity at June 30, 1998 and December 31, 1997 by transferring
the par value for the additional shares issued from the additional paid in
capital accounts to common stock accounts.
5. SUBSEQUENT EVENT
During July 1998, the Company acquired North Central Consulting, Inc.
("NCC"), a Minneapolis-based IT services firm. The Company issued 638,508
shares of its common stock in the transaction, which will be accounted as a
pooling-of-interests combination and, accordingly, the Company's historical
consolidated financial statements presented in future reports will be
restated to include the accounts and results of NCC. Headquartered in
Minnetonka, Minnesota, with a satellite office in Milwaukee, NCC's
approximately 120 professionals specialize in providing ERP software
implementations, custom application development and internet-enabled
solutions to middle-market manufacturing, distribution and financial services
companies, as well as some divisions and departments of Fortune 500
companies. The combination of Whittman-Hart's recently opened Minneapolis
branch with approximately 40 employees and NCC's four-year-old office
accelerates Whittman-Hart's ability to provide a full-suite of IT services to
its target customer base.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Whittman-Hart, Inc. (the "Company") provides strategic information
technology ("IT") business solutions designed to improve its clients'
productivity and competitive position. The Company offers its clients a
single source for a comprehensive range of services required to successfully
design, develop and implement integrated solutions in the client/server, open
systems, midrange and mainframe computing environments. The Company provides
its service through five business units: Solution Strategies, Package
Software Solutions, Custom Applications, Network Enable Solutions, and
Interactive Solutions. Among the services offered are systems integration;
strategic IT planning; business process reengineering; organizational change
management; package software evaluation and implementation; custom
application development; networking and connectivity; conventional and
multimedia documentation and training; design and implementation of
collaborative computing and electronic commerce solutions (such as
Internet/intranet and electronic data interchange). The Company believes
this breadth of services fosters long-term client relationships, affords
cross-selling opportunities and minimizes the Company's dependence on any
single technology.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected consolidated
statements of earnings and comprehensive income data as a percentage of
revenues:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
- ------------------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF EARNINGS
AND COMPREHENSIVE INCOME DATA:
Revenues 100% 100% 100% 100%
Cost of services 58 60 58 60
---- ---- ---- ----
Gross profit 42 40 42 40
Costs and expenses:
Selling 3 4 3 4
Recruiting 4 3 4 3
General and administrative 26 23 26 23
Business combination costs - - -* -
---- ---- ---- ----
Total costs and expenses 33 30 33 30
---- ---- ---- ----
Operating income 9 10 9 10
Other income 2 2 2 2
---- ---- ---- ----
Income before income taxes 11 12 11 12
Income taxes 4 5 5 5
Initial deferred income taxes - - - -
---- ---- ---- ----
Total income taxes 4 5 5 5
---- ---- ---- ----
Net income 7% 7% 6% 7%
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
* - Represents less than 1%
8
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REVENUES. Revenues increased 68% to $ 68.9 million for the three months
ended June 30, 1998 from $41.1million for the three months ended June 30, 1997.
Revenues in the first six months of 1998 also increased 68% to $127.6 million
from $76.1 million for the first six months of 1997. These increases were
attributable to the addition of new clients and the growth of current client
relationships at existing and new branch locations. Revenues from the Company's
ten most significant clients grew in both the second quarter and first six
months of 1998 by 50% and 48%, respectively, but as a percentage of total
revenues declined to 15% for both the three and six months ended June 30, 1998
as compared to 20% for the same periods in the prior year.
GROSS PROFIT. Gross profit consists of revenues less cost of services, which
includes consultant salaries and benefits. Gross profit for the three months
ended June 30, 1998 grew 75% to $29.1 million from $16.6 million for the three
months ended June 30, 1997. Gross profit in the first six months of 1998
increased 74% to $53.3 million from $30.7 in the first six months of 1997. Gross
profit as a percentage of revenues was 42% for the three and six months ended
June 30, 1998 as compared to 40% for the three and six months ended June 30,
1997. This increase was attributable to a change in the sales mix toward
higher-end service offerings and the Company's established branches reaching
critical mass, partially offset by lower margins in recently opened branches.
SELLING. Selling expenses include the salaries, benefits, commissions,
travel, entertainment and all other direct costs associated with the
Company's direct sales force. Selling expenses for the three months ended
June 30, 1998 increased approximately 68% to $2.6 million from $1.5 million
for the three months ended June 30, 1997. Selling expenses in the first six
months of 1998 increased 59% to $4.4 million from $2.7 million in the first
six months of 1997. These increases were attributable to higher commissions
and other costs associated with the increase in revenues. As a percentage of
revenues, however, selling expenses for the three months ended June 30,1998
and for the six months ended June 30, 1998 decreased to 3% as compared to 4%
for the same period in the prior year. The decrease in selling expenses as a
percentage of revenues was attributable to the Company's ability to leverage
its fixed selling costs over a greater revenue base.
RECRUITING. Recruiting expenses consist of costs related to hiring new
personnel. These costs include the salaries, benefits, bonuses and other direct
costs of in-house recruiters, outside recruiting agency fees, sign-on bonuses,
relocation fees and advertising costs. Recruiting expenses for the three months
ended June 30, 1998 increased 84% to $2.6 million from $1.4 million for the
three months ended June 30, 1997. Recruiting expenses for the first six months
of 1998 increased 88% to $4.5 million from $2.4 million for the first six months
of 1997. The number of employees increased 62% to 2,309 at June 30, 1998 from
1,422 at June 30, 1997. Total recruiting costs per hire increased to
approximately $5,700 for the six months ended June 30, 1998 from $4,900 for the
six months ended June 30, 1997. As a percentage of revenues, recruiting
expenses increased to 4% for the three and six months ended June 30, 1998 as
compared to 3% for the comparable periods in 1997. This increase is
attributable to expanding the Company's recruiting infrastructure to support
anticipated hiring needs. As of June 30, 1998, approximately 79% of the total
employees were consultants.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include
salaries and benefits of management and support personnel, facilities costs,
training, travel, outside professional fees and all other branch and corporate
costs. General and administrative expenses for the three months ended June 30,
1998 increased 85% to $17.7 million from $9.5 million for the three months
ended June 30, 1997. General and administrative expenses for the first six
months of 1998 increased 84% to $32.9 million from $17.9 million for the first
six months of 1997. As a percentage of revenues, general and administrative
expenses increased to 26% for the three months and six months ended June 30,
1998 from 23% for the three and six months ended June 30, 1997. This increase
was attributable to new and newly acquired offices, integration costs associated
with the Company's acquisitions, corporate initiatives associated with the
Company's Focus 2002 strategic plan, costs related to new branch locations and
the addition of management to support the Company's growth strategies.
9
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BUSINESS COMBINATION COSTS. Business combination costs were $0.4 million,
or less than 1% of revenues, for the six months ended June 30, 1998. These
costs related to the Company's acquisition of QCC Incorporated ("QCC") in
March 1998, which was accounted for as a pooling-of-interests. The business
combination costs included legal, accounting and other transaction-relations
fees and expenses. There were no material acquisition-related costs in the
six months ended June 30,1997.
INCOME TAXES. The Company's effective tax rate was 40% and 43% for second
quarter and first six months of 1998, respectively, as compared to 41% and 40%
for the same periods in 1997. The increased tax rate for the first six months
of 1998 was the result of the Company incurring non-deductible business
combination costs and, in addition, recording deferred income tax expense of
$0.3 million to establish deferred tax assets and liabilities arising at the
time of the combination with QCC.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had approximately $139.9 million of cash,
cash equivalents and short-term investments, compared to $67.8 million at
December 31, 1997. The Company's primary source of liquidity has been cash from
operations and cash provided through equity offerings. The Company has a loan
agreement for up to $5.0 million of unsecured credit with interest payable, 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, 1998. The Company's loan
agreement expires on April 30, 1999.
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. On August 27, 1996, the Company completed a follow-on public
offering of its common stock, resulting in net proceeds to the Company of
approximately $27.8 million. On May 8, 1998, the Company completed another
follow-on public offering of its common stock, resulting in net proceeds to
the Company of $69.8 million.
Operating activities provided net cash flows of $3.1 million for the six
months ended June 30, 1998. The increase was due primarily to net income,
increases in accrued compensation, income taxes payable and other accrued
liabilities, which were partially offset by increases in accounts receivable
and other current assets.
The Company plans to use the funds generated from its third public
offering primarily for the development and expansion of its existing
operations, including: (i) expansion of the Company's Chicago West Loop
complex from approximately 40,000 square feet to over 300,000 square feet
during the next two years to accommodate the further development of the
Whittman-Hart Institute of Strategic Education ("WHISE"), the relocation of
the Company's headquarters and the growth of the Company's Chicago branch
office; and (ii) general corporate purposes, including working capital,
branch expansion and possible acquisitions of related businesses.
The Company anticipates the net proceeds of its three public offerings,
together with existing sources of liquidity and funds generated from
operations, will provide adequate cash to fund its anticipated cash needs at
least through the next twelve months.
10
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YEAR 2000
The Company believes that the effect of the Year 2000 on its internal
information systems will have an immaterial impact on the Company. The Company
believes that a majority of middle-market companies have yet to achieve Year
2000 compliance. To resolve the Year 2000 issue, many companies are electing to
install new package software applications, rather than modify existing systems,
thus creating significant demand for package software-related services such as
those provided by the Company. Consequently, the Company believes that
companies' need to address their Year 2000 compliance is creating significant
demand for IT products and services such as those provided by the Company.
There can be no assurance that the passage of the Year 2000 will not have a
material adverse effect on the demand for the Company's services. In addition,
while the Company is not aware of any existing or potential claims, the
occurrence of Year 2000 could have a material adverse effect on the Company's
business, financial condition and results of operations, whether or not the
Company bears any responsibility, legal or otherwise, for the occurrence of
those problems.
ACQUISITIONS
During March 1998, the Company acquired all the outstanding capital stock
of QCC, Inc. ("QCC") for 600,000 shares (includes the effect of stock split)
of its common stock. Headquartered in the Boston metropolitan area, QCC's
approximately 75 professionals provide the following services: package
software evaluation; business process reengineering; data warehousing;
implementation of software packages developed by SSA-Registered Trademark-,
Oracle-Registered Trademark-and JDEdwards-Registered Trademark-; application
development for AS/400 and client server applications; and Year 2000
compliance services. This business combination has been accounted for as a
pooling-of-interests combination. The stockholders' equity and operations of
QCC were not material in relation to those of the Company. As such, the
Company has recorded the combination without restating prior periods'
consolidated financial statements to reflect the pooling-of-interests
combination.
During July 1998, the Company acquired North Central Consulting, Inc.
("NCC"), a Minneapolis-based IT services firm. The Company issued 638,508
shares (includes the effect of stock split) of its common stock in the
transaction, which will be accounted as a pooling-of-interests combination
and, accordingly, the Company's historical consolidated financial statements
presented in future reports will be restated to include the accounts and
results of NCC. Headquartered in Minnetonka, Minnesota, with a satellite
office in Milwaukee, NCC's approximately 120 professionals specialize in
providing ERP software implementations, custom application development and
internet-enabled solutions to middle-market manufacturing, distribution and
financial services companies, as well as some divisions and departments of
Fortune 500 companies. The combination of Whittman-Hart's recently opened
Minneapolis branch with approximately 40 employees and NCC's four-year-old
office accelerates Whittman-Hart's ability to provide a full-suite of IT
services to its target customer base.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 supersedes SFAS No.
14, "Financial Reporting for Segments of a Business Enterprise" and
establishes new standards for reporting information about operating segments
11
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in interim and annual financial statements. This statement is effective for
fiscal years beginning after December 15, 1997. The Company does not believe
that SFAS No. 131 will have a significant impact on its financial statements.
SAFE HARBOR PROVISION
This Form 10-Q contains certain forward-looking statements (as defined
in Section 21E of the Securities Exchange Act of 1934, as amended) that
involve substantial risks and uncertainties. When used in this Form 10-Q, the
words "plans", "intends", "anticipates," and "expects" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements. The Company's actual results,
performance or achievements could differ materially from the results,
performance or achievements expressed in, or implied by, these
forward-looking statements. Risks and uncertainties and other factors that
could cause or contribute to such differences include, but are not limited
to, difficulties in attracting and retaining highly skilled employees, the
Company's ability to manage rapid growth and expansion into new geographic
areas and service lines, the Company's ability to manage the risks associated
with client projects, risks related to recently completed and potential
future acquisitions; the Company's ability to develop IT solutions that keep
pace with continuing changes in technology, evolving industry standards and
changing client preferences; and risks related to Year 2000 failures in
client's information systems. These and other risks are more fully described
in the "Risk Factors" section of the Company's registration statement (No.
333-50029) on Form S-3 filed by the Company with the Securities and Exchange
Commission on April 14, 1998, as amended.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 30, 1998, the Company acquired all of the outstanding capital
stock of QCC, Inc. ("QCC") from the shareholders of QCC, in exchange for
600,000 shares of the Company's Common Stock. The shares of Common Stock
were issued in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933 and Regulation D thereunder.
There were no underwriters or other distributors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on May 21, 1998.
(b) The Stockholders voted to elect two directors of the first class to the
Company's Board of Directors.
<TABLE>
<CAPTION>
DIRECTORS FOR AGAINST ABSTAIN NON-VOTES
---------------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C>
Paul D. Carbery 19,083,957 -- 29,692 --
Edward V. Szofer 19,084,557 -- 29,092 --
</TABLE>
(c) The Stockholders voted a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to increase the number of Common Stock
authorized for issuance from 37,000,000 to 75,000,000 shares of Common Stock.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- -------- ------- ---------
<S> <C> <C> <C>
18,569,656 540,123 3,870 --
</TABLE>
(d) The Stockholders voted a proposal to amend the Company's 1995 Incentive
Stock Plan to increase the number of shares authorized for issuance thereunder
to 12,000,000 shares of Common Stock.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- -------- ------- ---------
<S> <C> <C> <C>
13,729,921 4,160,532 5,327 1,217,869
</TABLE>
12
<PAGE>
ITEM 5. OTHER INFORMATION
On July 1, 1998, the Registrant issued a press release attached as Exhibit 99.
The information contained in this press release is herein incorporated by
reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
(27) Financial Data Schedule
(99) Whittman-Hart Announces 2-for-1 Stock Spilt
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1998.
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.
Whittman-Hart, Inc.
Date: August 14, 1998 By: /s/ Robert F. Bernard
------------------------- -----------------------------
Robert F. Bernard
Chairman of the Board and
Chief Executive Officer
Date: August 14, 1998 By: /s/ Kevin M. Gaskey
------------------------- ------------------------------
Kevin M. Gaskey
Chief Financial Officer and Treasurer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AS OF JUNE 30, 1998 AND THE STATEMENT OF EARNINGS FOR
THE SIX MONTHS ENDED JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 79,989
<SECURITIES> 59,887
<RECEIVABLES> 48,839
<ALLOWANCES> 655
<INVENTORY> 0
<CURRENT-ASSETS> 193,934
<PP&E> 29,094
<DEPRECIATION> 6,871
<TOTAL-ASSETS> 217,794
<CURRENT-LIABILITIES> 27,489
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 188,441
<TOTAL-LIABILITY-AND-EQUITY> 217,794
<SALES> 0
<TOTAL-REVENUES> 127,597
<CGS> 0
<TOTAL-COSTS> 74,270
<OTHER-EXPENSES> 42,209
<LOSS-PROVISION> 572
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,402
<INCOME-TAX> 5,798
<INCOME-CONTINUING> 7,605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,605
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
<PAGE>
EXHIBIT 99
WHITTMAN-HART, INC.
WHITTMAN HART, INC. ANNOUNCES 2-FOR-1 STOCK SPILT
CHICAGO -- Whittman-Hart, Inc. (NASDAQ: WHIT) one of the nation's leading
information technology (IT) services firms, today announced that its Board of
Directors approved a 2-for-1 split of its common shares. Shareholders will
receive one additional common share for every share held on the record date of
July 12, 1998.
Whittman-Hart has approximately 25.2 million common shares outstanding. Upon
completion of the split, the number will increase to approximately 50.4 million.
The additional shares will be mailed or delivered on or about July 31 by the
Company's transfer agent, First Chicago Trust Company of New York. This is the
second time the common stock has split since the company went public on May 3,
1996.
Headquartered in Chicago, Whittman-Hart helps middle-market companies and
divisions and departments of the Fortune 500 improve productivity and
marketplace performance through the strategic use of information technology. In
November 1997, Forbes included Whittman-Hart in its list of the 200 Best Small
Companies in America. The company has more than 2,000 employees in 16 branch
offices throughout the United States and in the United Kingdom. The company had
1997 revenues of $173.5 million. Its web site is www.whittman-hart.com.
