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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the quarterly period ended June 30, 1997
Commission File Number 0-28840
INFORMATION MANAGEMENT RESOURCES, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2911475
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
26750 U.S. Highway 19 North, Suite 500, Clearwater, Florida 34621
(Address of principal executive offices and zip code)
813-797-7080
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
As of August 6, 1997, there were 16,774,958 outstanding shares of the
Registrant's Common Stock, par value $.10 per share.
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC.
Table of Contents
-----------------
Part I - Financial information
------------------------------
Page
----
Item 1. Consolidated Balance Sheets
as of June 30, 1997 and December 31, 1996.................. 3
Consolidated Statements of Income
for the Three Month and Six Month Periods Ended
June 30, 1997 and 1996..................................... 4
Consolidated Statements of Cash Flows
for the Six Month Periods Ended
June 30, 1997 and 1996..................................... 5
Notes to Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition......................... 9
Part II - Other Information
---------------------------
Item 1. Legal Proceedings........................................ 14
Item 5. Other Information........................................ 14
Item 6. Exhibits and Reports on Form 8-K......................... 14
2
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 19,059 $ 24,082
Marketable securities .................................. 11,613 5,644
Accounts receivable .................................... 13,006 5,670
Unbilled work in process ............................... 2,265 1,074
Accounts receivable, affiliate ......................... -- 646
Notes receivable, affiliate ............................ -- 533
Income taxes receivable ................................ 889 --
Deferred income taxes .................................. 2,846 --
Other current assets ................................... 1,342 890
-------- --------
Total current assets ............................. 51,020 38,539
Property and equipment, net of accumulated depreciation ... 7,829 3,703
Capitalized software costs, net of accumulated amortization 589 720
Note receivable, affiliate ................................ -- 159
Deposits and other assets ................................. 887 438
Goodwill, net of accumulated amortization ................. 10,205 5,394
-------- --------
Total assets ..................................... $ 70,530 $ 48,953
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans ................................. $ 624 $ --
Accounts payable ....................................... 2,350 1,364
Accrued expenses ....................................... 7,669 2,878
Income taxes payable ................................... -- 477
Deferred income taxes .................................. -- 258
Current portion of long-term debt ...................... 162 --
Current maturities of capital lease obligations ........ 75 55
Current portion of notes payable-shareholders .......... -- 814
Deferred revenue ....................................... 7,116 1,965
-------- --------
Total current liabilities ........................ 17,996 7,811
Long-term debt ............................................ 1,018 --
Deferred income taxes ..................................... 375 634
Other liabilities ......................................... 95 85
-------- --------
Total liabilities ................................ 19,484 8,530
-------- --------
Minority interest ......................................... 92 67
-------- --------
Shareholders' equity:
Preferred stock ........................................ -- --
Common stock ........................................... 1,523 1,447
Additional paid-in capital ............................. 44,961 38,359
Retained earnings ...................................... 4,578 669
Cumulative foreign currency translation adjustment ..... (108) (119)
-------- --------
Total shareholders' equity ....................... 50,954 40,356
-------- --------
Total liabilities and shareholders' equity ....... $ 70,530 $ 48,953
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues .................................... $ 18,767 $ 6,308 $ 33,114 $ 12,397
Cost of revenues ............................ 10,371 3,522 18,413 7,011
-------- -------- -------- --------
Gross profit ....................... 8,396 2,786 14,701 5,386
Selling, general and administrative expenses 4,751 1,699 8,671 3,275
Goodwill amortization ....................... 276 14 547 29
-------- -------- -------- --------
Total operating expense ............ 5,027 1,713 9,218 3,304
-------- -------- -------- --------
Income from operations ............. 3,369 1,073 5,483 2,082
Other income (expense):
Interest expense ................... (69) (97) (136) (160)
Interest income and other .......... 277 46 521 32
-------- -------- -------- --------
Total other income (expense) ...... 208 (51) 385 (128)
-------- -------- -------- --------
Income before provision for income taxes and
and minority interest .............. 3,577 1,022 5,868 1,954
Provision for income taxes .................. 1,082 39 1,934 115
-------- -------- -------- --------
Income before minority interest .... 2,495 983 3,934 1,839
Minority interest in net income ............. (18) (176) (25) (330)
-------- -------- -------- --------
Net income ......................... $ 2,477 $ 807 $ 3,909 $ 1,509
======== ======== ======== ========
Net income per share......................... $0.11 $0.18
===== =====
PRO FORMA INCOME DATA
Historical net income........................ $ 807 $ 1,509
Pro forma adjustment to income tax expense... 286 565
------- --------
Pro forma net income......................... $ 521 $ 944
======= ========
Pro forma net income per share............... $0.03 $0.06
===== =====
Weighted average common and
common stock equivalent shares...... 22,308 16,964 22,272 16,961
====== ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................................. $ 3,909 $ 1,509
Adjustment to reconcile net income to cash provided by (used in)
operating activities:
Depreciation and amortization ........................................ 1,372 234
Unrealized exchange losses ........................................... (20) (14)
Minority interest in net income ...................................... 25 330
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable and unbilled work-in-process .................. (5,180) (752)
Other current assets .............................................. 274 (205)
Deposits and other assets ......................................... (448) (118)
Accounts payable .................................................. 219 (106)
Accrued expenses .................................................. 2,090 (508)
Income taxes payable .............................................. 216 --
Deferred income taxes ............................................. -- 12
Deferred revenue .................................................. 4,772 532
Other liabilities ................................................. 18 (6)
-------- --------
Total adjustments ................................................. 3,338 (601)
-------- --------
Net cash provided by operating activities ......................... 7,247 908
-------- --------
Cash flows from investing activities:
Investment in marketable securities ..................................... (5,969) --
Additions to capitalized software costs ................................. (300) (87)
Additions to property and equipment ..................................... (3,771) (502)
Increase in equity investment and loans to affiliate .................... -- (393)
Acquisition of subsidiaries, net of cash received and liabilities assumed (2,838) --
-------- --------
Net cash used in investing activities ............................. (12,878) (982)
-------- --------
Cash flows from financing activities:
Net (reductions) borrowings from revolving credit line .................. (311) 120
Proceeds from long-term debt ............................................ 1,180 900
Payments on long-term debt .............................................. -- (1,216)
Payments on notes payable-shareholder ................................... (822) (246)
Payments on capital lease obligations ................................... (45) (83)
Payment of dividends .................................................... -- (22)
Proceeds from issuance of common stock .................................. 528 3
Proceeds from exercise of stock options ................................. 46 --
Purchase of treasury stock at cost ...................................... -- (77)
-------- --------
Net cash provided by (used in) financing activities ............... 576 (621)
-------- --------
Effect of exchange rate changes ............................................ 32 13
-------- --------
Net decrease in cash and cash equivalents .................................. (5,023) (682)
Cash and cash equivalents at beginning of year ............................. 24,082 1,621
-------- --------
Cash and equivalents at end of period ...................................... $ 19,059 $ 939
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles and include all adjustments, consisting only of all normal recurring
adjustments, necessary for a fair presentation. The results of operations for
the three and six month periods ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year. These interim
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements for the year ended December 31,
1996, which are contained in the Company's Annual Report on Form 10-K as filed
with the Securities and Exchange Commission.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Information Management Resources, Inc. ("IMR" or the "Company"),
its wholly owned subsidiaries and its effectively controlled foreign subsidiary.
All significant intercompany balances and transactions have been eliminated.
MARKETABLE SECURITIES - The Company currently invests in only high quality,
short-term investments which are classified as available-for-sale as defined by
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." As such there were no
significant differences between amortized cost and estimated fair value at June
30, 1997. Additionally, because investments are short-term and are generally
allowed to mature, realized gains and losses have been minimal through June 30,
1997.
The following table presents the estimated fair value of marketable
securities by category:
June 30, 1997
(In Thousands)
--------------
Municipal debt securities.................... $ 11,394
Certificates of deposit - foreign............ 19
Interest income receivable................... 200
-------------
$ 11,613
=============
The maturity of the above marketable securities at June 30, 1997, is
between one and two years.
COMPUTATION OF NET INCOME PER SHARE - Net income per common and common
equivalent shares has been computed using the weighted average number of common
and dilutive common equivalent shares outstanding during each period presented.
Shares of stock issuable pursuant to stock options have been included where
their effect is dilutive. Fully diluted earnings per common share are not
presented as they are not materially different from primary earnings per share.
Dilutive common equivalent shares consist of stock options (using the treasury
stock method).
RECLASSIFICATION - Recruiting expenses have been reclassified from cost of
revenues to selling, general and administrative expenses for the three and six
month periods ended June 30, 1996 to conform to the new classification of these
expenses for the three and six month periods ended June 30, 1997.
6
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
3. PRO FORMA NET INCOME
Prior to November 1996, the Company elected to be taxed as an S Corporation
under the provisions of the Internal Revenue Code whereby taxable income is
generally reported by the shareholders on their individual income tax returns.
In connection with the Company's initial public offering, the S Corporation
election was terminated on November 11, 1996 and subsequently the Company became
subject to U.S. federal and state income taxes as a C Corporation.
To properly reflect the Company's results of operations, the provision for
income taxes is presented on a pro forma basis as if the Company had been a
taxable entity subject to federal and state income taxes at the marginal rates
for the three and six month periods ended June 30, 1996 as a C Corporation.
4. ACQUISITIONS
LINK GROUP HOLDINGS LIMITED AND INFORMATION MANAGEMENT RESOURCES (U.K.)
LIMITED ("IMR-U.K. Acquisition") - On February 10, 1997 (effective January 8,
1997), the Company acquired 100% of the outstanding stock of Link Group Holdings
Limited ("Link"), a United Kingdom limited liability company. Link provides
transitional software outsourcing solutions to the information technology
departments of large businesses located in the U.K. In exchange for Link's
common stock, Link's shareholders received $2.1 million in cash and 107,562
shares of the Company's common stock. In addition, $1.6 million in cash is
payable to Link's former shareholders one year from closing. The Link
acquisition is accounted for as a purchase pursuant to the provisions of APB
Opinion No. 16. The purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values. The excess of the
purchase price over the net assets acquired will be amortized over a period not
to exceed ten years.
Coincident with the above acquisition, the Company also acquired 10.5% of
Information Management Resources (U.K.) Limited (IMR-U.K.) from the Company's
majority shareholder and his spouse for $520,000 in cash. The purchase price was
determined through negotiations between the Company and the shareholder and his
spouse. The excess of the $520,000 purchase price over the net assets acquired
was charged as a reduction in equity.
Prior to the above acquisitions, the Company owned 39.5% of IMR-U.K. and
Link owned 50% of IMR- U.K. After the above acquisitions the Company effectively
owns 100% of both Link and IMR-U.K.
Movitone Electronics Limited. - In March 1997, the Company acquired 100% of
the outstanding stock of Movitone Electronics Limited (an Indian limited
liability company) for approximately $1.7 million in cash. Movitone Electronics
Limited has no significant ongoing activities and its only significant asset is
a building located in India's Santacruz Electronics Export Processing Zone in
Mumbai, India. The acquisition is recorded as a purchase pursuant to the
provisions of APB Opinion No. 16. The entire purchase price was allocated to the
building as it approximated its fair value.
7
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
5. SHAREHOLDERS' EQUITY
On June 19, 1997, the Company declared a 3-for-2 stock split in the
form of a stock dividend payable on July 10, 1997 to shareholders of record on
June 26, 1997. All applicable share and per share data in the accompanying
financial statements have been retroactively adjusted to reflect this dividend.
Changes in shareholders' equity for the six months ended June 30, 1997
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Common Stock
------------------- Paid-in Retained Translation
Shares Amount Capital Earnings Adjustment Total
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 ........... 14,474 $ 1,447 $ 38,359 $ 669 $ (119) $ 40,356
Link Acquisition ..................... 108 11 1,078 -- -- 1,089
Employee Stock Purchase .............. 64 7 521 -- -- 528
Stock options exercised .............. 582 58 (12) -- -- 46
Tax benefit of stock options exercised -- -- 5,015 -- -- 5,015
Net income ........................... -- -- -- 3,909 -- 3,909
Translation Adjustment ............... -- -- -- -- 11 11
-------- -------- -------- -------- -------- --------
Balance, June 30, 1997 ............... 15,228 $ 1,523 $ 44,961 $ 4,578 $ (108) $ 50,954
======== ======== ======== ======== ======== ========
</TABLE>
6. SUBSEQUENT EVENT
On August 5, 1997, the Company completed a second public offering of
1,500,000 shares of its authorized but unissued Common Stock, par value $0.10
per share. Net proceeds from this offering were approximately $45.6 million.
8
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information contained herein, some matters discussed
in this report constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company notes that a variety of
risk factors could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements. Reference is made in particular to the
discussion set forth below in this report and set forth in the Company's
Registration Statement on Form S- 1 (Registration No. 333-30741) and its Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, as filed with
the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
For the three months ended June 30, 1997, revenues increased to $18.8
million representing a 197.5% increase over revenues of $6.3 million for the
three months ended June 30, 1996. The January 8, 1997 IMR- U.K. acquisition (see
Note 4 of the Consolidated Financial Statements) accounted for $4.0 million of
the revenue increase. In addition, transitional outsourcing services (software
development, application maintenance, migration and re-engineering) revenues
increased 36.6% over the second quarter of 1996. The largest revenue increase
was attributable to the Company's continued expansion of its Year 2000 service
offering. Second quarter revenues from the Company's Year 2000 services
increased to $10.3 million (including IMR-U.K. revenues), compared to less than
$1.0 million for the second quarter of 1996.
Gross profit increased to $8.4 million in the second quarter of 1997
compared to $2.8 million in the prior comparable period. As a percentage of
revenues, gross profit increased to 44.7% in the second quarter of 1997 compared
to 44.2% in the second quarter of 1996. The Company's gross profit margin
increased for the U.S. and India operations, however, the U.K. operations
partially offset this increase as the newly acquired company derived a
substantial portion of its revenues from professional services which generally
result in lower profit margins.
For the three months ended June 30, 1997, selling, general and
administrative (SG&A) expenses increased to $4.8 million, compared to $1.7
million for the three months ended June 30, 1996. As a percentage of revenues,
SG&A expenses for the three months ended June 30, 1997 decreased to 25.3% from
26.9% for the same period in 1996. This decrease as a percentage of revenue
occurred due to the rapid increase in revenues compared to the rate of increase
in SG&A. The increase in dollars is attributable to the IMR-U.K. acquisition,
expansion of the delivery capacity, regionalization of operations, additional
costs associated with being a public company, and increases in costs related to
expanding the Company's general support staff (primarily recruiting, research
and development and human resources). The Company will continue to increase its
SG&A expense in anticipation of a potential increase in business volume in late
1997 and 1998.
9
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Goodwill amortization increased to approximately $276,000 for the three
months ended June 30, 1997 from approximately $14,000 for the three months ended
June 30, 1996. This increase reflects the goodwill resulting from the
acquisition of 64.0% of IMR-India in the second half of 1996 and the IMR-U.K.
acquisition effective January 8, 1997.
Operating income for the second quarter of 1997 was $3.4 million compared
to $1.1 million in the comparable period of 1996, representing a 214.0%
increase. As a percentage of revenues, income from operations for the three
months ended June 30, 1997 increased to 18.0% from 17.0% in the comparable
period in 1996.
The Company realized net other income of approximately $208,000 in the
second quarter of 1997 compared to net other expense of approximately $51,000 in
the comparable period of 1996. Other expense in the second quarter of 1996
included interest expense of $97,000, interest and other income of $30,000 and a
gain related to the Company's equity investment in IMR-U.K. of approximately
$16,000. During the second quarter of 1997, the Company recognized approximately
$277,000 in investment income from the investment of the remaining net proceeds
from its initial public offering and incurred approximately $69,000 of interest
expense related primarily to credit facilities in India and the U.K.
The provision for income taxes increased to approximately $1.1 million for
the three months ended June 30, 1997 from approximately $39,000 for the three
months ended June 30, 1996. This increase is due to increased earnings and the
Company's termination of its S Corporation tax status in conjunction with its
initial public offering in November 1996. Prior to this termination the
provision for income taxes only reflected taxes related to IMR-India. On a pro
forma basis, giving effect to the Company's termination of its S Corporation tax
status as of November 11, 1996, the income tax provision for the second quarter
of 1996 would have been approximately $325,000. This represents an effective pro
forma tax rate of 30.2% and 31.8% for the three month periods ended June 30,
1997 and June 30, 1996, respectively. The decrease in the effective tax rate
reflects a greater portion of profits generated by the operations in India which
has favorable tax rates and the investment of excess liquid assets into tax
exempt investments.
Minority interest in net income decreased to approximately $18,000 for the
three months ended June 30, 1997 from approximately $176,000 in the comparable
period in 1996. This represents the portion of IMR- India's net income which is
allocated to IMR-India's minority shareholders. This decrease was a result of
the acquisition of 64.0% of IMR-India by IMR-U.S. during late 1996.
Net income for the second quarter of 1997 is approximately $2.5 million or
$.11 per share compared to pro forma net income of approximately $521,000 or
$.03 per share in the comparable period in 1996.
10
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
For the six months ended June 30, 1997, revenues increased to $33.1
million representing a 167.1% increase over revenues of $12.4 million for the
six months ended June 30, 1996. The January 8, 1997 IMR-U.K. acquisition (see
Note 4 of the Consolidated Financial Statements) accounted for $7.8 million of
the revenue increase. In addition, transitional outsourcing services (software
development, application maintenance, migration and re-engineering) revenues and
in particular Year 2000 revenues continued to expand. For the first six months
of 1997 revenues from the Company's Year 2000 services increased to $16.5
million (including IMR-U.K. revenues), compared to approximately $1.5 million
for the first six months of 1996.
Gross profit increased to $14.7 million in the first six months of 1997
compared to $5.4 million in the prior comparable period. As a percentage of
revenues, gross profit increased to 44.4% in the first six months of 1997
compared to 43.4% in the first six months of 1996. The Company's gross profit
margin increased for the U.S. and India operations, however, the U.K. operations
partially offset this increase as the newly acquired company derived a
substantial portion of its revenues from professional services which generally
result in lower profit margins.
For the six months ended June 30, 1997, selling, general and
administrative (SG&A) expenses increased to $8.7 million, compared to $3.3
million for the six months ended June 30, 1996. As a percentage of revenues,
SG&A expenses for the six months ended June 30, 1997 decreased to 26.2% from
26.4% for the same period in 1996. While as a percentage of revenues SG&A
expenses decreased slightly, the increase in real terms is attributable to the
inclusion of IMR-U.K. SG&A expenses, expansion of the delivery capacity,
regionalization of operations, additional costs associated with being a public
company, and increases in costs related to expanding the Company's general
support staff (primarily recruiting, research and development and human
resources). The Company will continue to increase SG&A expense in anticipation
of a potential increase in business volume in late 1997 and 1998.
Goodwill amortization increased to approximately $547,000 for the six
months ended June 30, 1997 from approximately $29,000 for the six months ended
June 30, 1996. This increase reflects the goodwill resulting from the
acquisition of 64.0% of IMR-India in the second half of 1996 and the IMR-U.K.
acquisition effective January 8, 1997.
Operating income for the first six months of 1997 was $5.5 million
compared to $2.1 million in the prior comparable period, representing a 163.4%
increase. As a percentage of revenues, income from operations for the six months
ended June 30, 1997 decreased to 16.6% from 16.8% in the comparable period in
1996. As a percentage of revenues, 1.7% of this change was attributable to
expanded goodwill amortization described above, offset by the affect of revenues
increasing more rapidly than operating expenses.
11
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
The Company realized net other income of approximately $385,000 in the
first six months of 1997 compared to net other expense of approximately $128,000
in the comparable period of 1996. Other expense in the first six months of 1996
included interest expense of $160,000 offset by interest and other income of
$32,000. During the first six months of 1997, the Company recognized
approximately $521,000 in investment income from the investment of the remaining
net proceeds from its initial public offering and incurred approximately
$136,000 of interest expense related primarily to credit facilities in India and
the U.K. and shareholder notes payable.
The provision for income taxes increased to approximately $1.9 million for
the six months ended June 30, 1997 from approximately $115,000 for the six
months ended June 30, 1996. This increase is due to increased earnings and the
Company's termination of its S Corporation tax status in conjunction with its
initial public offering in November 1996. Prior to this termination the
provision for income taxes only reflected taxes related to IMR-India. On a pro
forma basis, giving effect to the Company's termination of its S Corporation tax
status as of November 11, 1996, the income tax provision for the first six
months of 1996 would have been approximately $680,000. This represents an
effective pro forma tax rate of 33.0% and 34.8% for the six month periods ended
June 30, 1997 and June 30, 1996, respectively. The decrease in the effective tax
rate reflects a greater portion of profits generated by the operations in India
which has favorable tax rates and the investment of excess liquid assets into
tax exempt investments..
Minority interest in net income decreased to approximately $25,000 for the
six months ended June 30, 1997 from approximately $330,000 in the comparable
period in 1996. This represents the portion of IMR- India's net income which is
allocated to IMR-India minority shareholders. This decrease was a result of the
acquisition of 64.0% of IMR-India by IMR-U.S. during late 1996.
Net income for the first six months of 1997 is approximately $3.9 million
or $.18 per share compared to pro forma net income of approximately $944,000 or
$.06 per share in the comparable period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had a current ratio of 2.8 to 1, highly
liquid assets (cash, cash equivalents and marketable securities) of $30.7
million and available bank lines of credit of approximately $6.0 million. In
addition, on August 5, 1997, the Company completed a second public offering
which yielded net proceeds of approximately $45.6 million to the Company. The
Company continuously reviews its future cash requirements, together with its
available bank lines of credit and internally generated funds. The Company
believes it will meet all working capital obligations and fund further
development of its business for at least the next 12 months.
12
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
OTHER MATTERS
During June 1997, the Company initiated operations in Belfast, Northern
Ireland which will serve as a software development center. Initial operations
will include establishing an infrastructure, recruiting resources and training
project personnel.
In March 1997, the Company acquired a building located in Mumbai, India
(Movitone Electronics Limited) to develop a new offshore software development
center. The building is located in an area designated for certain tax incentives
and relaxed regulatory restrictions similar to those applicable to IMR's
Bangalore operations. Currently, the Company is in the process of renovating
this facility and expects it to be operational by the third quarter of 1997.
During the renovation, the Company has operated in Mumbai from temporary
facilities. No assurance can be given that renovations of the Mumbai facility
will be completed on time or that the Indian government will continue to provide
tax and other incentives to the software industry or in the area in which this
facility is located.
13
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
Part II. Other Information
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any pending material litigation.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
14
<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.
INFORMATION MANAGEMENT RESOURCES, INC.
Date August 13, 1997 /s/ Satish K. Sanan
------------------------- ----------------------------------------
Satish K. Sanan
Chief Executive Officer
Date August 13, 1997 /s/ John R. Hindman
------------------------- ----------------------------------------
John R. Hindman
Chief Financial Officer
15
<PAGE>
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
11 Computation of earnings per common share for the
three month and six month periods ended June 30, 1997 and 1996... 17
27 Financial Data Schedule.......................................... 18
16
EXHIBIT NUMBER 11
INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited and in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Pro forma net income ........................... $ 2,477 $ 521 $ 3,909 $ 944
Shares:
Weighted average number of common shares
outstanding .............................. 15,060 9,606 15,057 9,606
Assuming conversion of options issued and
outstanding .............................. 7,248 7,358 7,215 7,355
------- ------- ------- -------
Weighted average common and
common stock equivalent shares outstanding 22,308 16,964 22,272 16,961
======= ======= ======= =======
Pro forma net income per share.................. $0.11 $0.03 $0.18 $0.06
===== ===== ===== =====
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF INFORMATION MANAGEMENT RESOURCES, INC. AND SUBSIDIARIES FOR THE
PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 19,059
<SECURITIES> 11,613
<RECEIVABLES> 13,006
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,020
<PP&E> 9,989
<DEPRECIATION> 2,160
<TOTAL-ASSETS> 70,530
<CURRENT-LIABILITIES> 17,996
<BONDS> 1,018
0
0
<COMMON> 1,523
<OTHER-SE> 49,431
<TOTAL-LIABILITY-AND-EQUITY> 70,530
<SALES> 0
<TOTAL-REVENUES> 33,114
<CGS> 0
<TOTAL-COSTS> 18,413
<OTHER-EXPENSES> 9,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136
<INCOME-PRETAX> 5,868
<INCOME-TAX> 1,934
<INCOME-CONTINUING> 3,909
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,909
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
