<PAGE>
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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, 1999
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 NO. 0-21107
---------------------------
TELESPECTRUM WORLDWIDE INC.
---------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2845501
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
443 SOUTH GULPH ROAD
King of Prussia, Pennsylvania 19406
----------------------------- -----
(Address of principal executive offices) (ZIP Code)
610-878-7400
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 of 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 _____
-----
The number of outstanding shares of the Registrant's Common Stock, par value
$.01 per share, on May 4, 1999 was 25,843,248.
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<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
Table of Contents
-----------------
<TABLE>
<CAPTION>
Item No. Page
- -------- ----
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
1. Financial Statements (unaudited):
Condensed Consolidated Results of Operations
For the Three Months Ended March 31, 1999 and
For the Three Months Ended March 31, 1998 3
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998 4
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1999 and
For the Three Months Ended March 31, 1998 5
Notes to Condensed Consolidated Financial Statements 6
2. Management's Discussion and Analysis of Results of Operations 12
and Financial Condition
PART II - OTHER INFORMATION 20
</TABLE>
2
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
Condensed Consolidated Results of Operations
(Unaudited)
(Dollars in Thousands -- Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
REVENUES $ 47,925 $ 39,634
-------------- --------------
Operating Expenses:
Cost of services 38,787 42,764
Selling, general and administrative 3,929 6,565
Amortization of goodwill 295 295
-------------- --------------
Total operating expenses 43,011 49,624
-------------- --------------
Operating income (loss) 4,914 (9,990)
INTEREST EXPENSE, net (172) (805)
-------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 4,742 (10,795)
INCOME TAX BENEFIT - 247
-------------- --------------
Income (loss) from Continuing Operations 4,742 (10,548)
INCOME FROM DISCONTINUED OPERATIONS
- 479
-------------- --------------
NET INCOME (LOSS) $ 4,742 $ $(10,069)
============== ==============
BASIC EARNINGS (LOSS) PER SHARE (Note 4):
CONTINUING OPERATIONS $ 0.18 $ $ (0.42)
DISCONTINUED OPERATIONS - 0.02
-------------- --------------
NET INCOME (LOSS) $ 0.18 $ $ (0.40)
============== ==============
DILUTED EARNINGS (LOSS) PER SHARE (NOTE 4):
CONTINUING OPERATIONS $ 0.17 $ (0.42)
DISCONTINUED OPERATIONS - $ 0.02
-------------- --------------
NET INCOME (LOSS) $ 0.17 $ (0.40)
============== ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Dollars in Thousands -- Except Share Amounts)
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 520 $ 794
Accounts receivable, net 47,949 36,859
Prepaid expenses and other 2,760 2,307
--------- ---------
Total current assets 51,229 39,960
PROPERTY AND EQUIPMENT, net 36,255 35,430
GOODWILL, net 26,491 26,786
OTHER ASSETS 4,376 1,513
--------- ---------
Total assets $ 118,351 $ 103,689
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Secured credit facility $ 6,665 $ --
Current maturities of long-term debt 747 820
Cash overdraft 3,581 1,658
Accounts payable 6,653 7,058
Accrued expenses 5,016 3,784
Accrued compensation 6,184 5,081
Deferred revenue 2,299 2,512
Other current liabilities 1,985 2,345
--------- ---------
Total current liabilities 33,130 23,258
--------- ---------
Long-term Debt 2,824 2,876
--------- ---------
Other Noncurrent Liabilities 746 987
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
No shares issued or outstanding -- --
Common stock, $.01 par value, 200,000,000 shares authorized,
25,842,948 and 25,771,449 shares issued and outstanding, respectively 259 258
Additional paid-in capital 240,525 240,176
Deferred compensation (316) (363)
Accumulated deficit (158,544) (163,286)
Cumulative currency translation adjustment (273) (217)
--------- ---------
Total stockholders' equity 81,651 76,568
--------- ---------
Total liabilities and stockholders' equity $ 118,351 $ 103,689
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 4,742 $(10,069)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization 2,238 1,981
Amortization of goodwill 295 295
Provision for bad debts 300 --
Non-cash compensation 47 327
Other items, net -- 79
Changes in operating assets and liabilities-
Accounts receivable (11,390) 2,683
Income tax receivable 1,180
Prepaid expenses and other (732) 218
Accounts payable 1,073 (2,346)
Accrued expenses 1,232 (485)
Accrued compensation 1,103 (183)
Deferred revenue (213) (153)
Other liabilities (400) 1,267
Net operating activities of discontinued operations -- (775)
-------- --------
Net cash used in operating activities (1,705) (5,981)
-------- --------
Cash Flows From Investing Activities:
Purchases of property and equipment (4,541) (914)
Payments of notes payable to seller and acquisition liabilities (257) (228)
Proceeds from sale of discontinued operations -- 15,000
Payments of deferred transaction costs (2,584)
Net investing activities of discontinued operations -- (275)
-------- --------
Net cash provided by (used in) investing activities (7,382) 13,583
-------- --------
Cash Flows From Financing Activities:
Net borrowings (payments) on secured credit facility 6,665 (7,115)
Cash overdraft 1,923 --
Borrowings of debt 117 --
Payments of debt (83) (83)
Payments of capital lease obligations (159) (323)
Proceeds from exercise of stock options and sale of common stock 350 --
-------- --------------
Net cash provided by (used in) financing activities 8,813 (7,521)
-------- --------
Net increase (decrease) in cash and cash equivalents (274) 81
Cash and cash equivalents, beginning of period 794 774
-------- --------
Cash and cash equivalents, end of period $ 520 $ 855
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements are unaudited and have been prepared by
TeleSpectrum Worldwide Inc. and subsidiaries ("TeleSpectrum" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). The December 31, 1998 balance sheet was derived from audited financial
statements, however, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations. The Company believes that the financial statements include all
adjustments of a normal and recurring nature necessary to present fairly the
results of operations, financial position and cash flows for the periods
presented. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K for
the year ended December 31, 1998.
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany balances and
transactions have been eliminated. There have been no material changes in
accounting policies from those stated in the Company's Form 10-K for the year
ended December 31, 1998. Certain prior period amounts have been reclassified to
conform with the current year presentation.
2. COMPANY BACKGROUND
The Company was incorporated in Delaware on April 26, 1996 and on August 12,
1996 completed its initial public offering. Concurrent with the offering, the
Company began material operations with the acquisition of the assets of a number
of businesses. The Company provides services to its customers through its two
business segments, Telemarketing and Customer Care. The results of operations of
the Market Research Segment and Direct Mail and Fulfillment Segment have been
accounted for as discontinued operations (see Note 5).
3. RECENT DEVELOPMENTS
IDRC MERGER
On January 14, 1999, TeleSpectrum and International Data Response Corporation
("IDRC") entered into a merger agreement and on February 26, 1999 they amended
the agreement. Under this agreement each of the holders of outstanding shares of
IDRC common stock, options and warrants will be entitled to receive their pro
rata portion of an aggregate of 9,200,000 shares of TeleSpectrum common stock
and options and warrants exercisable for 3,000,000 shares of TeleSpectrum common
stock. In addition, the IDRC preferred stock will be exchanged for $6,000,000 of
cash, plus all accrued and unpaid dividends. The majority stockholders of IDRC
will be required to invest their proceeds from the exchange of their IDRC
preferred stock of $4,900,000 in a term note with the Company. This note will be
payable in one year and bear interest at 10.0%. The excess of the total
estimated purchase price over the fair market value of the net liabilities
acquired will be amortized on a straight line basis over a period not to exceed
25 years. The merger will be accounted for as a purchase by TeleSpectrum
pursuant to APB Opinion No. 16 "Business Combinations."
In connection with the IDRC merger, the Company received a financing commitment
for $135,000,000 senior debt facility, which will be used to refinance IDRC's
current maturities of long-term debt, long-term debt and seller notes. The
Company will incur debt issuance costs, in connection with this senior facility,
of approximately $4,200,000, which will be amortized on a straight-line basis
over four years. This new facility will consist of three term notes in the
aggregate of $86,000,000 with maturities between 32 and 56 months and a
revolving credit facility of $49,000,000 due in 32 months. The facility allows
for alternative interest rates. After three months, the Company can elect LIBOR
plus a margin of 3.25% to 4.25%. The senior debt facility contains various
financial and non-financial covenants, including minimum interest coverage,
fixed charge coverage, minimum EBITDA, maximum leverage ratio and limitations on
capital expenditures. The merger is expected to close in the second quarter of
1999.
6
<PAGE>
CRW MERGER
On September 3, 1998, TeleSpectrum and CRW entered into a merger agreement
whereby each outstanding share of CRW common stock (6,917,521 shares as of March
31, 1999) will be exchanged for .709 of a share of TeleSpectrum common stock. In
addition, each outstanding option (1,536,433 as of March 31, 1999) to purchase
shares of CRW common stock will be exchanged for an option to purchase .709 of a
share of TeleSpectrum common stock and the 678,000 warrants to purchase shares
of TeleSpectrum common stock, owned by CRW, will be exchanged for 678,000
warrants to purchase TeleSpectrum common stock. The merger is expected to close
in the second quarter of 1999. Immediately prior to the merger, CRW will not
have any continuing business operations and its only asset will be 6,946,583
shares of TeleSpectrum common stock. For financial reporting purposes,
TeleSpectrum will treat the exchange of shares of TeleSpectrum common stock for
shares of CRW common stock as a treasury stock transaction. The transaction will
not have an effect on TeleSpectrum's net income (loss) but will have an effect
on its net income (loss) per share.
4. EARNINGS PER SHARE
The Company has adopted SFAS No. 128 "Earnings Per Share." SFAS No. 128 requires
a dual presentation of "basic" and "diluted" EPS on the face of the income
statement. Basic EPS is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding for the period. Diluted EPS
includes the effect, if any, from the potential exercise or conversion of
securities, such as stock options, which would result in the issuance of shares
of common stock.
The table below sets forth the reconciliation of the weighted average number of
shares outstanding used to compute basic and diluted earnings (loss) per share
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 1998
---- ----
<S> <C> <C>
Shares used in computing basic earnings (loss)
Per share.................................... 25,820 25,249
Dilutive effect of options........................ 2,720 -
------ ------
Shares used in computing diluted earnings
(loss) per share............................. 28,540 25,249
====== ======
</TABLE>
5. DISCONTINUED OPERATIONS
In December 1997, the Company committed to a plan to dispose of its Market
Research Segment and Direct Mail and Fulfillment Segment. As required by APB
Opinion No. 30, "Reporting the Results of Operations, Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," the Company has accounted for the results of
operations and net assets of the Market Research Segment and Direct Mail and
Fulfillment Segment as discontinued operations. The operating results for the
three months ended March 31, 1998, and the net assets at March 31, 1998 have
been restated to reflect discontinued operations.
In the first quarter of 1998, the Company sold substantially all of the assets
and liabilities of the Market Research segment and the Direct Mail and
Fulfillment segment for approximately $38,000,000 in cash, which resulted in a
loss of approximately $907,000, which was recorded as of December 31, 1997. The
Company used the proceeds from these sales to repay outstanding borrowings on
the secured credit facility.
7
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following table summarizes the operating results of the discontinued
operations (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 1998
---- ----
<S> <C> <C>
Revenues........................................ $ - $4,189
Operating expenses.............................. - 3,463
------
Income before income taxes...................... - 726
Income tax provision............................ - 247
------ ------
Income from discontinued operations............. - $ 479
====== ======
</TABLE>
6. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Company capitalizes software development costs in accordance with SFAS No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed." The Company capitalizes software development costs
subsequent to the establishment of technological feasibility and until the
product is available for general release. Costs incurred prior to the
establishment of technological feasibility are charged to product development
expense. Development costs associated with product enhancements that extend the
original product's life or significantly improve the original product's
marketability are also capitalized once technological feasibility has been
established. Software development costs are amortized over the greater of the
ratio of current revenues to total anticipated revenues or on a straight-line
basis over the estimated useful lives of the products (three years), beginning
with the initial release to customers. The Company continually evaluates whether
events or circumstances have occurred that indicate that the remaining useful
life of the capitalized software development costs should be revised or that the
remaining balance of such assets may not be recoverable. The Company evaluates
the recoverability of capitalized software based on the estimated future
revenues of each product. As of March 31, 1999, the Company believes that no
revisions to the remaining useful life or write-downs are required for
capitalized software development costs. At March 31, 1999, the Company has
$943,000 of capitalized software development costs. General release is expected
during the third quarter of 1999.
7. SECURED CREDIT FACILITY
On April 14, 1998, the Company entered into a four-year Loan and Security
Agreement, which provides for a $20,000,000 credit facility (the "Credit
Facility"). Under the terms of the Credit Facility, the Company can borrow up to
the lesser of $20,000,000 or an amount that is determined as 80% of the net
eligible accounts receivable. The Company can elect at the time it makes
borrowings to pay interest at prime plus 0.50% or at LIBOR plus 2.50% and pays a
commitment fee of 0.375% on the unused borrowing capacity. The Credit Facility
also makes available to the Company letters of credit at a fee of 1% per annum
on the face amount of each letter of credit and in an aggregate amount not to
exceed the lower of $1,500,000 or the amount available under the credit
facility. Borrowings under the Credit Facility are collateralized by
substantially all of the assets of the Company. The Credit Facility also
contains various financial and non-financial covenants, including limitations on
purchases of property and equipment, minimum working capital, net worth and
current ratio requirements. At March 31, 1999 and December 31, 1998, the Company
had $6,665,000 and no outstanding borrowings and $13,335,000 and $18,104,000 of
available borrowings under the Credit Facility, respectively. For the three
months ended March 31, 1999 and 1998, the weighted average interest rate on
borrowings under the Credit Facility was 8.25% and 8.75% and the Company
recorded interest expense under this facility of $90,000 and $504,000,
respectively. The Credit Facility will be refinanced with the debt financing
obtained in connection with the Company's merger with IDRC (see Note 3).
8
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. SUPPLEMENTAL CASH FLOWS INFORMATION
The Company paid $118,000 and $545,000 of interest expense for the three months
ended March 31, 1999 and 1998, respectively. The Company did not pay any income
taxes during the three months ended March 31, 1999 and 1998.
9. COMMITMENTS AND CONTINGENCIES
On March 18, 1998, the Company entered into an employment contract with its new
Chairman of the Board, CEO and President which expires in March 2001. The
contract provides for annual compensation of $200,000 per year, plus potential
bonuses. The Company entered into a subscription agreement whereby this
executive acquired 227,964 shares of the Company's common stock for $500,000 and
was granted options to purchase 2,000,000 shares of common stock at $3.29 per
share. The options will vest over three to five years with accelerated vesting
for 500,000 options based on the achievement of certain performance objectives,
as defined. The Company recorded compensation expense of $327,000, which
represents the difference between the stock purchase price and the fair market
value of the stock on the effective date of the stock subscription agreement. In
addition, the Company will record compensation expense of $670,000 over the
vesting period of the options to purchase 2,000,000 shares of common stock which
represents the difference between the fair market value of the stock on the
grant date and the option exercise price of $3.29.
In July 1998, the Company commenced litigation in Federal court against Parcel
Consultants Incorporated d/b/a/ NTC ("NTC"). The Company filed suit as part of
its efforts to collect approximately $4,742,000 of accounts receivable for
telemarketing services performed on behalf of NTC. NTC filed a counter suit
against the Company alleging breach of contract and fraud. The Company believes
that NTC's claims against the Company are without merit. On February 26, 1999,
NTC filed for reorganization under Chapter 11 of the Federal Bankruptcy Code. In
1998, the Company established a reserve of approximately $2,100,000 of the
accounts receivable amount due from NTC. Based on current facts and
circumstances, the Company believes that this reserve is adequate, however, the
Company cannot be certain that it will be successful in collecting the accounts
receivable due from NTC.
The Company is party to various claims and other matters arising in the ordinary
course of business. In the opinion of management, the outcome of these matters
will not have a material adverse effect on the Company's financial position or
results of operations.
10. CONCENTRATIONS OF RISK
The financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers comprising the Company's customer base, and
their dispersion across many different industries and geographies. The Company
does not require collateral or other securities to support customer accounts
receivable. The Company performs periodic reviews of its clients' condition to
reduce the collection risk.
The Company does not believe a significant credit risk exists at March 31, 1999.
The Company had one client in the telecommunications industry which accounted
for approximately 16% and 10% of total revenues for the three months ended March
31, 1999 and 1998, respectively, and 21% and 23% of total accounts receivable at
March 31, 1999 and December 31, 1998, respectively. In addition, the Company
had another client in the telecommunications industry which accounted for
approximately 13% of total accounts receivable at December 31, 1998.
9
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
11. COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income," which is
effective for financial statements issued for fiscal years beginning after
December 15, 1997. The Company's comprehensive income includes net income (loss)
and unrealized gains and losses from foreign currency translation. Total
comprehensive income (loss) for the three months ended March 31, 1999 and 1998
was $4,686,000 and $(10,046,000), respectively.
12. RELATED-PARTY TRANSACTIONS
CRW FINANCIAL, INC.
On May 22, 1996, CRW Financial, Inc. ("CRW"), made an initial capital
contribution of $2,100,000 representing the proceeds of borrowings by CRW under
subordinated notes issued to certain officers and directors of CRW and the
Company, CRW consultants and CRW outside investors. As additional consideration,
the lenders to CRW received warrants from CRW to purchase 1,433,000 shares of
the Company's common stock owned by CRW at $1.50 per share ("CRW Lender
Warrants"). In addition, CRW issued to its bank, warrants to purchase 75,000
shares of the Company's common stock owned by CRW at $1.50 per share. These
warrants were issued as consideration for CRW's bank issuing a waiver under its
loan facility with CRW, permitting the May 22, 1996 capital contribution to the
Company.
CRW also issued warrants to purchase 839,000 shares of the Company's common
stock owned by CRW at $1.50 per share to certain officers of CRW and the Company
("CRW Management Warrants"). The warrants were granted by CRW to these
individuals for services provided to CRW. In June 1997 certain officers of CRW
and the Company exercised the CRW Management Warrants to purchase 229,000 shares
of the Company's common stock.
The deemed value for accounting purposes of the CRW Lender Warrants and the CRW
Management Warrants is based upon the difference between $9.75 (35% discount to
the initial public offering price) and the $1.50 warrant exercise price. The
deemed value for accounting purposes of $18,749,000 is treated as additional
purchase price consideration of the acquisitions of the Initial Operating
Businesses.
The Company subleases a 21,000 square foot office building in King of Prussia,
Pennsylvania, from CRW. The sublease commenced on May 9, 1996, and requires
monthly base rent payments through September 30, 2004, of approximately $35,000.
Total rent expense for the three months ended March 31, 1999 and 1998 was
$120,000 and $112,000, respectively.
AFFINICORP USA, INC.
On September 25, 1998, the Company purchased 19.4% of the outstanding common
stock of AffiniCorp USA, Inc. for $500,000. AffiniCorp develops and manages
enhancement products for credit card issuers. The Company has entered into a
relationship with AffiniCorp whereby the Company provides telemarketing services
at its normal rates with six month extended payment terms. In addition, the
Company provides telemarketing services at its normal rates and normal payment
terms. Outstanding balances for telemarketing services under the six month
extended terms are capped at $1,500,000. The Company has a security interest in
the accounts receivable and certain other assets of AffiniCorp. As of March 31,
1999, the Company has $2,099,000 of accounts receivable from AffiniCorp recorded
in current assets and a $500,000 investment recorded in other assets.
10
<PAGE>
13. SEGMENTS
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." The Company classifies its continuing
operations into two segments: Telemarketing and Customer Care. The operating
segments are managed separately because each operating segment represents a
strategic business unit that offers different services. The business segments
are described in further detail below. Segment assets include amounts
specifically identified to Telemarketing and Customer Care Segments. Corporate
assets consist primarily of property and equipment.
The Telemarketing Segment provides both business-to-consumer and business-to-
business telemarketing services--primarily direct sales initiated by the Company
on behalf of its clients.
The Customer Care Segment provides customer service expertise to its clients.
The Company's customer service expertise includes customer care support,
typically through toll-free telephone numbers, for activities such as responses
to clients' customer service inquiries, catalogue sales and electronic order
processing and consulting services to a wide range of clients.
Corporate operations include the selling, general and administrative functions
of the Company.
The results of operations of the Market Research Segment and Direct Mail and
Fulfillment Segment have been accounted for as discontinued operations (see Note
5).
Business segment information is as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
---------
1999 1998
--------- ---------
<S> <C> <C>
REVENUES
Telemarketing................................................... $ 34,986 $ 28,131
Customer Care................................................... 12,939 11,503
-------- --------
Total......................................................... $ 47,925 $ 39,634
======== ========
OPERATING INCOME (LOSS)
Telemarketing................................................... $ 6,398 $ (3,827)
Customer Care................................................... 2,445 402
Corporate....................................................... (3,929) (6,565)
-------- --------
Total......................................................... $ 4,914 $ (9,990)
======== ========
TOTAL ASSETS
Telemarketing................................................. $ 55,101 $ 47,832
Customer Care................................................. 49,080 49,658
Corporate..................................................... 14,170 6,889
-------- --------
Total continuing operations.................................. 118,351 104,379
Discontinued operations....................................... - 23,093
-------- --------
Total........................................................ $118,351 $127,472
======== ========
</TABLE>
11
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Quarterly Report contain forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995.These statements address, among other things, the Company's
business strategy, including its use of cash and cash equivalents; reliance on
certain customers; projected capital expenditures; liquidity; Year 2000
disclosure, including statements regarding readiness, remediation, consequences
and contingency plans; increased sales in future periods; the continuation of
fluctuations in results of operations, as well as information contained
elsewhere in this Report where statements are preceded by, followed by or
include the words "believes," "expects," "anticipates," "plans" or similar
expressions. These statements are based on a number of assumptions concerning
future events, and are subject to a number of uncertainties and other factors,
many of which are outside the Company's control, that could cause actual results
to differ materially from such statements. The Company undertakes no obligation
to update or revise forward-looking statements, whether as a result of new
information, future events or otherwise.
RECENT DEVELOPMENTS
OVERVIEW
IDRC Merger Agreement
On January 14, 1999, we entered into a merger agreement with International Data
Response Corporation ("IDRC") and its majority stockholders. This agreement was
amended on February 26, 1999. Under this agreement, the holders of outstanding
IDRC common stock and options will be entitled to receive their pro rata portion
of an aggregate of 9.2 million shares and warrants exercisable for 3.0 million
shares of our common stock. These warrants would be exercisable during the
period between the first and seventh anniversaries of the completion of the
merger at an exercise price of $8.988 per share. In addition, the IDRC
preferred stock will be exchanged for $6.0 million in cash, plus all accrued and
unpaid dividends. The majority stockholder of IDRC, McCown De Leeuw & Co. will
be required to invest all of their proceeds from the exchange of their IDRC
preferred stock, estimated at approximately $4.9 million, to purchase a term
note from us. This note will be payable in one year and bear interest at 10.0%.
We will account for the IDRC merger as a purchase by us pursuant to Accounting
Principles Board Opinion No. 16 "Business Combinations." We received a
financing commitment for a new $135.0 million senior debt facility which will be
used to replace our current facility and to refinance IDRC's current maturities
of long-term debt, long-term debt and seller notes. If the IDRC merger is
completed, we will incur debt issuance costs associated with this facility of
approximately $4.2 million. We would amortize these costs over four years.
This debt facility will consist of three term notes in the aggregate of $86.0
million with maturities between 32 and 56 months and a revolving credit facility
of $49.0 million due in 32 months. The debt facility allows for alternative
interest rates. After three months, we can elect LIBOR plus a margin of 3.25%
to 4.25%. The debt facility contains various financial and non-financial
covenants, including minimum interest coverage, fixed charge coverage, minimum
EBITDA, maximum leverage ratio and limitations on capital expenditures. We
expect to complete the merger in the second quarter of 1999.
12
<PAGE>
CRW Merger Agreement
On September 3, 1998, we entered into a merger agreement with CRW Financial,
Inc. ("CRW"). This agreement was amended December 30, 1998. Under this
agreement each outstanding share of CRW common stock will be exchanged for .709
of a share of TeleSpectrum common stock. In addition, each outstanding option
to purchase shares of CRW common stock will be exchanged for an option to
purchase .709 of a share of TeleSpectrum common stock. The warrants issued by
CRW to purchase 0.7 million shares of our common stock owned by CRW will be
unaffected by this merger. CRW does not have any continuing business operations
and its only significant asset is 6.9 million shares of our common stock. For
financial reporting purposes, we will treat the exchange of our shares of
common stock for shares of CRW common stock as a treasury stock transaction.
The transaction will not have an effect on our net income or loss, but will have
an effect on our net income or loss per share. We expect to complete the merger
in the second quarter of 1999.
Litigation with NTC
In July 1998, we commenced litigation in Federal court against Parcel
Consultants Incorporated d/b/a NTC. We filed suit as part of our efforts to
collect approximately $4.7 million of accounts receivable from telemarketing
services performed on behalf of NTC. NTC filed a counter suit against us
alleging breach of contract and fraud. We believe that NTC's claims against us
are without merit. In February 1999, NTC filed for reorganization under Chapter
11 of the Federal Bankruptcy Code. We have reserved approximately $2.1 million
of the accounts receivable due from NTC. We believe that our reserve is
adequate, however, we cannot assure that we will be successful in collecting
this receivable from NTC.
13
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
Certain prior period amounts have been reclassified to conform to the current
year presentation.
The following discussions should be read in connection with the Consolidated
Financial Statements contained within this report on Form 10Q.
Comparison of the results of operations for the three months ended March 31,
1999 to the three months ended March 31, 1998.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
------------------------------------------------------------------------
THREE MONTHS AS A THREE MONTHS AS A
ENDED PERCENTAGE OF ENDED PERCENTAGE OF
MARCH 31, 1999 REVENUES MARCH 31, 1998 REVENUES
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Telemarketing................................ $35.0 73% $ 28.1 71%
Customer care................................ 12.9 27 11.5 29
----- --- ------ ---
Total revenue.................................. 47.9 100 39.6 100
Cost of services:
Telemarketing................................ 28.6 60 31.9 81
Customer care................................ 10.2 21 10.8 27
----- --- ------ ---
Total cost of services......................... 38.8 81 42.7 108
Total selling, general and administrative...... 3.9 8 6.6 16
Amortization of goodwill....................... 0.3 1 0.3 1
----- --- ------ ---
Total operating expenses....................... 43.0 90 49.6 125
Operating income (loss)........................ 4.9 10 (10.0) (25)
Interest expense............................... (0.2) -- (0.8) (2)
----- --- ------ ---
Income (loss) before taxes..................... 4.7 10 (10.8) (27)
Income tax benefit............................. -- -- 0.2 --
----- --- ------ ---
Income (loss) from continuing operations....... $ 4.7 10 $(10.6) (27)
===== === ====== ===
</TABLE>
14
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
REVENUES
Our total revenues for the three months ended March 31, 1999 were $47.9 million,
representing an increase of 21% from $39.6 million for the three months ended
March 31, 1998. This increase is primarily the result of increased fulfillment
revenues and higher revenue per hour. Fulfillment services involve filling
orders received through telemarketing.
Telemarketing Segment
Our telemarketing segment revenues were $35.0 million for the three months ended
March 31, 1999. These revenues accounted for 73% of our total revenues and
represent an increase of $6.9 million or 25% from telemarketing revenues of
$28.1 million for the three months ended March 31, 1998. The increase in
telemarketing revenues is primarily attributable to an increase in fulfillment
revenues of $3.6 million provided via a third party, an increase in revenue per
hour of $2.3 million and increased volume of $1.0 million. Services initiated
for new clients totaled $7.4 million, and net new services totaled $5.0 million
offset by lost clients of $9.1 million. Approximately 22% of telemarketing
revenues for the three months ended March 31, 1999 was generated by services
provided on behalf of a client in the telecommunications industry.
Customer Care Segment
Our customer care segment revenues were $12.9 million for the three months ended
March 31, 1999. These revenues accounted for 27% of our total revenues and
increased by $1.4 million or 12% from the three months ended March 31, 1998. Of
this increase, $1.9 million was the result of services initiated for new
clients, offset by $0.5 million for lost clients.
COST OF SERVICES
Our cost of services were $38.8 million for the three months ended March 31,
1999, a decrease of $3.9 million or 9% from cost of services of $42.7 million
for the three months ended March 31, 1998. As a percentage of total revenues,
cost of services were 81% and 108% for the three months ended March 31, 1999 and
1998, respectively.
Telemarketing Segment
Our telemarketing segment cost of services for the three months ended March 31,
1999 were 82% of telemarketing revenues and decreased by $3.3 million or 10%
from the three months ended March 31, 1998. Cost of services for the three
months ended March 31, 1998 were 114% of telemarketing revenues. The decrease
in cost of services is attributable to higher capacity utilization, operational
efficiencies and increased revenue per hour.
Customer Care Segment
Our customer care segment cost of services accounted for 79% of our customer
care revenues for the three months ended March 31, 1999 and decreased by $0.6
million or 6% from the three months ended March 31, 1998. The decrease in cost
of services is attributable to operational efficiencies.
SELLING, GENERAL AND ADMINISTRATIVE
SG&A expenses were $3.9 million for the three months ended March 31, 1999, a
decrease of $2.7 million or 41% from the three months ended March 31, 1998. As
of percentage of total revenue, SG&A expenses were 8% and 16% for the three
months ended March 31, 1999 and 1998, respectively. The decrease in SG&A
expenses is attributable to severance and other one time expenses included in
the three months ended March 31, 1998 and continuing corporate overhead
reductions.
15
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
AMORTIZATION OF GOODWILL
Our goodwill amortization was $0.3 million, representing 1% of total revenues
for the three months ended March 31, 1999 and 1998.
INTEREST EXPENSE
We incurred interest expense of $0.2 million for the three months ended March
31, 1999 which represented a decrease of $0.6 million from the three months
ended March 31, 1998. This decrease in interest expense is due to reduced
borrowings under our credit facility during the three months ended March 31,
1999 as compared to the three months ended March 31, 1998.
INCOME TAX BENEFIT
The income tax benefit from continuing operations for the three months ended
March 31, 1998 represents the offset of the provision for income taxes for
discontinued operations.
INCOME FROM DISCONTINUED OPERATIONS
In January 1998 the Company sold its former Market Research Segment business and
in March 1998 the Company consummated the sale of its former Direct Mail and
Fulfillment Segment business. For the three months ended March 31, 1998, the
Company has accounted for the results of operations of the Market Research
Segment and Direct Mail and Fulfillment Segment as discontinued operations.
Income from discontinued operations for the three months ended March 31, 1998
amounted to $0.5 million (net of tax).
16
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS THREE MONTHS ENDED THREE MONTHS ENDED
CASH FLOWS PROVIDED BY (USED IN): MARCH 31, 1999 MARCH 31, 1998
- --------------------------------- -------------------- --------------------
<S> <C> <C>
Operating Activities.................................................... (1,705) (5,981)
Investing Activities.................................................... (7,382) 13,583
Financing Activities.................................................... 8,813 (7,521)
</TABLE>
For the three months ended March 31, 1999
The $1.7 million of cash used in operating activities consisted of $4.7 million
of net income and non cash items including depreciation and amortization of $2.9
million, offset by working capital requirements including a significant increase
in accounts receivable of $11.4 million.
The $7.4 million of cash used in investing activities primarily consisted of
$4.5 million of purchases of property and equipment attributed to maintaining
and enhancing our technology platforms. In addition, $2.6 million consisted of
deferred transaction cost payments related to the IDRC and CRW mergers.
The $8.8 million of net cash provided by financing activities primarily
consisted of $6.7 million of net borrowings under our secured credit facility.
In addition, our cash overdraft increased $1.9 million.
On April 14, 1998, we entered into a four-year Loan and Security Agreement with
Mellon Bank N.A. ("Mellon"), which provides for a $20.0 million credit facility
(the "Credit Facility"). Under the terms of the Credit Facility, we can borrow
up to the lesser of $20.0 million or an amount that is determined as 80% of the
net eligible accounts receivable. We can elect at the time of our borrowings to
pay interest at prime plus 0.50% or at LIBOR plus 2.50% and will pay a
commitment fee of 0.375% on the unused borrowing capacity. The Credit Facility
also makes available letters of credit at a fee of 1% per annum on the face
amount of each letter of credit and in an aggregate amount not to exceed the
lower of $1.5 million or the amount available under the Credit Facility.
Borrowings under the Credit Facility are collaterlized by substantially all of
our assets. The Credit Facility also contains various financial and non-
financial covenants. At March 31, 1999, we had $6.7 million outstanding and
$13.3 million available under the Credit Facility.
We believe that our existing cash balances, and borrowings available under our
Credit Facility will be sufficient to meet our operating and capital needs into
2000. The amount of future capital expenditures will be highly dependent on
future revenue growth.
On January 14, 1999, we entered into a merger agreement with IDRC. In
connection with the merger agreement, we received a financing commitment for a
new $135.0 million senior debt facility which will be used to replace our
current credit facility and to refinance IDRC's debt. Should the merger close,
we believe that our existing cash balances and borrowings available under the
new $135.0 million senior debt facility will be sufficient to meet our combined
operating and capital needs into 2000.
For the three months ended March 31, 1998
The $6.0 million of cash used in operating activities consisted of $5.2 million
used in continuing operations and $0.8 million used in discontinued operations.
Our net loss of $10.1 million was reduced by non-cash items including
depreciation and amortization, and a decrease in working capital requirements.
17
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
The $13.6 million of cash provided by investing activities primarily consisted
of $15.0 million of proceeds from the sale of the Market Research Segment,
primarily offset by $0.9 million of purchases of property and equipment.
The $7.5 million of net cash used in financing activities primarily consisted of
$7.1 million of net payments under our secured credit facility and $0.4 million
of other debt payments.
18
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
YEAR 2000 ISSUE
Year 2000 Issue. The Year 2000 issue results from the writing of computer
programs using two digits rather than four to define the applicable year.
Because of this programming convention, computer software, hardware or firmware
may recognize a date using "00" as the year 1900 rather than year 2000. This
could result in system failures, miscalculations or errors causing disruptions
of operations or other business problems, including, among others, a temporary
inability to process transactions or engage in other normal business activities.
State of Readiness. We have undertaken a comprehensive program, including the
hiring of an outside consulting firm, to address the Year 2000 issue with
respect to the following:
. our information technology and operating systems, which include call
processing, network, server, security and application systems;
. our non-information technology systems that may contain embedded
microchip technology, which include buildings, plant, equipment and
other infrastructure systems; and
. the systems of our major vendors and telecommunication service
providers insofar as they relate to our business.
Our core business systems are in the process of receiving Year 2000 compliant
upgrades furnished by our vendors, being replaced by our TeleSpectrum Enterprise
System Solution (TESS), or being rewritten to be Year 2000 compliant. We are
developing TESS to replace many of our current data processing systems. We
believe that the TESS product will be Year 2000 compliant and that our core
business systems will be ready to successfully recognize years beginning with
2000. Although we have received compliance information from many suppliers, we
are unable to predict the extent to which our suppliers will be affected by the
Year 2000 issue. We are also unable to predict the extent to which we may be
vulnerable to a supplier's inability to remedy any issues in a timely manner.
This matter is most prevalent with our telecommunications service suppliers.
Costs to Address the Year 2000 Issue. Our current cost estimate to become Year
2000 compliant is $1,500,000 in 1999, of which approximately 40% will be for
outside consultants and 60% will be for internal resources which have been or
will be reallocated from other projects. Many of our systems that require Year
2000 remediation or replacement are also simultaneously receiving performance
upgrades or feature enhancements. Our current cost estimate does not include
costs related to these upgrades or enhancements, as the decision to upgrade or
enhance these systems was not based on Year 2000 compliance and the timing of
these upgrades and enhancements has not been accelerated as a result of becoming
Year 2000 compliant. Our policy is to expense the costs incurred to become Year
2000 compliant in accordance with EIFT 96-14. To date, the financial impact of
remediation expenses has not been material, and we do not expect future
remediation costs to be material to our consolidated financial position or
results of operations.
Risks Presented by Year 2000 Problems. Our reasonably anticipated worst case
scenario involves Year 2000 problems experienced by our suppliers. If our
telecommunications vendors do not appropriately address their Year 2000 issues
and alternative telecommunications providers are not able to provide us with
adequate telecommunications services, we will not be able to provide our
services to our clients. If there is widespread and continued shortage in
telecommunications services available from telecommunications vendors, we will
be materially adversely affected. In addition, our computer systems are linked
to many of our clients' computer systems. Through these links, clients furnish
us with information that is necessary for us to provide our services and we
provide our clients with feedback regarding their services. While we have made
inquiries regarding their state of readiness for the Year 2000, we may not be
able to accurately predict whether our clients' systems will be Year 2000
compliant. We will likely experience service disruptions and may be materially
adversely affected if our clients' systems are not Year 2000 compliant.
19
<PAGE>
Contingency Plans. Our Year 2000 plan calls for the development of contingency
plans for areas of our business that are susceptible to a substantive risk of a
disruption resulting from a Year 2000 related event. For our internal systems,
we are developing remediation plans for our existing systems, including as a
contingency to the timely implementation of TESS. For vendor supplied services,
we are evaluating alternative vendors for backup services. However, we may not
be able to obtain backup services if there is a widespread and continued
shortage in telecommunications services available from telecommunications
vendors. For client computer links, we will seek to exchange information on a
manual basis until such time as the necessary corrections have been made.
Consistent with our Year 2000 plan, we will develop specific Year 2000
contingency plans for any other areas of our business as the need is identified.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to
borrowings under our secured credit facility. The secured credit facility bears
interest at prime plus 0.50% or of LIBOR plus 2.50% (8.25% and 7.44% at March
31, 1999, respectively). We typically use available cash in excess of amounts
required for operating activities to pay amounts due under the secured credit
facility. Accordingly, we have not had a significant level of funds available
for investment purposes. Interest rate fluctuations have not had a significant
effect on our results of operations. We do not use derivative financial
instruments in our operations.
Foreign Currency Risk
We do not use foreign currency exchange contracts or purchase currency options
to hedge local currency cash flows. We have subsidiaries in Canada and the
United Kingdom, which are subject to foreign currency fluctuations. As currency
rates change, translation of income statements of these subsidiaries from local
currencies to U.S. dollars affects year-over-year comparability of our operating
results. Gains and losses on translation are recorded as a separate component
of stockholders' equity. The foreign subsidiaries are limited in their
operations and the level of investment by the parent company so that the risk of
foreign currency fluctuations is not expected to be material.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 1998, the Company commenced litigation in Federal court
against Parcel Consultants Incorporated d/b/a/ NTC ("NTC"). The
Company filed suit as part of its efforts to collect approximately
$4,742,000 of accounts receivable for telemarketing services
performed on behalf of NTC. NTC filed a counter suit against the
Company alleging breach of contract and fraud. The Company
believes that NTC's claims against the Company are without merit.
On February 26, 1999, NTC filed for reorganization under Chapter
11 of the Federal Bankruptcy Code. The Company has reserved
approximately $2,100,000 of the accounts receivable amount due
from NTC. Based on current facts and circumstances, the Company
believes that this reserve is adequate, however, the Company
cannot be certain that it will be successful in collecting the
accounts receivable due from NTC.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
20
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. OTHER INFORMATION
On April 15, 1999, our Chief Financial Officer, Richard C.
Schwenk, Jr. resigned from his employment with TeleSpectrum. As
previously announced, upon completion of the IDRC merger, Paul J.
Grinberg is expected to become our Chief Financial Officer. Keith
E. Alessi, our Chairman, President and Chief Executive Officer
will also serve as Interim Chief Financial Officer until such
time.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is a list of exhibits filed as part of this
quarterly report on Form 10-Q. Where so indicated by
footnote, exhibits which were previously filed are
incorporated by reference. For exhibits incorporated by
reference, the location of the exhibit in the previous
filing is indicated in parentheses.
3.01 Restated Certificate of Incorporation of TeleSpectrum
Worldwide Inc. is incorporated by reference to
exhibit 3.01 of the Company's Registration Statement
on Form S-1 (File No. 333-04349).
3.02 Bylaws of TeleSpectrum Worldwide Inc. are
incorporated by reference to exhibit 3.02 of the
Company's Registration Statement on Form S-1 (File
No. 333-04349).
27.01 Financial Data Schedule.
(b) FORM 8-K
The Company filed a Current Report on Form 8-K with the
Commission on January 26,1999.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TeleSpectrum Worldwide Inc.
---------------------------------------------
(Registrant)
Date: May 4, 1999 /s/ Keith E. Alessi
----------- ---------------------------------------------
Keith E. Alessi
TeleSpectrum Worldwide Inc.
Chairman, President & Chief Financial Officer
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND RESULTS OF OPERATIONS 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 520
<SECURITIES> 0
<RECEIVABLES> 51,111
<ALLOWANCES> (3,162)
<INVENTORY> 0
<CURRENT-ASSETS> 51,229
<PP&E> 56,365
<DEPRECIATION> (20,110)
<TOTAL-ASSETS> 118,351
<CURRENT-LIABILITIES> 23,258
<BONDS> 10,236
0
0
<COMMON> 259
<OTHER-SE> 81,392
<TOTAL-LIABILITY-AND-EQUITY> 118,351
<SALES> 47,925
<TOTAL-REVENUES> 47,925
<CGS> 38,787
<TOTAL-COSTS> 43,011
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 172
<INCOME-PRETAX> 4,742
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,742
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,742
<EPS-PRIMARY> .18
<EPS-DILUTED> .17
</TABLE>
