<PAGE>
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 25, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
--------------------------------
Commission File Number 0-28192
RENAISSANCE WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
--------------------------------
Massachusetts 04-2920563
(State of Incorporation) (IRS Employer
Identification No.)
--------------------------------
52 Second Avenue
Waltham, MA 02451
(781) 290-3000
(Address, including zip code, and telephone number, including area code
of registrant's principal executive offices)
--------------------------------
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 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 May 5th, 2000, there were 56,386,310 shares of Common Stock, no par
value, outstanding.
<PAGE>
RENAISSANCE WORLDWIDE, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at December 25, 1999 and March 25, 2000
(Unaudited) 3
Consolidated Statement of Operations for the three months ended March 27, 1999 and March 25,
2000 (Unaudited) 4
Consolidated Statement of Cash Flows for the three months ended ended March 27, 1999 and March
25, 2000 (Unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION 12
SIGNATURES 13
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements. The
important factors discussed below under the caption "Certain Factors That May
Affect Future Operating Results," among others, could cause actual results to
differ materially from those indicated by forward-looking statements made herein
and presented elsewhere by management from time to time.
2
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RENAISSANCE WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
March 25,
December 25, 2000
ASSETS 1999 (unaudited)
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,605 $ 5,530
Accounts receivable, net 155,784 156,946
Deferred income taxes 12,136 12,136
Other assets 6,882 3,302
Net current assets of discontinued operations 7,765 -
---------------- ---------------
Total current assets 193,172 177,914
Fixed assets, net 29,674 29,078
Goodwill and other intangible assets, net 70,868 68,276
Other assets 9,450 9,559
Deferred income taxes 3,336 3,336
Net non-current assets of discontinued operations 32,144 -
---------------- ---------------
Total assets $ 338,644 $ 288,163
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 18,914 $ 20,000
Current portion of long-term debt 1,544 1,250
Accounts payable 28,546 23,481
Accrued salaries, wages and related benefit costs 31,754 28,903
Other accrued expenses 13,156 12,312
Accrued income taxes - 5,129
Deferred income taxes 3,339 3,339
---------------- ---------------
Total current liabilities 97,253 94,414
Deferred income taxes 6,983 6,983
Term loan 50,000 -
Other long-term debt 3,051 110
---------------- ---------------
Total liabilities 157,287 101,507
---------------- ---------------
Stockholders' equity:
Common stock and additional paid in capital 188,908 190,056
Notes receivable from stockholders (722) (722)
Retained earnings (deficit) (3,732) 1,259
Accumulated other comprehensive loss (551) (1,391)
Treasury stock (2,546) (2,546)
---------------- ---------------
Total stockholders' equity 181,357 186,656
---------------- ---------------
Total liabilities and stockholders' equity $ 338,644 $ 288,163
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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RENAISSANCE WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data - unaudited)
<TABLE>
<CAPTION>
For the Quarter Ended
March 27, March 25,
1999 2000
--------- ---------
<S> <C> <C>
Revenue $ 198,171 $ 149,833
Cost of revenue 138,766 113,160
--------- ---------
Gross Profit 59,405 36,673
Selling, general and administrative expenses 54,448 46,091
--------- ---------
Income (loss) from operations 4,957 (9,418)
Interest and other expense, net 2,547 1,593
--------- ---------
Income (loss) from continuing operations before taxes 2,410 (11,011)
Income tax provision (benefit) 989 (4,206)
--------- ---------
Income (loss) from continuing operations 1,421 (6,805)
Discontinued operations:
Income from Strategy segment, net of tax 280 1,151
Gain on disposal of Strategy segment, net of tax - 10,645
--------- ---------
Net income $ 1,701 $ 4,991
========= =========
Basic earnings per share:
Income (loss) from continuing operations $ 0.03 $ (0.12)
Discontinued operations:
Income from Strategy segment - 0.02
Gain on disposal of Strategy segment - 0.19
--------- ---------
Net income $ 0.03 $ 0.09
========= =========
Diluted earnings per share:
Income (loss) from continuing operations $ 0.03 $ (0.12)
Discontinued operations:
Income from Strategy segment - 0.02
Gain on disposal of Strategy segment - 0.19
--------- ---------
Net income $ 0.03 $ 0.09
========= =========
Weighted average common shares:
Basic 56,155 56,705
========= =========
Diluted 56,548 56,705
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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RENAISSANCE WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter Ended
March 27, March 25,
1999 2000
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,701 $ 4,991
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 3,462 3,666
Deferred income taxes (8) -
Gain on disposal of Strategy segment - (10,645)
Changes in operating assets and liabilities:
Accounts receivable (6,462) (2,069)
Other current assets 5,773 3,070
Other assets (1,237) (464)
Accounts payable, accrued expenses and other liabilities (5,818) (18,901)
--------- ---------
Net cash used for operating activities (2,589) (20,352)
Cash flows from investing activities:
Cash disbursed for acquisitions, net of cash acquired (8,454) (108)
Cash proceeds from the sale of Strategy segment - 67,699
Net decrease (increase) in notes receivable (1,486) 137
Purchases of fixed assets (5,600) (3,099)
--------- ---------
Net cash provided (used for) by investing activities (15,540) 64,629
Cash flows from financing activities:
Net borrowings on revolving credit facilities 7,704 1,086
Principal payments on long-term debt (1,768) (51,296)
Proceeds from issuance of long-term debt 44 -
Debt issue costs on credit facility 1,063 -
Cash proceeds from exercise of stock options and purchase plans 1,080 1,148
--------- ---------
Net cash provided by (used for) financing activities 8,123 (49,062)
Effect of exchange rate changes on cash and cash equivalents (151) (290)
--------- ---------
Net decrease in cash and cash equivalents (10,157) (5,075)
Cash and cash equivalents, beginning of period 10,957 10,605
--------- ---------
Cash and cash equivalents, end of period $ 800 $ 5,530
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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RENAISSANCE WORLDWIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Renaissance Worldwide, Inc. (''Renaissance'' or the ''Company'') is a
global provider of business and technology consulting services to organizations
with complex information technology ("IT") operations in a broad range of
industries. The Company's offerings are categorized into four business segments:
the Information Technology Consulting Services Group ("ITCS Group"), the
Enterprise Solutions Group, the Government Consulting Group and GovConnect.com.
The ITCS Group provides consulting services centered around application design,
implementation and support. The Enterprise Solutions Group provides IT solutions
design and implementation services. The Government Consulting Group provides
specialized management and technology consulting services to the public sector.
GovConnect.com, is focused on the market opportunity for public access to
electronic government services. A fifth segment, the Business Strategy Group
which provides management consulting and technology integration services in
connection with performance support systems, was sold for $67.7 million on March
10, 2000, and is reported as discontinued operations (see Note 3).
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Renaissance Worldwide, Inc. and its wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated.
Deconsolidation Of Real Estate Trust
The Company leased office space from the Wells Avenue Trust ("Trust"), of
which the Chief Executive Officer and Chairman of the Board, and significant
stockholder of the Company, was the sole beneficiary. Effective September 19,
1995, the Company renegotiated its lease with the Trust in conjunction with a
refinancing of the Trust's mortgage. As of that date, the Company obtained
significant control over the operations of the Trust and assumed a significant
portion of the Trust's obligations. As a result, the Company had consolidated
the accounts of the Trust as of September 19, 1995 on a prospective basis. This
office building was sold in March, 2000 and the Company ceased to consolidate
the accounts of the Trust effective with the date of sale.
Interim Financial Statements
The consolidated balance sheet at March 25, 2000 and consolidated
statements of operations and of cash flows for the three month periods ended
March 27, 1999 and March 25, 2000 are unaudited and, in the opinion of
management, include all adjustments (consisting of normal and recurring
adjustments) necessary for a fair presentation of results for these interim
periods. Certain information and footnote disclosures normally included in the
Company's annual consolidated financial statements have been condensed or
omitted. The results of operations for the interim period ended March 25, 2000
are not necessarily indicative of the results to be expected for future quarters
or the entire year. The balance sheet at December 25, 1999 contained herein has
been derived from the audited consolidated financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These interim
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 25, 1999, which
are contained in the Company's 1999 Report on Form 10-K.
Earnings Per Share
Basic earnings per share has been computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
has been computed by dividing net income by the weighted average number of
common shares and dilutive potential common stock outstanding. Potential common
stock includes stock options and warrants, calculated using the treasury stock
method. For the quarter ended March 25, 2000, basic and diluted earnings per
share are the same, as the effect of including common stock equivalents is
anti-dilutive. A reconciliation of the weighted average number of common shares
outstanding is as follows:
6
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RENAISSANCE WORLDWIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended
---------------------------
March 27, March 25,
1999 2000
------------- -----------
(In thousands)
Weighted average number of common shares
outstanding-basic 56,155 56,705
Assumed exercise of stock options, using the
treasury stock method 393 -
------------- -----------
Weighted average number of common and
potential common shares outstanding - diluted 56,548 56,705
============= ===========
Other Comprehensive Income
The Company accounts for comprehensive income in accordance with Statement
of Financial Accounting Standards No. 130, "Reporting of Comprehensive Income."
This Statement requires disclosure of comprehensive income and its components in
interim and annual reports. For the quarters ended March 27, 1999 and March 25,
2000, accumulated other comprehensive income (expense) items included in
stockholders' equity consisted of translation adjustments of $(0.6 million) and
$(0.8 million).
Recent Accounting Developments
In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Company is required to be in conformity with the
provisions of SAB 101 in fiscal 2000 and is currently evaluating the impact SAB
101 will have on its financial condition or results of operations.
2. Long-Term Debt
On July 15, 1999, the Company entered into a three-year, $150 million
revolving credit and term loan agreement (the "Credit Facility") with a bank
syndicate. The Credit Facility consists of a revolving line of credit of $100
million ("Revolving Credit Facility") and a term loan of $50 million ("Term
Loan"). The Credit Facility bears interest at the higher of the Federal Funds
Rate plus 0.50% or the prime rate, plus up to 1.75% or LIBOR plus up to 3.0%,
depending on the Company's level of compliance with certain financial ratios.
The Credit Facility requires the Company to pay a commitment fee of 0.375% to
0.50% per annum, depending on certain financial criteria, on the unused portion
of the Credit Facility. The Credit Facility is collateralized by the majority of
the assets of the Company and contains certain restrictions and various
covenants, including the maintenance of defined financial ratios.
On September 15, 1999, the Company announced that it was revising its
revenue and earnings estimates for the third and fourth quarters of 1999 due to
a softening in the demand for services in two of its core business -- the
Enterprise Solutions and ITCS Groups. Based upon this revised outlook, the
Company informed the bank syndicate that it would not be in compliance with
certain of its financial covenants for the third quarter of 1999. On November 4,
1999, the Company and the banks signed an amendment to the Credit Facility
amending certain financial covenants for the third quarter of 1999 through the
third quarter of 2000, reverting back to the original financial covenants
established in the Credit Facility thereafter. The Credit Facility, as amended,
now bears interest at the higher of the Federal Funds Rate plus 0.50% or the
7
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RENAISSANCE WORLDWIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
prime rate, plus up to 2.25% or LIBOR plus up to 3.5%, depending on the
Company's level of compliance with certain financial ratios. In connection with
this amendment, the Company was required to pay amendment fees to the banks and
related expenses of approximately $0.5 million which were recorded in the third
quarter of 1999 as interest and other expense, net.
On February 25, 2000, the Company and the banks signed a second amendment
to the Credit Facility which permitted the Company to complete its sale of the
Business Strategy Group (see Note 3) and the Renaissance Worldwide Professionals
Ltd., formerly James Duncan Associates, and amended certain financial covenants
to reflect the sale of the businesses.
Based upon the results for the first quarter of 2000, the Company informed
the bank syndicate that it would not be in compliance with one of its financial
covenants for the first quarter of 2000 and that it may not be in compliance
with this and other financial covenants for the remainder of 2000 based upon its
current outlook for the remainder of the year. The banks agreed to waive the
particular financial covenant in question for the first quarter of 2000 until
June 30, 2000. While the Company believes that it will be able to negotiate an
amendment to the Credit Facility to revise the financial covenants to levels
that it believes it can attain, no assurance can be given that the Company will
be able to do so.
On March 14, 2000, the Company used $60.0 million of the proceeds that it
received from the sale of its Business Strategy Group to repay the $50.0 million
Term Loan and $10.0 million of borrowings under the Revolving Credit Facility.
As of March 25, 1999, the total amount outstanding under the Credit Facility,
was $20 million at an interest rate of 9.5% with a remaining borrowing
availability under the Credit Facility of approximately $49.4 million.
3. Discontinued Operations and other Dispositions
In the fourth quarter of 1999, the Company decided to sell its management
consulting practice, the Business Strategy Group in an initiative to support the
Company's new strategic direction. The cash transaction of $67.7 million closed
on March 10, 2000 and resulted in a gain for the Company estimated at $10.6
million, net of taxes of approximately $11.8 million. Accordingly, the Company
has reported the results of operations of the Business Strategy Group as
discontinued operations in the accompanying financial statements and related
notes for all periods shown.
For the For the
Quarter Period
Ended Ended
March 27, March 10,
1999 2000
------------ -----------
(In thousands)
Revenue $ 11,392 $ 10,029
Cost of revenue 7,372 6,159
Selling, general and administrative expenses 3,583 1,743
Interest expense, net (22) -
Income tax provision (benefit) 179 976
------------- -----------
Income from Strategy segment, net of tax 280 1,151
Gain on disposal of Strategy segment, net of tax - 10,645
------------- -----------
Net income $ 280 $ 11,796
============= ===========
At December 25, 1999, assets of the Business Strategy Group consisted
primarily of accounts receivable, goodwill and deferred income taxes amounting
to $47.7 million; and liabilities of $7.8 million consisted primarily of accrued
expenses and deferred income taxes.
In February 2000, the Company also signed a letter of intent to sell
Renaissance Worldwide Professionals, Ltd. (formerly James Duncan & Associates)
back to its management for approximately $1.2 million. In connection with this
transaction, which closed on March 31, 2000, the Company recorded a
non-recurring charge of $4.0 million in the fourth quarter of 1999 to write-down
goodwill.
8
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RENAISSANCE WORLDWIDE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4. Segment Reporting
The Company adopted SFAS 131 in fiscal 1998. The Company's four primary
business segments include: the ITCS Group, the Enterprise Solutions Group, the
Government Consulting Group and GovConnect.com. The following presents
information about reported segments for the quarters ended March 27, 1999 and
March 25, 2000. In the first quarter of 2000, the Company changed the structure
of its internal organization such that the Government Solutions segment became
two reportable segments, the Government Consulting Group and GovConnect.com.
Certain amounts previously reported have been reclassified to conform to the
Company's current basis of presentation.
For the Quarter Ended
--------------------------
March 27, March 25,
1999 2000
------------ ----------
(In thousands)
Revenues:
ITCS Group $ 140,019 $ 108,150
Enterprise Solutions Group 50,071 31,497
Government Consulting Group 5,518 6,041
GovConnect.com 2,563 4,145
------------ ----------
Total (1) $ 198,171 $ 149,833
============ ==========
Income (loss) from operations:
ITCS Group $ 11,288 $ 2,654
Enterprise Solutions Group 775 (1,356)
Government Consulting Group 1,148 760
GovConnect.com 59 354
------------ ----------
Total (1) $ 13,270 $ 2,412
============ ==========
Corporate expenses $ 8,313 $ 11,830
Interest and other expense, net 2,547 1,593
------------ ----------
Total income (loss) before taxes $ 2,410 $ (11,011)
============ ==========
(1) Intersegment revenues were not material and have been eliminated in
the above presentation.
9
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RENAISSANCE WORLDWIDE, INC.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three months ended March 27, 1999 and March 25, 2000
Revenue. Total revenue decreased 24.4% to $149.8 million for the first
quarter of 2000 from $198.2 million in the first quarter of 1999. This revenue
decrease was attributable to a 37.1% decrease in the Enterprise Solutions
Group's revenue which decreased to $31.5 million in 2000 from $50.1 million in
1999 and a 22.8% decrease in the ITCS Group's revenue which decreased to $108.2
million in 2000 from $140.0 million in 1999. These decreases were partially
offset by a 61.7% increase in GovConnect.com revenue which increased to $4.1
million in 2000 from $2.6 million in 1999 and a 9.5% increase in the Government
Consulting Group's revenue to $6.0 million in 2000 from $5.5 million in 1999.
The decrease in the Enterprise Solutions Group's revenue was partially due to
the sale by the Company of its Customer Management Solutions Vantive practice
and Neoglyphics Media Corporation in May of 1999. These businesses generated
$3.8 million of revenue in the quarter ended March 27, 1999. The Company
believes that the remaining decrease in the Enterprise Solutions Group's revenue
as well as the decrease in the ITCS Group's revenue continues to be attributable
to concerns about the impact of the Year 2000 issue and delayed start of new
projects.
Gross Profit. Gross profit decreased 38.3% to $36.7 million for the first
quarter of 2000 from $59.4 million for the comparable prior period. As a
percentage of revenue, gross profit decreased to 24.5% for the period compared
to 30.0% for the comparable prior period. This decrease in gross profit
percentage was attributable to a reduction in the ITCS and Enterprise Solutions
Groups' margins as both experienced a decrease in their respective utilization
rates.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by 15.3% to $46.1 million for the first
quarter of 2000 from $54.4 million for the comparable prior period. As a
percentage of revenue, selling, general and administrative expenses increased to
30.8% from 27.5% for the comparable prior period. This decrease in expense was
attributable primarily to the Company's efforts to resize supporting functions
to match the lower revenue levels discussed above.
Discontinued Operations. In the fourth quarter of 1999, the Company
decided to sell its management consulting practice, the Business Strategy Group
in an initiative to support the Company's new strategic direction. The cash
transaction of $67.7 million closed on March 10, 2000 and resulted in a gain for
the Company estimated at $10.6 million, net of taxes of approximately $11.8
million.
Interest and Other Expense, Net. Interest and other expense, net,
decreased to $1.6 million for the first quarter of 2000 from $2.5 million for
the comparable prior period. This decrease was due to lower borrowings in 2000,
and the repayment on March 14, 2000 of the $50.0 million Term Loan and $10.0
million of borrowings under the Revolving Credit Facility from the proceeds of
the sale of the Business Strategy Group.
Liquidity and Capital Resources
On July 15, 1999 the Company entered into a three-year, $150 million
revolving credit and term loan agreement with a bank syndicate. The Credit
Facility consists of a revolving line of credit of $100 million and a term loan
of $50 million. The Credit Facility bears interest at the higher of the Federal
Funds Rate plus 0.50% or the prime rate, plus up to 1.75% or LIBOR plus up to
3.0%, depending on the Company's level of compliance with certain financial
ratios. The Credit Facility requires the Company to pay a commitment fee of
0.375% to 0.50% per annum, depending on certain financial criteria, on the
unused portion of the Credit Facility. The Credit Facility is collateralized by
the majority of the assets of the Company and contains certain restrictions and
various covenants, including the maintenance of defined financial ratios.
On September 15, 1999, the Company announced that it was revising its
revenue and earnings estimates for the third and fourth quarters of 1999 due to
a softening in the demand for services in two of its core business -- the
Enterprise Solutions and ITCS Groups. Based upon this revised outlook, the
Company informed the bank syndicate that it would not be in compliance with
certain of its financial covenants for the third quarter of 1999. On November 4,
1999, the Company and the banks signed an amendment to the Credit Facility
amending certain financial covenants for the third quarter of 1999 through the
third quarter of 2000, reverting back to the original financial covenants
established in the Credit Facility thereafter. The Credit Facility, as amended,
now bears interest at the higher of the Federal Funds Rate plus 0.50% or the
prime rate, plus up to
10
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RENAISSANCE WORLDWIDE, INC.
2.25% or LIBOR plus up to 3.5%, depending on the Company's level of compliance
with certain financial ratios. In connection with this amendment, the Company
was required to pay amendment fees to the banks and related expenses of
approximately $0.5 million which were recorded in the third quarter of 1999 as
interest and other expense, net.
On February 25, 2000, the Company and the banks signed a second amendment
to the Credit Facility which permitted the Company to complete its sale of the
Business Strategy Group (see Note 3 of Notes to Unaudited Consolidated Financial
Statements) and the Renaissance Worldwide Professionals Ltd., formerly James
Duncan Associates, and amended certain financial covenants to reflect the sale
of the businesses.
Based upon the results for the first quarter of 2000, the Company informed
the bank syndicate that it would not be in compliance with one of its financial
covenants for the first quarter of 2000 and that it may not be in compliance
with this and other financial covenants for the remainder of 2000 based upon its
current outlook for the remainder of the year. The banks agreed to waive the
particular financial covenant in question for the first quarter of 2000 until
June 30, 2000. While the Company believes that it will be able to negotiate an
amendment to the Credit Facility to revise the financial covenants to levels
that it believes it can attain, no assurance can be given that the Company will
be able to do so.
On March 14, 2000 the Company used $60.0 million of the proceeds that it
received from the sale of its Business Strategy Group to repay the $50.0 million
Term Loan and $10.0 million of borrowings under the Revolving Credit Facility.
As of March 25, 1999, the total amount outstanding under the Credit Facility,
was $20 million at an interest rate of 9.5% with a remaining borrowing
availability under the Credit Facility of approximately $49.4 million.
The Company had negative cash flows from operations of $20.4 million for
the three months ended March 25, 2000. The negative operating cash flows were
due primarily to a decrease of $18.9 million in accounts payable, accrued
expenses and other liabilities due primarily to contingent payments under
certain earnout arrangements.
The Company had cash flows of $64.6 million from investing activities for
the three months ended March 25, 2000 due primarily to the sale of the Business
Strategy Group for $67.7 million, offset by purchases of fixed assets of $3.1
million.
The Company anticipates that its primary uses of working capital in future
periods will be for funding growth, either through acquisitions, the internal
development of existing branch offices or the development of new branch offices
and new service offerings. The Company also anticipates making approximately $15
to $20 million in capital expenditures over the next twelve months primarily
related to information systems. In connection with certain of its acquisitions,
the Company may be obligated to make certain contingent payments during the next
several years, including approximately $6 million which the Company is currently
required to pay over the next 12 months. The Company does not believe that such
payments will have a material impact on the Company's liquidity, results of
operations or capital requirements. The Company's principal capital requirement
is working capital to support the accounts receivable associated with its
revenue growth. The Company believes that its new Credit Facility, together with
cash flows from operations, will be sufficient to meet the Company's presently
anticipated working capital and financing needs for at least the next 12 months.
Recent Accounting Developments
In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Company is required to be in conformity with the
provisions of SAB 101 in fiscal 2000 and is currently evaluating the impact SAB
101 will have on its financial condition or results of operations.
Certain Factors That May Affect Future Operating Results
The foregoing section of the Company's Form 10-Q entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contains forward-looking statements regarding risks and uncertainties. The
Company's actual performance and results may differ materially due to many
important factors, including, but not limited to, the risk in transforming the
Company to an e-solutions provider, the need for additional financing, the
Company's dependence on the availability of qualified IT consultants, its
ability to sustain and manage growth, the risks associated with acquisitions,
the Company's dependence on key clients and personnel, risks associated with
international operations, the relatively short history of profitability, the
impact of the government regulation on immigration, fluctuations in operating
results due in part to the opening of new branch offices, general economic
conditions, employment liability risks, and the like. For additional and more
11
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RENAISSANCE WORLDWIDE, INC.
comprehensive discussions of the risks associated with ownership of Common Stock
of the Company, please see the Risk Factors section of the Company's Report on
Form 10-K, filed on March 24, 2000. As a result of these and other factors,
there can be no assurance that the Company will not experience material
fluctuations in future operating results on a quarterly or annual basis.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to a variety of risks, including foreign currency
fluctuations and changes in interest rates on its borrowings. The Company does
not engage in trading market risk sensitive instruments for speculative
purposes. There have been no material changes in market risk exposures from the
information disclosed in the Form 10-K for the year ended December 25, 1999.
Part II. Other Information
Item 1 - Legal Proceedings
Not applicable
Item 2 - Change in Securities
Not applicable
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Non applicable
Item 5 - Other Information
Not applicable
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits
27.1 Financial Data Schedule
b. Reports on Form 8-K
On March 24, 2000, the Company filed a Current Report on Form 8-K
dated March 10, 2000, reporting under Item 2 (Acquisition and
Disposition of Assets) the disposition of its Business Strategy
Group.
12
<PAGE>
RENAISSANCE WORLDWIDE, INC.
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.
Renaissance Worldwide, Inc.
(Registrant)
Date: May 9, 2000 By: /s/ G. Drew Conway
------------------------------
G. Drew Conway, Chairman and
Chief Executive Officer
(Principal Executive Officer)
Date: May 9, 2000 By: /s/ Joseph F. Pesce
-------------------------------
Joseph F. Pesce, Executive
Vice President of Finance,
Chief Financial Officer and Treasurer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> DEC-26-1999
<PERIOD-END> MAR-25-2000
<CASH> 5,530
<SECURITIES> 0
<RECEIVABLES> 167,942
<ALLOWANCES> 10,996
<INVENTORY> 0
<CURRENT-ASSETS> 177,914
<PP&E> 45,196
<DEPRECIATION> 16,118
<TOTAL-ASSETS> 288,163
<CURRENT-LIABILITIES> 94,414
<BONDS> 0
0
0
<COMMON> 4,725
<OTHER-SE> 181,931
<TOTAL-LIABILITY-AND-EQUITY> 288,163
<SALES> 0
<TOTAL-REVENUES> 149,833
<CGS> 0
<TOTAL-COSTS> 113,160
<OTHER-EXPENSES> 46,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,642
<INCOME-PRETAX> (11,011)
<INCOME-TAX> (4,206)
<INCOME-CONTINUING> (6,805)
<DISCONTINUED> 1,151
<EXTRAORDINARY> 10,645
<CHANGES> 0
<NET-INCOME> 4,991
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
