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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
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
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marchFIRST, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 36-3797833
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(State or other jurisdiction of (IRS 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
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(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 April 30, 2000, there were 146,828,804 shares of common stock of the
registrant outstanding.
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marchFIRST, Inc.
FORM 10-Q
For the quarterly period ended March 31, 2000
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 3
and December 31, 1999
Consolidated Statements of Operations 4
for the three months ended March 31, 2000
and March 31, 1999
Consolidated Statements of Cash Flows 5
for the three months ended March 31, 2000
and March 31, 1999
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II: OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 18
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
marchFIRST, Inc.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ -------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 280,970 $ 147,816
Short-term investments 88,856 80,424
Trade accounts receivable, net of allowance for doubtful accounts 406,029 90,709
Prepaid expenses 39,934 11,542
Deferred income taxes - 1,956
------------ -------------
Total current assets 815,789 332,447
------------ -------------
Property and equipment:
Buildings and Land 26,716 23,911
Office furniture and equipment 37,787 19,531
Computer equipment and software 89,757 37,912
Automobiles 380 105
Leasehold improvements 22,273 2,891
------------ -------------
176,913 84,350
Less accumulated depreciation and amortization (41,378) (16,331)
------------ ------------
Net property and equipment 135,535 68,019
Long-term investments 121,071 56,095
Deferred income taxes - 16,896
Intangible assets, net 6,784,391 29,250
Other assets 7,842 1,501
============ =============
Total assets $ 7,864,628 $ 504,208
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,519 $ 5,469
Accrued compensation and related costs 83,658 28,290
Accrued expenses and other liabilities 215,600 13,873
Deferred revenue 56,031 57
Current maturities of long-term debt 17,084 -
------------ -------------
Total current liabilities 411,892 47,689
------------ -------------
Deferred income taxes, net 46,502 -
Deferred rent 2,039 1,865
Long-term debt, less current maturities 3,011 -
------------ -------------
Total liabilities 463,444 49,554
------------ --------------
Stockholders' equity:
Preferred stock, $.001 par value; 3,000 shares authorized, none
issued and outstanding - -
Common stock, $.001 par value; 500,000 authorized, 145,961 and
61,934 shares issued in 2000 and 1999, respectively 146 62
Additional paid-in capital 7,455,195 388,517
Retained earnings (49,840) 67,490
Deferred compensation (561) (1,209)
Accumulated other comprehensive income (loss) (3,756) (206)
------------ -------------
Total stockholders' equity 7,401,184 454,654
------------ -------------
Total liabilities and stockholders' equity $ 7,864,628 $ 551,897
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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marchFIRST, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------- -------------
<S> <C> <C>
Revenues $ 227,396 $ 108,674
Cost of services 114,513 61,560
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Gross profit 112,883 47,114
----------------- -------------
Costs and expenses:
Selling and marketing (excluding stock compensation) 14,842 5,448
General and administrative (excluding stock compensation) 66,494 29,864
Stock compensation 15,214 -
Acquired in-process technology 4,800 -
Amortization of intangible assets 118,274 90
Merger and integration costs 6,924 2,652
----------------- --------------
Total costs and expenses 226,548 38,054
----------------- --------------
Income (loss) from operations (113,665) 9,060
Other income, net 3,327 1,731
----------------- --------------
Net income (loss) before provision for income taxes (110,338) 10,791
Provision for income taxes 6,992 4,776
----------------- --------------
Net income (loss) $ (117,330) $ 6,015
================= ==============
Basic earnings (loss) per share $ (1.28) $ 0.11
================= ==============
Diluted earnings (loss) per share $ (1.28) $ 0.10
================= ==============
Weighted average number of common shares outstanding - basic 91,733 54,590
================= ==============
Weighted average number of common shares outstanding - diluted 91,733 62,286
================= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
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marchFIRST, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (117,330) $ 6,015
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,234 1,259
Amortization of intangible assets 118,274 90
Deferred income taxes 631 (803)
Tax benefit of stock options 9,981 6,882
Acquired in-process technology 4,800 -
Unrealized holding loss on investments - 30
Non-cash stock compensation expense 15,214 1,090
Changes in assets and liabilities, net of acquisition:
Trade accounts receivable, net (66,967) (5,864)
Prepaid expenses 1,317 (797)
Other assets (3,720) 6
Accounts payable 1,755 1,085
Accrued compensation and related costs 13,694 3,606
Income taxes payable (1,384) (3,737)
Accrued expenses and other liabilities (13,269) (1,276)
Deferred revenue (8,870) -
Other, net (418) 181
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Net cash provided by (used in) operating activities (42,058) 7,767
------------ ------------
Cash flows from investing activities:
Purchases of short-term investments (34,314) (32,426)
Sales of short-term investments 67,079 19,844
Investments in non-marketable equity securities (23,087) -
Cash acquired in acquistion 162,102 -
Purchases of property and equipment (14,850) (9,744)
------------ ------------
Net cash provided by (used in) investing activities 156,930 (22,326)
------------ ------------
Cash flows from financing activities:
Proceeds from line of credit, net 2,412 -
Payments on bank debt - (662)
Proceeds from exercise of stock options and sale of common stock 18,999 6,334
Partnership capital distributions - (350)
------------ ------------
Net cash provided by financing activities 21,411 5,322
------------ ------------
Effect of foreign exchange rate changes (3,129)
Net increase (decrease) in cash and cash equivalents 133,154 (9,237)
Cash and cash equivalents at beginning of period 147,816 50,710
------------ ------------
Cash and cash equivalents at end of period $ 280,970 $ 41,473
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 120 $ 13
Income taxes paid 1,863 2,529
Supplemental disclosures of non-cash investing activity:
Common stock issued for acquisition $ 5,286,615 -
</TABLE>
See accompanying notes to consolidated financial statements.
5
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marchFIRST, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of
marchFIRST, 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, except for adjustment
relating to the acquisition as discussed in Note 4. The results of operations
for the three months ended March 31, 2000 are not necessarily indicative of the
results to be expected for the year ending December 31, 2000.
These financial statements should be read in conjunction with the
Company's historical audited consolidated financial statements and notes thereto
for the year ended December 31, 1999 included in the Annual Report on Form 10-K
filed by the Company with the Securities and Exchange Commission.
NOTE 2. BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Trade accounts receivable, net:
Accounts receivable $ 331,809 $ 88,230
Media receivable 11,222 -
Unbilled revenues 73,630 5,998
Less: Allowance for doubtful accounts (10,632) (3,519)
------------ ----------
$ 406,029 $ 90,709
============ ==========
Intangible assets, net:
Workforce in place $ 139,702 $ 12,602
Goodwill 6,694,349 15,640
Customer lists 50,360 1,260
Purchased technology 18,600 -
------------ ----------
$ 6,903,011 $ 29,502
Less: Accumulated amortization (118,620) (252)
------------ ----------
$ 6,784,391 $ 29,250
============ ==========
Accrued expenses and other liabilities:
Marketing costs $ 612 $ -
Professional fees 2,380 980
Merger and related costs 169,302 -
Other 43,306 12,893
------------ ----------
$ 215,600 $ 13,873
============ ==========
</TABLE>
NOTE 3. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) includes changes in the balances of items that
are reported directly as a separate component of stockholders' equity in the
consolidated balance sheets. marchFIRST, Inc. has comprehensive income (loss)
comprised of net unrealized loss on equity
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securities and foreign currency translation adjustments. The components of
comprehensive income (loss) for the three months ended March 31, 2000, and
1999 were as follows:
<TABLE>
<CAPTION>
Three months Ended
March 31, March 31,
2000 1999
----------- ---------
<S> <C> <C>
Net income (loss) $ (117,330) $ 6,015
Foreign currency translation adjustments (2,403) (30)
Net unrealized loss on equity securities (1,147) 46
----------- ---------
Comprehensive income (loss) $ (120,880) $ 6,031
=========== =========
</TABLE>
The components of accumulated other comprehensive loss at March 31, 2000
and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Net unrealized loss on equity securities $ (1,240) $ (93)
Foreign currency translation adjustments (2,516) (113)
----------- ------------
Accumulated other comprehensive loss $ (3,756) $ (206)
========== ==========
</TABLE>
NOTE 4. BUSINESS COMBINATIONS
On March 1, 2000, the Company and USWeb Corporation completed a merger.
Under the terms of the merger agreement, approximately 82,431,300 shares of
Whittman-Hart common stock were exchanged for all the outstanding common stock
of USWeb/CKS. In addition, employee options and warrants to purchase 34,010,426
shares of the Company's common stock and warrants to purchase 2,058,700 shares
of the Company's common stock were assumed by Whittman-Hart and became options
or warrants to purchase Whittman-Hart common stock. These amounts reflect an
exchange ratio of 0.865 of a share of Whittman-Hart common stock for each share
of USWeb/CKS common stock. This transaction was accounted for as a purchase
business combination in accordance with Accounting Principles Board ("APB")
Opinion No. 16, "Business Combinations" and, accordingly, the results of
operations of USWeb/CKS have been included in the Company's financial statements
from March 1, 2000.
The total consideration for the transaction was valued at approximately
$7.1 billion as of February 29, 2000, which includes the value, as of March 1,
2000, of common stock issued in the merger, options and warrants, and other
direct acquisition costs.
The purchase price was preliminarily allocated to the following:
Fair value of assets acquired
and liabilities assumed $ 233,466
Workforce in place 127,100
Existing and in-process technology 18,600
Customer list 49,100
Goodwill 6,652,072
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Total $ 7,080,338
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The above intangible asset amounts are being amortized over their useful
lives of 3 to 5 years. The following unaudited pro forma financial information
presents the combined results of operations of the Company and USWeb/CKS as if
the acquisition had occurred as of the beginning of 2000 and 1999, after giving
effect to certain adjustments, including amortization of goodwill, and related
income tax effects. The pro forma financial information does not reflect the
results of operations that would have occurred had the Company and USWeb/CKS
constituted a single entity during such periods.
Three Months Ended March 31,
----------------------------
(unaudited)
2000 1999
---- ----
Revenue $ 352,038 $ 192,674
Net loss $ (373,510) $ (369,581)
Diluted loss per share $ (2.53) $ (3.19)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE DISCUSSION BELOW CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS (AS SUCH
TERM IS DEFINED IN SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934) THAT ARE
BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT, AS WELL AS ASSUMPTIONS MADE
BY, AND INFORMATION CURRENTLY AVAILABLE TO, THE COMPANY'S MANAGEMENT. THE
COMPANY'S RESULTS, PERFORMANCE AND ACHIEVEMENTS IN 2000 AND BEYOND COULD DIFFER
MATERIALLY FROM THOSE EXPRESSED IN, OR IMPLIED BY, ANY SUCH FORWARD-LOOKING
STATEMENTS. SEE "CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE
17.
OVERVIEW
On March 1, 2000, Whittman-Hart merged with USWeb/CKS. As a result of
the merger, the Company's revenue and operating expenses increased
substantially in the current period and the Company believes that such
increases are likely to continue to increase in future periods as compared to
pre-merger periods. This business combination was accounted for by the
purchase method, and accordingly, the results of operations of USWeb/CKS have
been included in the Company's financial statements and reflected in the
Company's results of operations from March 1, 2000. Prior to the consummation
of the merger on March 1, 2000, the Company filed a registration statement on
Form S-4 on January 27, 2000, Registration No. 333-94565, which was declared
effective by the Securities and Exchange Commission on January 27, 2000. This
registration statement contains unaudited pro forma information for the
combined company.
marchFIRST is the new name for the company formerly known as
Whittman-Hart, which reflects the merger of Whittman-Hart and USWeb/CKS,
completed on March 1, 2000. As a leading information technology services company
prior to the merger, Whittman-Hart provided technology-based e-Business
solutions, including back office business systems integration, supply-chain
management and business-to-business processes and technologies. USWeb/CKS was a
leading provider of Internet professional services, with an emphasis on emerging
e-commerce companies and the Fortune 500 business-to-consumer marketplace, and
offered strong strategy and creative capabilities.
marchFIRST, Inc. ("marchFIRST" or the "Company") is now an Internet
professional services firm that helps companies
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build business models, brands, systems and processes to capitalize on the
opportunities created by the Internet and related computer and communications
technologies. marchFIRST has more than 70 offices in 14 countries and employs
more than 9,000 employees. The professional services provided by marchFIRST
include business strategy and management consulting, creative branding and
marketing, Web application design and development, packaged software
implementation and integration, and Web and network infrastructure design and
implementation. marchFIRST also provides integrated application hosting
services and, through an affiliate company, plans to provide access to
venture capital and external funding sources. marchFIRST provides services to
clients ranging from early-stage Internet start up companies to Global 2000
companies, reflecting management's belief that the Internet has narrowed the
range of needs among small, middle-market and global companies.
The Company's revenues are generated primarily from professional fees,
which are generally billed at a contracted hourly rate and are recognized as
services are provided. A majority of marchFIRST's revenues are generated on a
time and materials basis. The Company's services are also provided on a
fixed-bid or fee-capped basis, in which case revenues are recognized by the
percentage of completion method. Billable rates vary by service provided and
geographic region. Although a majority of engagements are billed on a time and
material basis, marchFIRST will increase the percentage of its engagements that
are based on a fixed price, as a result of the merger with USWeb/CKS. These
arrangements subject the Company to the risk of cost overruns; however,
historically, such overruns have not been significant. The Company typically
bills on a weekly basis to monitor client satisfaction and manage its
outstanding accounts receivable balances. The Company's most significant cost is
project cost of services, which consists of consultant salaries and benefits.
Thus, the Company's financial performance is primarily based upon billing margin
(billable hourly rate less the consultant's hourly cost) and personnel
utilization rates (billable hours divided by paid hours).
To date, the Company has been able to maintain its billing margins by
offsetting increases in consultant salaries with increases in its hourly rates.
Because most of the Company's engagements are on a time and materials basis,
increases in its cost of services are generally passed along to the Company's
clients and, accordingly, do not have a significant impact on the Company's
financial results. In addition, the Company attempts to control expenses that
are not passed through to its clients. Furthermore, profitability is improved by
tying significant incentive compensation to achieving performance goals.
The Company establishes standard billing guidelines based on the type of
service offered. Actual billing rates are established on a project-by-project
basis and may vary from the standard guidelines. Over the last three years, the
Company's average revenue per assignment hour has steadily increased. The growth
in average revenue per assignment hour reflects a higher percentage of
value-added services, such as package software implementations and
solutions-oriented strategic consulting projects.
The Company manages its personnel utilization rates by monitoring project
requirements and timetables. The number of consultants assigned to a project
will vary according to the size, complexity, duration and demands of the
project. Project terminations, completions and scheduling delays may result in
periods in which consultants are not fully utilized. An unanticipated
termination of a project could result in a higher than expected number of
unassigned consultants or, if the Company were to terminate such consultants,
increased severance expenses. Although the number of the Company's consultants
can be adjusted to correspond to the number of active projects, marchFIRST must
maintain a sufficient number of senior consultants to oversee existing client
projects and assist the Company's sales force in
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securing new client assignments. marchFIRST consultants are subject to
employment contracts that may be terminated upon two weeks' notice without
substantial penalty or further expense to the Company.
Historically, the Company's revenue growth has been attributable to the
addition of new clients and the growth of current client relationships at
existing and new branch locations supplemented by acquisitions. The Company's
merger with USWeb/CKS doubled the number of professionals employed by the
Company. During the remainder of 2000, the Company intends to continue to
achieve growth primarily through acquisitions and through the addition of new
clients and growth of current client relationships at both existing and new
branch locations.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
consolidated statements of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Consolidated statement of operations data:
Revenues 100% 100%
Cost of services 50 57
---- ---
Gross profit 50 43
Costs and expenses:
Selling and marketing 7 5
General and administrative 29 28
Stock compensation 7 -
Acquired in-process technology 2 -
Amortization of intangible assets 52 -
Merger and integration costs 3 2
---- ---
Total costs and expenses 100 35
---- ---
Income (loss) from operations (50) 8
Other income, net 1 2
---- ---
Net income (loss) before provision for income taxes: (49) 10
Provision for income taxes 3 4
---- ---
Net income (loss) (52)% 6%
===== ===
</TABLE>
REVENUES. Revenues increased 109%, or 118.7 million, to $227.4 million for
the three months ended March 31, 2000 from $ 108.7 million for the three months
ended March 31, 1999. The increase was primarily attributable to additional
revenues generated subsequent to March 1, 2000 which resulted from the Company's
merger with USWeb/CKS. The revenues recognized subsequent to March 1, 2000 and
which were attributable to the merger were $85.5 million. The remaining increase
in revenue was due to the addition of new clients and to the growth of current
client relationships at existing and new branch locations and to the acquisition
of Fulcrum Solutions, Ltd. ("Fulcrum") in November 1999.
Revenues from the Company's ten most significant clients grew more than
300%, and as a percentage of total revenues, increased to 17% for the three
months ended March 31, 2000. This compared to 13% for the three months ended
March 31, 1999. The increase in revenue from the Company's ten most significant
clients is attributable to new clients resulting from the merger with USWeb/CKS.
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GROSS PROFIT. Gross profit consists of revenues less cost of services,
which includes consultant salaries and benefits and other incentives for
employees engaged in delivering professional services. Gross profit for the
three months ended March 31, 2000 grew 140% to $112.9 million from $47.1 million
for the three months ended March 31, 1999. Gross profit as a percentage of
revenues was 50% in the first three months of 2000, compared to 43% in 1999. The
increase in gross profit was due to increased gross profits resulting from the
merger with USWeb/CKS subsequent to March 1, 2000. Gross profit recognized
subsequent to March 1, 2000 attributable to the merger was $50.7 million. The
remaining increase in gross profit was due to a change in the sales mix toward
higher-end service offerings, the Company's established branches reaching
critical mass, and the acquisition of Fulcrum in November 1999, partially offset
by lower margins in recently opened branches.
SELLING AND MARKETING EXPENSES. Sales and marketing expenses include the
salaries, benefits, commissions, travel, entertainment and all other direct
costs associated with the direct sales force as well as advertising, branding,
and other marketing costs. During the first quarter of 2000, costs related to
branding and marketing resulted primarily from the merger and integration of
Whittman-Hart and USWeb/CKS. Accordingly, the costs were classified as merger
and integration costs.
Selling and marketing expenses for the three months ended March 31, 2000
increased approximately 172% to $14.8 million from $5.4 million for the three
months ended March 31, 1999. This increase was subsequent to March 1, 2000 and
was largely attributable to additional sales and marketing personnel expenses
resulting from the Company's merger with USWeb/CKS. It was also due to increased
efforts in the area of sales and marketing. As a percentage of revenues, selling
expenses in the first quarter of 2000 were 7%, compared to 5% in the first
quarter of 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. 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, including recruiting costs. General and administrative expenses
for the three months ended March 31, 2000 increased 123% to $66.5 million from
$29.9 million for the three months ended March 31, 1999. The increase was due to
additional costs subsequent to March 1, 2000 and was related to the merger with
USWeb/CKS. As a percentage of revenues, general and administrative expenses
increased to 29% for the three month period ended March 31, 2000, compared to
28% in the three month period ended March 31, 1999. The increase in general and
administrative expenses as a percentage of revenues resulted largely from
duplicative efforts during the integration of the two companies. The Company
expects further decreases in general and administrative expenses as the Company
continues its integration efforts.
ACQUIRED IN-PROCESS TECHNOLOGY. Acquired in-process technology resulted
from the Company's merger with USWeb/CKS. Acquired in-process technology
expenses were $4.8 million in the three month period ended March 31, 2000.
Acquired in-process technology represents purchased technology that had not
reached the stage of technological feasibility as of the merger and had no
alternative future use. Accordingly, such amounts were charged to operations in
the period. There were no in-process technology expenses during the three month
period ended March 31, 1999.
STOCK COMPENSATION. Stock compensation resulted principally from non-cash
stock compensation arrangements assumed when the Company merged with USWeb/CKS.
The
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expense resulted primarily from stock bonuses awarded to employees of
companies previously acquired by USWeb/CKS, prior to March 1, 2000, as well
as stock from options granted by USWeb/CKS, with exercise prices below the
fair market value of the common stock on the date of grant. Stock
compensation is classified as a cost of revenue or operating expense
depending on the classification of the respective employees. Such expenses
are recognized ratably over the vesting period, which are generally three to
four years. Stock compensation expense totaled $15.2 million during the three
months ended March 31, 2000 and related largely to costs incurred subsequent
to March 1, 2000. The Company did not incur stock compensation expense in the
three-month period ended March 31, 1999. The Company expects to continue to
incur similar stock compensation expense during the remainder of 2000.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
consists primarily of amortization of purchased technology, workforce in place,
and goodwill resulting from acquisitions. Amortization of intangible assets
totaled $118.3 million in the three months ended March 31, 2000 and included
amortization of intangible assets capitalized as a result of the merger with
USWeb/CKS subsequent to March 1, 2000. Amortization of intangible assets for the
three months ended March 31, 1999 totaled $0.1 million. The Company will
continue to amortize its intangible assets related to the merger with USWeb/CKS
during the next five years. Amortization expense related to intangible assets is
expected to approximate $1.4 billion annually.
MERGER AND INTEGRATION COSTS. Merger and integration costs were $6.9
million for the three months ended March 31, 2000 and $2.7 million for the three
months ended March 31, 1999. As a percentage of revenue, merger and integration
costs accounted for 3% of revenues for the three months ended March 31, 2000,
and 2% for the three months ended March 31, 1999. The merger and integration
costs included legal, accounting, other transaction-related fees and expenses,
and severance payments and costs directly related to integrating acquired
companies. During the first three months of 2000, these costs related to the
Company's merger with USWeb/CKS on March 1, 2000. In the first quarter of 1999,
these costs related to the Company's acquisition of Waterfield in March 1999.
Also contributing to the increase were expenses related to the creation, launch
and promotion of the Company's new brand. The Company anticipates that merger
and integration costs related to the merger with USWeb/CKS will total
approximately $70 million in 2000.
OPERATING INCOME (LOSS). Operating income (loss) decreased $122.7 million
to a loss of $113.7 million for the three months ended March 31, 2000 from
operating income of $9.1 million in the three months ended March 31, 1999. The
increased operating loss is due principally to expenses associated with the
amortization of intangible assets, stock compensation expense and merger and
integration costs associated with the merger with USWeb/CKS. As a percentage of
revenues, operating income (loss) decreased to a negative 50% for the three
months ended March 31, 2000, compared to 8% for the three months ended March 31,
1999.
OTHER INCOME, NET. Other income, net increased 92% to $3.3 million for the
three months ended March 31, 2000 from $1.7 million for the three months ended
March 31, 1999. The first quarter of 2000 included increased interest income on
investments related to the net proceeds of $98.2 million from the Company's
issuance of common stock to Novell, Inc. in November 1999 and the cash resulting
from the acquisition of USWeb/CKS.
INCOME TAXES. For the three months ended March 31, 2000, the provision
for income taxes represents U.S. federal, foreign and state taxes accrued for
marchFIRST subsidiaries. The tax expense is computed based on taxes paid in
foreign jurisdictions and the effect of certain items
12
<PAGE>
affecting taxable income that do not affect provision for income taxes. For
the quarter ended March 31, 1999, the provision for income taxes represents
the actual provision for income taxes of Whittman-Hart prior to its merger
with USWeb/CKS.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had approximately $490.9 million of cash,
cash equivalents, and short-term and long-term investments compared to $284.3
million at December 31, 1999. Long-term investments at March 31, 2000 included
$38.5 million in non-marketable equity securities and $43.3 million in
marketable equity securities. The Company's cash and cash equivalents as well as
short and long term investments increased approximately $275 million resulting
from its merger with USWeb/CKS. The Company's primary source of liquidity has
been cash provided through equity offerings and cash from operations.
As of March 31, 2000, marchFIRST had a loan agreement for up to $10.0
million of unsecured 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 March 31, 2000. On April 30, 2000, the above loan agreement was
extended to April 30, 2001, and the available amount of borrowings was increased
to $20.0 million. In connection with the Company's merger with USWeb/CKS, the
Company assumed two revolving credit lines with the maximum borrowing capacity
of $35 million of which approximately $15.5 million was outstanding as of March
3, 2000. The credit agreements are scheduled to expire June 30, 2000.
Net cash used in operating activities was $42.1 million during the three
month period ended March 31, 2000. The use of cash during the three months ended
March 31, 2000 was due largely to increases in accounts receivable, which were
partially offset by increases in liabilities and other non-cash expenses. During
the three months ended March 31, 1999, operating activities provided $7.8
million due primarily to net income generated during the period.
Capital expenditures of $14.9 million and $9.7 million for the three month
periods ended March 31, 2000 and 1999, respectively, consisted primarily of real
estate, computer equipment and software and office furniture and equipment to
support the growth and expansion of the Company.
During the remainder of 2000, marchFIRST expects to make similar types of
expenditures relating to the expansion of offices and the improvement of
information systems. The Company also expects to make expenditures of
approximately $50.0 million in 2000 related to the expansion of marchFIRST's new
Chicago facility, which will house marchFIRST's education center, the Chicago
branch office, and its corporate headquarters. Total capital expenditures for
marchFIRST during 2000 are expected to approximate $100.0 million.
During the three-month periods ended March 31, 2000 and March 31, 1999,
$19.0 million and $6.3 million, respectively, of cash was provided by the
exercise of stock options and the purchase of common stock through the Company's
employee stock purchase plan.
On April 26, 2000, the Company signed an operating lease agreement which
engaged Bank One Capital Markets, Inc. as administrative agent to structure,
arrange and syndicate a $93 million lease facility. The financing will be
utilized to develop previously acquired property into the new corporate
headquarters of marchFIRST. Included as part of this lease facility is the
construction of a parking facility. The lease agreement will include a
construction period of up to
13
<PAGE>
27 months. Upon completion of the structures, the five-year lease term will
commence. The lease will bear an interest rate of the LIBOR rate plus an
applicable margin. The Company's lease obligation is dependent upon the
ultimate cost of the facility. The lease contains certain restrictive
covenants related to change in control and also various financial covenants.
In addition, the Company has the option to renew the lease at the end of the
term or purchase the lessor's interest in the property.
The Company anticipates its current cash resources, together with existing
sources of liquidity and funds generated from operations, will provide adequate
cash to fund the Company's anticipated cash needs at least through the next 12
months as well as its long term liquidity needs.
STRATEGIC ALLIANCES
On November 12, 1999, Novell, Inc. purchased 3,294,893 shares of the
Company's common stock for a purchase price of $100 million, and the Company
agreed to issue Novell a warrant to purchase 400,000 shares of the Company's
common stock, with an exercise price of $35.875 per share (the "Warrant"). In
addition, the Company and Novell entered into a global alliance agreement. These
transactions are intended to accelerate the deployment of the Novell Directory
Services (NDS) in enterprise and e-Business solutions for mid-sized businesses.
Under the global alliance agreement, the Company has agreed to establish a
solutions deployment center and to train at least 600 consultants in NDS and
related Novell solutions. The Warrant will become exercisable only if the
Company fails to meet certain milestones under the global alliance agreement.
As a result of the Company's merger with USWeb/CKS, the Company assumed
a preexisting strategic alliance signed in September 1999 between USWeb/CKS
and with Microsoft Corporation. The alliance was formed to assist in the
development of the Internet framework ("iFrame"), a standardized architecture
for developing integrated e-business solutions. Under terms of the Alliance,
Microsoft will provide the Company with a non-refundable $67.5 million, to be
paid over twelve months, to offset the costs necessary for the development,
marketing and training needed to bring iFrame and associated application
services to market. In addition, Microsoft will provide a joint technology
application services lab to assist in such development and will provide
certain other funding including a joint marketing fund. As part of the
agreement, Microsoft purchased, for $15.0 million, a warrant allowing
Microsoft to acquire shares of USWeb/CKS common stock. This warrant was
assumed by Whittman-Hart and became a warrant to purchase up to 865,000
shares of marchFIRST common stock at an exercise price of $31.90 per share,
which represented the fair value of the Company's common stock at the date of
the alliance. The warrant is exercisable anytime prior to its expiration in
September 2004. Should the Company be successful in developing iFrame and its
associated applications, the Company will pay to Microsoft a royalty,
beginning in July 2001, equal to 8.9% of such revenues, if any. The royalty
will continue until the earlier of December 31, 2007, or the aggregate
royalty paid totals $105.0 million. The agreement also requires a repayment
of the $67.5 million if the agreement is terminated.
ACQUISITIONS
On March 9, 1999, the Company acquired the Waterfield Technology Group
("Waterfield") a Boston-based IT services firm and strategic business partner of
Kurt Salmon and Associates, a global consulting firm, for 576,074 shares of the
Company's common stock. Headquarted in Lexington, Massachusetts, with a branch
office in Parsippany, New Jersey, Waterfield had approximately 90 employees and
specialized in client server and Internet-enabled application
14
<PAGE>
development. They had extensive experience with Java and Java-based tools,
Powerbuilder and the Microsoft suite of products. This business combination
was accounted for as a pooling-of-interests combination and, accordingly, the
Company's historical consolidated financial statements have been restated to
include the accounts and results of operations of Waterfield for all periods
presented.
On May 20, 1999, the Company issued 474,650 of its common shares in
exchange for all of the outstanding capital stock of POV Partners, Inc.
("POV") an Ohio-based IT services firm. Headquartered in Columbus, Ohio, with
offices in Phoenix, Arizona, and Charlotte, North Carolina, POV had
approximately 90 employees and provided a broad range of business strategy
and IT services including Internet-enabled application development and
electronic commerce solutions. This business combination has been accounted
for as a pooling-of-interests combination. The stockholders' equity and
operations of POV 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.
On August 27, 1999, the Company issued 1,145,796 shares of the Company's
common stock in exchange for all of the outstanding stock of the BALR
Corporation ("BALR"), an Oakbrook, Illinois-based IT services firm. BALR had
approximately 100 employees who designed systems and provided technical
consulting services. BALR's services included e-Business and Web-enabled systems
development, relational database management and client-server application
development. This business combination was accounted for as a
pooling-of-interests combination and, accordingly, the Company's historical
consolidated financial statements have been restated to include the accounts and
results of operations of BALR for all periods presented.
On November 12, 1999, the Company issued 1,098,221 shares of its common
stock in exchange for all of the outstanding stock of the Four Points Digital,
L.L.C. ("Four Points"), a Chicago, Illinois-based IT services firm with an
office if San Francisco, California. The approximately 80 employees specialized
in digital marketing including interactive advertising using rich media, online
site development and online media buying. This business combination was
accounted for as a pooling-of-interests combination and, accordingly, the
Company's historical consolidated financial statements have been restated to
include the accounts and results of operations of Four Points for all periods
presented.
On November 27, 1999, the Company acquired Fulcrum Solutions, Ltd.
("Fulcrum"), a London, England-based IT services firm, further expanding its
European presence. The Company acquired all of the outstanding common stock and
stock options of Fulcrum in exchange for $2,193,857 in cash and 360,869 shares
of the Company's common stock. In addition to its London headquarters, Fulcrum
operated offices in Manchester, England; Edinburgh, Scotland; and New York City.
Its approximately 180 professionals designed systems and provided technical
consulting services. The firm specialized in Oracle-based e-Business solutions
including customer relationship management; enterprise-wide Internet transaction
systems in sales and marketing, manufacturing, financial and human resources;
business intelligence, and data migration and integration. The acquisition has
been accounted for by the purchase method of accounting, and accordingly, the
results of operations of Fulcrum have been included in the Company's
consolidated financial statements from November 27, 1999.
On March 1, 2000, the Company and USWeb/CKS completed a merger. Under the
terms of the merger agreement, approximately 82,431,300 shares of Whittman-Hart
common stock were exchanged for all the outstanding common stock of USWeb/CKS.
In addition, employee options
15
<PAGE>
and warrants to purchase shares of USWeb/CKS common stock were assumed by
Whittman-Hart and became options to purchase approximately 34,010,426 shares
of the Company's common stock and warrants to purchase approximately
2,058,700 shares of USWeb/CKS common stock. These amounts reflect an exchange
ratio of 0.865 of a share of Whittman-Hart common stock for each share of
USWeb/CKS common stock. This transaction was accounted for as a purchase
business combination in accordance with Accounting Principles Board ("APB")
Opinion No. 16, "Business Combinations." The total consideration for the
transaction was valued at approximately $7.1 billion, which includes the
value of common stock issued in the merger, options and warrants, and other
direct acquisition costs.
YEAR 2000
The Company had identified three issues related to Year 2000 compliance;
first was the effect on internal information systems, second were issues related
to vendors performing services for the Company, and finally, were issues related
to consulting activities performed by the Company.
The Company replaced its existing internal information systems in the
fourth quarter of 1999. The system is currently operating without any
significant interruptions and the Company is not aware of any Year 2000 related
problems associated with the system. The cost of this implementation did not
have a material adverse impact on the Company's results of operations or
financial condition.
The Company has relationships with several vendors that provide
administration of compensation and related employee benefits and other vendors
that perform banking and treasury services. The Company completed an evaluation
of the state of readiness of these vendors and it believes that the vendors are
currently Year 2000 compliant. Also, the Company is not aware of any significant
issues relating to the Year 2000 compliance of its vendors. The cost to the
Company in the event of non-compliance with Year 2000 issues by any of these
third parties is not expected to have material impact on the Company's result of
operations or its financial condition.
To date, the Company has not experienced any material adverse effect on
the demand for its services as a result of uncertainty relating to, or
diminished functionality of systems resulting from the passage of the Year
2000. The Company provides solutions for IT systems that are critical to
companies' operations. Business interruptions, loss or corruption of data or
other major problems resulting from the failure of a client's IT system to
process Year 2000 data correctly could have significant adverse consequences
to that client. The Company cannot currently predict whether or to what
extent there will be any legal claims brought against the Company or whether
there will be any other material adverse effect on the Company's business,
financial condition or the results of operations, as a result of any such
adverse consequences to its clients.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards "SFAS" No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
is effective for financial statements for fiscal years ending December 31, 2000,
but may be adopted in earlier periods. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. The
Company does not believe that SFAS No. 133 will have a significant impact on its
financial statements.
16
<PAGE>
Financial Accounting Standards Board Interpretation No. 44 "FIN" No. 44,
"Accounting for Certain Transactions Involving Stock Compensation," an
interpretation of Accounting Principles Board Opinion No. 25, is effective for
financial statements beginning after July 1, 2000. The company does not believe
FIN No. 44 will have a significant impact on its financial statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements that reflect
marchFIRST's current expectations about its future operating results,
performance, and opportunities that involve substantial risks and uncertainties.
When used in this Form 10-Q, the words "anticipate," "believe," "estimate,"
"plan," "intend," and "expect," and similar expressions, as they relate to
marchFIRST or its management, are intended to identify such forward-looking
statements. These forward-looking statements are based on information currently
available to marchFIRST and are subject to a number of risks, uncertainties, and
other factors that could cause marchFIRST's actual results, performance,
prospects, and opportunities to differ materially from those expressed in, or
implied by, these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, integration and
other risks related to the merger with USWeb/CKS, difficulties in attracting and
retaining highly skilled employees, marchFIRST's ability to manage rapid growth
and expansion into new geographic areas and service lines, marchFIRST's ability
to manage the risk associated with client projects, and risks related to
possible acquisitions. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations - Risk Factors" in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 for further description
of factors that could affect the Company's operating results, performance and
opportunities. Except as required by the Federal Securities law, the Company
does not undertake any obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this Form 10-Q or for any other reason.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At March 31, 2000, the Company maintained investments in marketable
securities. The securities are classified as available for sale on the
consolidated balance sheet at fair value, with unrealized gains and losses
reported as a separate component of stockholders' equity, net of applicable
deferred income taxes. As of March 31, 2000, the fair value of the Company's
marketable securities portfolio was $209.9 million, all of which was invested in
equity and debt securities.
As a result of the merger with USWeb/CKS, the Company assumed certain
additional risks, including changes in interest rates affecting the return on
its investments and, to a lesser extent, risks associated with foreign currency
fluctuations. In the normal course of business, the Company establishes policies
and procedures to manage its exposure to fluctuations in interest rates and
foreign currency values.
17
<PAGE>
INTEREST RATE RISK. The Company's exposure to interest rate risks results
primarily from its short-term investments. To minimize exposure to interest rate
risks, the Company invests predominately in instruments that are highly liquid,
are of investment grade and generally have maturities of less than one year. The
Company intends to make such funds readily available for operating purposes. At
March 31, 2000, the Company had investments with maturities and weighted-average
interest rates as follows (in thousands):
<TABLE>
<CAPTION>
Maturities
2000 2001
------- -------
<S> <C> <C>
Balance $88,894 $82,533
Interest Rate 5.5% 5.42%
</TABLE>
FOREIGN CURRENCY RISKS. As of March 31, 2000, the Company had operating
subsidiaries located in several countries including the United Kingdom, Germany,
France, Canada, Switzerland, Spain, Australia, and South Africa. These
subsidiaries operate primarily in the functional currency of their individual
countries. As a result, the Company does not have exposure to significant
foreign currency risk related to the ongoing operations of these subsidiaries.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Effective March 1, 2000, the Company's Amended and Restated
Certificate of Incorporation (the "Charter") was amended in connection with
the Company's merger with USWeb/CKS. The amendment modified the Charter to
increase the authorized common stock of the Company from 75,000,000 shares to
500,000,000 shares. Also effective March 1, 2000, by resolution of the
Company's Board of Directors, the size of the Board of Directors was
increased from seven members to nine members.
18
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following summarizes the votes of the Special Meeting of the Company's
stockholders held on February 28, 2000:
MATTER
Approval of the issuance of shares of common stock to the stockholders of USWeb
Corporation ("USWeb/CKS") pursuant to the Merger Agreement among the Company,
Uniwhale, Inc. and USWeb/CKS.
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
45,700,633 589,318 31,500 0
Matter
- ------
Approval of an amendment to the Company's Certificate of Incorporation
increasing the authorized shares of Common Stock from 75,000,000 to 500,000,000.
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
39,296,889 6,998,745 25,817 0
Matter
- ------
Approval of an increase in the number of authorized shares of common stock
available for issuance under the Whittman-Hart 1995 Incentive Stock Plan.
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
30,254,658 15,805,870 260,923 0
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(27.1) Financial Data Schedule
(27.2) Financial Data Schedule - restated
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K dated January 24, 2000, as
amended on March 13, 2000, announcing its fourth quarter 1999 results of
operations.
The Company filed a report on Form 8-K dated January 28, 2000 to
incorporate by reference the audited financial statements of USWeb/CKS.
The Company filed a report on Form 8-K dated March 1, 2000, announcing
its acquisition of USWeb/CKS.
The Company filed a report on Form 8-K dated March 23, 2000 attaching a
press release to announce its name change and to present its results of
operations on a pro forma basis for the fiscal years 1999 and 1998 to reflect
purchase business combinations consummated by USWeb/CKS and Whittman-Hart.
20
<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.
marchFIRST, Inc.
Date: May 15, 2000 By: /s/ Robert F. Bernard
------------ ---------------------
Robert F. Bernard
Chairman of the Board
Date: May 15, 2000 By: /s/ Bert B. Young
------------ -----------------
Bert B. Young
Chief Financial Officer and Treasurer
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and the statement of operations for the three months ended March 31, 2000
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 280,970
<SECURITIES> 88,856
<RECEIVABLES> 416,661
<ALLOWANCES> (10,632)
<INVENTORY> 0
<CURRENT-ASSETS> 815,789
<PP&E> 176,913
<DEPRECIATION> 41,378
<TOTAL-ASSETS> 7,864,628
<CURRENT-LIABILITIES> 411,892
<BONDS> 3,011
0
0
<COMMON> 146
<OTHER-SE> 7,401,038
<TOTAL-LIABILITY-AND-EQUITY> 7,864,628
<SALES> 0
<TOTAL-REVENUES> 227,396
<CGS> 0
<TOTAL-COSTS> 114,513
<OTHER-EXPENSES> 226,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (110,338)
<INCOME-TAX> 6,992
<INCOME-CONTINUING> (117,330)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (117,330)
<EPS-BASIC> (1.28)
<EPS-DILUTED> (1.28)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and the statement of operations for the three months ended March 31, 2000
and is qualified in its entirety by reference to such financial statements. The
three months ended March 31, 1999 have been restated to reflect the effect of
the acquisitions of BALR and Four Points accounted for as a pooling-of-interests
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 41,473
<SECURITIES> 78,716
<RECEIVABLES> 68,986
<ALLOWANCES> 1,853
<INVENTORY> 0
<CURRENT-ASSETS> 194,413
<PP&E> 55,331
<DEPRECIATION> 11,630
<TOTAL-ASSETS> 273,938
<CURRENT-LIABILITIES> 39,826
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 231,623
<TOTAL-LIABILITY-AND-EQUITY> 278,938
<SALES> 0
<TOTAL-REVENUES> 108,674
<CGS> 0
<TOTAL-COSTS> 61,560
<OTHER-EXPENSES> 38,054
<LOSS-PROVISION> 996
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,791
<INCOME-TAX> 4,776
<INCOME-CONTINUING> 6,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,015
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.10
</TABLE>
