<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1999
REGISTRATION NO. 333 - _____
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
IMRGLOBAL CORP.
(Exact Name of Registrant as Specified in Its Charter)
FLORIDA 59-2911475
(State or Other Jurisdiction of (I.R.S.Employer
Incorporation or Organization) Identification No.)
100 SOUTH MISSOURI AVENUE
CLEARWATER, FLORIDA 33756
(727) 467-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant=s Principal Executive Offices)
DILIP PATEL
IMRGLOBAL CORP.
100 SOUTH MISSOURI AVENUE
CLEARWATER, FLORIDA 33756
(727) 467-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant=s Principal Executive Offices)
--------------------------
COPIES TO:
THOMAS J. EGAN, JR.
BAKER & MCKENZIE
815 CONNECTICUT AVENUE, N.W.
WASHINGTON, DC 20006
(202) 452-7050
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
At various times after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Shares Amount to be Offering Price Per Aggregate Offering Registration Fee
to be Registered Registered(1) Unit(2) Price
- ----------------------- ------------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.10 per share(2) 2,513,159 $11.188 $28,117,229 $7,816.59
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457(c) under the Securities Act of 1933, the proposed
maximum aggregate offering price is based upon the average of the high and
low prices per share of the Registrant=s Common Stock report on the Nasdaq
National Market on September 8, 1999.
(2) This Registration Statement covers shares owned by certain selling
shareholders which shares may be offered from time to time by the selling
shareholders.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1999
[GRAPHIC OMITTED]
2,513,159 SHARES
OF
COMMON STOCK
This prospectus is part of a registration statement that has been filed
with the Securities and Exchange Commission and that covers 2,513,159 shares of
our common stock. These shares may be offered and sold from time to time by
certain of our shareholders which we refer to as the selling shareholders.
The selling shareholders obtained their shares of our common stock in
connection with business combinations entered into between IMRglobal and
Atechsys S.A., ECWerks, Inc., Fusion Systems, Ltd. and Orion Consulting, Inc. in
the first two quarters of 1999.
The selling shareholders may offer their shares of our common stock
through public or private transactions, on or off the United States exchanges,
at prevailing market prices, or at privately negotiated prices.
We will not receive any of the proceeds from the sale of this common
stock. We will, however, bear the costs relating to the registration of these
shares of common stock, which we estimate to be $117,816.59.
Our common stock is quoted on the Nasdaq National Market under the
symbol "IMRS." The average of the high and low prices of our common stock as
reported on the Nasdaq National Market on September 8, 1999 was $11.188 per
share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT CERTAIN RISKS
THAT YOU SHOULD CONSIDER BEFORE MAKING AN INVESTMENT DECISION.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. NO ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER OF THESE SHARES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
The date of this prospectus is September __, 1999
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
Prospectus Summary .............................................................................. 1
Use of Proceeds.................................................................................. 11
Where You Can Find More Information.............................................................. 3
Special Note Regarding Forward-Looking Statements................................................ 3
Risk Factors..................................................................................... 4
Dividend Policy.................................................................................. 11
Selected Consolidated Financial Data............................................................. 12
Management's Discussion and Analysis of Financial Condition and Results of Operations............ 14
Business ........................................................................................ 28
Selling Shareholders............................................................................. 37
Plan of Distribution............................................................................. 49
Legal Matters.................................................................................... 50
Experts ....................................................................................... 50
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE
RISKS OF INVESTING IN OUR SECURITIES DISCUSSED UNDER "RISK FACTORS" BEFORE
MAKING AN INVESTMENT DECISION.
OUR BUSINESS
We are a leading international provider of innovative business and IT
solutions to Fortune 500 and Global 2000 sized companies. We focus on providing
our comprehensive range of services to companies in the following vertical
industries:
- Insurance
- Capital markets
- Healthcare
- Utilities
- Media and communications
- Retail and manufacturing/distribution
We believe companies in these industries are facing unique and
substantial changes and competition that are altering the way they conduct
business.
We offer the following services to our clients in these industries:
- Business consulting - provide vertical industry business
expertise
- IT strategy formulation - plan and develop IT strategies
- E-Business services
- design and implement Internet solutions
- Component-based application development
- build new applications using components
- Component-based vertical industry solutions
- build industry specific applications using components.
- Application modernization/transformation - transform older
software to newer technologies
- Application management and support - manage and support
existing computer applications
Due to the scope and pace of the changes facing our clients, IT
solutions in these industries rarely lend themselves to packaged "off the shelf"
programs or services. Instead, a customized and technology-based approach is
needed. Since early 1998, we have been developing component-based, vertical
industry solutions to meet these needs and have acquired companies with
complementary business knowledge or technology to assist in this development
effort. Our component-based vertical industry solutions combine the
functionality of customized software with the speed of implementation of a
packaged solution and are generally delivered at a lesser total cost than fully
customized solutions. In addition we believe component-based solutions to be
more reliable and better tailored to the specific needs of our clients than
pre-packaged products.
We provide all of our services on an outsourcing basis and provide our
clients with a global network of centers with highly trained and qualified
technology professionals. We utilize the time differences between our
development centers in our global network to create a 24-hour "virtual workday"
during which our technology professionals can work on projects for our clients.
An important part of our strategy is to offer our services on a
fixed-price, fixed-time basis. By offering fixed pricing, we enable our clients
to reduce their exposure to increased costs and by using our "on-site, off-site"
delivery model, which utilizes one or more of our worldwide delivery centers, we
can maintain consistent quality and reduce the project delivery time.
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In addition to fixed-priced, fixed-time projects, we provide
programming and IT consulting services at clients' sites as needed, usually only
time and materials basis. We also help our clients with tactical issues such as
Year 2000 conversion services and the transition to the Euro currency. Our Year
2000 service offering was our largest source of revenue in each of 1997 and 1998
as our clients committed significant financial resources in addressing this
issue. As Year 2000 engagements are completed in 1999, our revenue from this
service offering will decrease and is expected to be less than 15% of our
business for 1999.
Currently, we maintain a staff of approximately 2,700 software
development professionals to serve our clients from our 46 locations worldwide.
We intend to further broaden our geographical reach mainly through acquisitions.
In addition we intend to continue to acquire companies that have specific
industry expertise in one of our targeted vertical markets and/or significant
expertise in new technologies.
HOW TO REACH US
Our principal executive offices are located at 100 South Missouri
Avenue, Clearwater, Florida 33756. Our telephone number at that address is
727-467-8000.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the public reference facilities of the SEC at 450 Fifth Street, N.W.,
Washington, D.C., or at the public reference rooms of the SEC in Chicago,
Illinois and New York, New York. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http:\www.sec.gov and from
our website at http://www.imr.com.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and any later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any additional documents
we file with the SEC until the offering of the common stock is terminated. This
prospectus is part of a registration statement on Form S-3 that we filed with
the SEC. The documents we incorporate by reference are:
- Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998
- Our Quarterly Report on Form 10-Q for the quarter ended June
30, 1999
- The description of our common stock that is contained in our
Registration Statement on Form 8-A filed on October 20, 1996
- Our Current Reports on Form 8-K filed on January 15, 1999,
April 8, 1999, June 29, 1999 and August 27, 1999
You may request a copy of these filings, at no cost, by writing,
telephoning or e-mailing us at the following address:
INVESTOR RELATIONS
IMRGLOBAL CORP.
100 SOUTH MISSOURI AVENUE
CLEARWATER, FLORIDA 33756
727-467-8000 - TEL
727-467-8001 - FAX
[email protected] - E-MAIL
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act. These statements express or are based on
expectations about future events and generally include forward-looking language
such as "will likely result," "may,"are expected to," "is anticipated,"
"believes," "estimated," "projected," "intends to" or other similar words. Our
actual results are likely to differ, and could differ materially, from the
results expressed in, or implied by, these forward-looking statements. There are
many factors that could cause these forward-looking statements to be incorrect,
including but not limited to the risks described above under "Risk Factors".
When considering these forward-looking statements, you should keep in mind these
risk factors and the other cautionary statements in this prospectus, and should
recognize that those forward-looking statements speak only as of the date made.
MedQuist does not undertake any obligation to update any forward-looking
statement included in this prospectus.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE
MAKING AN INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE
NOT THE ONLY ONES FACING US. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED. IN
SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE
ALL OR PART OF YOUR INVESTMENT.
WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH
The continued rapid growth of our business is an important part of our
strategy. Our growth places, and will continue to place, significant demands on
our management and other resources, especially on members of senior management
who have to manage more people, and face a larger number of, and increasingly
complex, issues as our company grows. If we do not manage our growth
effectively, the quality of the services we offer, our ability to attract and
retain key personnel and our business and our financial condition would be
materially adversely affected. We expect that the number of our employees,
particularly skilled technical, marketing and management employees will continue
to increase. We must continue to develop and improve our operational, financial,
communications and other internal systems, both in the United States and
offshore.
In addition, we must coordinate our business and staffing needs because
any unexpected shortfall in revenue without a corresponding and timely reduction
in staffing and other expenses, or a staffing increase that is unaccompanied by
a corresponding increase in revenue, could also have a material adverse effect
on our results of operations and our financial condition.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO INTEGRATE
BUSINESSES WE ACQUIRE
We have expanded, and plan to continue to expand, our operations through the
acquisition of additional companies that complement our business. We may not be
able to continue to identify and acquire companies that have the potential to
increase our overall value at prices that are attractive to us, or at all.
During 1999, we completed several acquisitions, including the following:
- Atechsys, S.A. and ECWerks, Inc. in January 1999
- Fusion Systems Japan Co., Ltd. in March 1999
- Professional Partners Inc. and Lakewood Software Technology
Center, Inc. in April 1999
- Orion Consulting, Inc. in June 1999
We may not be able to achieve the anticipated benefits from these and
future acquisitions unless the operations of the acquired business are
successfully combined with our business in a timely manner. The integration of
acquisitions requires substantial attention from management. The diversion of
the attention of management, and any difficulties encountered in the transition
process, could have an adverse impact on this integration and, as a result, on
our business results. In addition, the process of integrating various businesses
could cause the interruption of, or a loss of momentum in, the activities of
some or all of these businesses, which could also have an adverse effect on our
business results.
WE FACE SIGNIFICANT COMPETITION IN MARKETS THAT ARE NEW, INTENSELY COMPETITIVE
AND RAPIDLY CHANGING
The markets for the services we provide are highly competitive. We
believe that we currently compete principally with information technology (known
as "IT") consulting firms, Internet and E-business professional service
providers, software integration firms, application software vendors and internal
IT departments. Many companies that provide such services have significantly
greater financial, technical and marketing resources, generate greater revenues
and have greater name recognition than we do. In addition, there are relatively
few
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<PAGE>
barriers to entry into our markets. We have faced, and expect to continue to
face, additional competition from new entrants into our markets. We believe
that the principal competitive factors in our markets include:
- quality of service, price and speed of delivery
- ability to integrate strategy, technology and creative design
services
- vertical industry knowledge
- Internet expertise and talent
- project management capability
We believe that our ability to compete also depends in part on
competitive factors outside our control, including:
- the ability of our competitors to hire, retain and motivate
their personnel
- the development by others of software that is competitive with
our products and services
- our competitors' responsiveness to client needs
WE MAY NOT BE ABLE TO GENERATE SUFFICIENT NEW BUSINESS TO REPLACE OUR
SIGNIFICANT, BUT DIMINISHING, REVENUE FROM YEAR 2000 CONVERSION PROJECTS
We realized 38.6% of our total revenue from Year 2000 conversion
service in 1997, 37.1% in 1998 and 21.3% in the six months ended June 30, 1999.
We believe that demand for Year 2000 conversion services has started to diminish
and will continue to diminish as many Year 2000 compliance solutions are
implemented and tested. A core element of our growth strategy is to obtain
additional IT projects from the clients to whom we have provided Year 2000
compliance solutions. If we are not successful in obtaining additional business
from these clients for other services or if the additional business is less
profitable, our profitability may decline substantially.
THE SIGNIFICANCE OF OUR NON-UNITED STATES OPERATIONS IS INCREASING AND IF WE
CANNOT MONITOR OUR INTERNATIONAL BUSINESS EXPOSURE, INCLUDING OUR FOREIGN
CURRENCY TRANSACTIONS, OUR RESULTS OF OPERATIONS AND OUR FINANCIAL CONDITION MAY
SUFFER
Revenue from clients outside the United States was 30.1% of our total
revenues in 1997, 33.8% in 1998 and 38.8% for the six months ended June 30,
1999. We expect that international revenue will account for an increasingly
significant percentage of our revenue. Our international operations and business
activities are subject to the following risks:
- difficulty in managing international operations
- tariffs, duties, governmental royalties and other trade
barriers
- potential foreign tax consequences, including taxes payable on
the repatriation of earnings
- compliance with, and unexpected changes in, a growing variety
of foreign laws and regulations
- unexpected changes in the local and regional political climate
and the possible reactions to those changes by the
international community, including economic sanctions
Our international operations greatly depend upon business and
technology transfer laws and related restrictions and upon continued development
of technology infrastructure.
We presently incur a significant amount of our costs in local currency
in India and expect to establish additional offshore centers in other countries.
In contrast, we presently generate most of our revenue in United States dollars.
Accordingly, we are subject to risks that, as a result of currency fluctuations,
the translation of foreign currencies into United States dollars for accounting
purposes will adversely affect our result of operations. Historically, we have
not hedged any material portion of our foreign exchange transactions.
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THE LOSS OF ANY LARGE CLIENTS WOULD HAVE AN ADVERSE EFFECT ON OUR REVENUE AND
OUR BUSINESS
We derive and believe that we will continue to derive a significant
portion of our revenue from a limited number of large corporate clients. In the
six months ended June 30, 1999, our five largest clients accounted for
approximately 21.1% of our revenue. During that period, Michelin North America,
Inc. accounted for approximately 5.9% of our revenue and John Hancock Mutual
Life Insurance Company accounted for approximately 5.8% of our revenue. The
volume of work performed for specific clients is likely to vary from year to
year. A major client in one year may not provide the same level of revenue in
any subsequent year. Because many of our contractual engagements involve
projects that are critical to our clients' businesses, our failure to meet a
client's expectations could result in a cancellation or nonrenewal of the
contract and could damage our reputation and adversely affect our ability to
attract new business. Furthermore, we generally are not the exclusive outside
source of IT products and services to our clients. Accordingly, a client's
dissatisfaction with our performance could lead the client to purchase these
services from a competitor, thereby reducing our revenue and profitability.
IF WE CANNOT RECRUIT AND RETAIN TECHNICAL PERSONNEL, OUR BUSINESS WILL SUFFER
The future success of our growth strategy, our ability to manage and
complete our existing projects and our ability to bid for or obtain new projects
all depend, to a significant extent, on our ability to attract, train, motivate
and retain highly skilled software development professionals, particularly
project managers, software engineers and other senior technical personnel. If we
are not successful in this regard, our business will suffer.
We believe that there is a shortage of, and significant competition
for, software development professionals with the advanced technological skills
necessary to perform the services offered by us. Our ability to maintain and
renew existing engagements and obtain new business depends, in large part, on
our ability to hire, train and retain technical personnel with the IT skills to
keep pace with the continuing changes in information processing technology,
evolving industry standards and changing client preferences.
As of July 31, 1999, approximately 500 of our United States employees
were working for us in the non-immigrant work permitted visa (H-1B)
classification. There is a limit on the number of new H-1B petitions that the
United States Immigration and Naturalization Services may approve in any
government fiscal year. In years in which this limit is reached, we may not be
able to obtain the H-1B visas necessary to bring critical foreign employees to
the United States. Compliance with existing United States immigration laws, or
changes in such laws, make it more difficult to hire foreign nationals or limit
our ability to retain H-1B employees in the United States, and could require us
to incur unexpected labor costs.
THE LOSS OF SATELLITE COMMUNICATIONS WITH OUR OFFSITE SOFTWARE DEVELOPMENT
CENTERS COULD HARM OUR BUSINESS
Any loss of our ability to transmit voice and data through satellite
communications, at commercially reasonable prices, could have a material adverse
effect on our financial condition because a significant element of our business
strategy is to continue to leverage our offsite software development centers in
Bangalore and Mumbai, India. We believe that the use of a strategically located
network of offshore software development centers provides us with potential cost
advantages as well as the ability to provide 24-hour service to our clients. To
achieve this goal, we must maintain active satellite communications among our
offices, the offices of our clients in the United States and elsewhere and our
offshore software development facilities.
WE ARE EXPOSED TO GREATER BUSINESS RISKS RELATING TO THE ECONOMIC, LEGAL AND
SOCIAL ENVIRONMENT OF OUR OPERATIONS IN OTHER COUNTRIES, ESPECIALLY INDIA AND
NORTHERN IRELAND, THAN WE ARE FOR OUR OPERATIONS IN THE UNITED STATES
We may be adversely affected by future changes in inflation, interest
rates, taxation, social stability or other political, economic or diplomatic
developments in or affecting countries in which we establish software
development facilities. For example, in the past, India has experienced
significant inflation, low growth in gross domestic product and shortages of
foreign exchange. Furthermore, both India and Northern Ireland have experienced
civil unrest and terrorism and, from time to time, have been involved in
regional conflicts.
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We have enjoyed certain benefits granted by the governments of India
and Northern Ireland. The elimination of any of these benefits could have a
material adverse effect on our financial results. The Indian government has
exercised and continues to exercise significant influence over many aspects of
the Indian economy, and its actions concerning the economy could adversely
affect private sector entities, including us. During the past five years,
India's government has provided significant tax incentives and relaxed certain
regulatory restrictions in order to encourage foreign investment in specified
sectors of the economy, including the software development industry. Benefits
which have directly affected us include, among others, tax holidays, liberalized
import and export duties and preferential rules concerning foreign investment
and repatriation. Notwithstanding these benefits, however, India's central and
state governments remain significantly involved in the Indian economy as
regulators.
The government of Northern Ireland has committed to provide monetary
grants to us to encourage employment in our software development center in
Belfast, if we meet specified requirements, including investments in facilities
and the employment and training of a minimum number of personnel.
THE SUCCESS OF THE E-BUSINESS CONSULTING SERVICES BUSINESS DEPENDS ON INCREASED
ADOPTION BY BUSINESSES AND CONSUMERS OF THE INTERNET AS A MEANS FOR COMMERCE
The future success of our E-business consulting services depends
heavily on the acceptance and use of the Internet as a means for commerce. The
widespread acceptance and adoption of the Internet for conducting business is
likely only in the event that the Internet provides businesses with greater
efficiencies and improvements. If commerce on the Internet does not grow, or
grows more slowly than expected, our growth would decline and our business would
be seriously harmed. Businesses and consumers may reject the Internet as a
viable commercial medium for a number of reasons, including:
- potentially inadequate network infrastructure
- delays in the development of Internet enabling technologies
and performance improvements
- delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet
activity
- delays in the development of security and authentication
- insufficient technology necessary to ensure secure
transmission of confidential information
- changes in, or insufficient availability of,
telecommunications services to support the Internet
- failure of companies to meet their clients' expectations in
delivering goods and services over the Internet
OUR BUSINESS IS DEPENDENT ON OUR ABILITY TO KEEP PACE WITH THE LATEST
TECHNOLOGICAL CHANGES
Our market and the technologies used by our clients are characterized
by rapid technological changes. Failure to respond successfully to technological
developments, or failure to respond in a timely or cost-effective way, will
seriously harm our business and operating results. We expect to derive a
substantial portion of our revenue from creating E-business systems that are
based upon today's leading technologies and that are capable of adapting to
future technologies. As a result, our success will depend, in part, on our
ability to offer services that keep pace with continuing changes in technology,
evolving industry standards and changing client preferences. In addition, we
must hire, train and retain technologically knowledgeable professionals so that
they can fulfill the increasingly sophisticated needs of our clients. We cannot
assure you that we will be successful in addressing these developments on a
timely basis or that even if we address them, we will be successful in the
marketplace.
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INCREASING GOVERNMENT REGULATION COULD AFFECT OUR BUSINESS
We are subject not only to regulations applicable to businesses
generally, but also to laws and regulations directly applicable to electronic
commerce. Although there are currently few such laws and regulations, both
state, federal and foreign governments may adopt a number of these laws and
regulations. Any such legislation or regulation could dampen the growth of the
Internet and decrease its acceptance as a communications and commercial medium.
If such a decline occurs, companies may decide in the future not to use our
services to create electronic business channels. This decrease in the demand for
our services would seriously harm our business and operating results. New laws
and regulations may affect the following:
- user privacy
- the pricing and taxation of goods and services offered over
the Internet
- the content of websites
- consumer protection
- the characteristics and quality of products and services
offered over the Internet
For example, the Telecommunications Act of 1996 prohibits the
transmission of certain types of information and content over the Internet. The
scope of the Act's prohibition is currently unsettled. In addition, although
courts recently held that substantial portions of the Communications Decency Act
are unconstitutional, federal or state governments may enact, and courts may
uphold, similar legislation in the future. Future legislation could expose
companies involved in Internet commerce to liability.
WE MAY HAVE LIABILITY TO CLIENTS FOR DAMAGES TO THEIR COMPUTER SYSTEMS BECAUSE
OUR CONTRACTS LIMITING THE LIABILITY MAY NOT BE ENFORCEABLE OR BECAUSE WE MAY
NOT BE COVERED BY INSURANCE
Many of our contractual engagements involve projects that are critical
to our clients' operations and provide benefits that may be difficult to
quantify. Any failure in a client's system could result in a claim for
substantial damages against us, regardless of our responsibility for such
failure. We attempt to limit contractually our liability for damages arising
from negligent acts, errors, mistakes, or omissions in rendering our IT products
and services, but the limitations of liability set forth in our service
contracts may not be enforceable in all instances or may not otherwise protect
us from liability for damages. In addition, we maintain general liability
insurance coverage, including coverage for errors or omissions, but this
coverage may not continue to be available on reasonable terms or may not be
available in sufficient amounts to cover one or more large claims, or the
insurer may disclaim coverage as to any future claim. The successful assertion
of one or more large claims against us that exceed available insurance coverage
or changes in our insurance policies, including premium increases or the
imposition of large deductible or co-insurance requirements, could materially
adversely affect our results of operations and financial condition.
WE RISK HAVING COST OVERRUNS IN FIXED-PRICE, FIXED-TIME FRAME CONTRACTS WHICH
MAY REDUCE OUR PROFITABILITY
As a core element of our business philosophy, our strategy is to offer
many of our IT services on fixed-price, fixed-time frame contracts, rather than
contracts in which payment to us is determined solely on a time and materials
basis. Although we use our total software quality management software
engineering process and our past project experience to reduce the risks
associated with estimating, planning and performing fixed-price, fixed-time
frame projects, we bear the risk of cost over-runs and inflation in connection
with these projects. Our failure to estimate accurately the resources and time
required for a project, future rates of inflation and currency translations, or
our failure to complete our contractual obligations within the time frame
committed could reduce our profitability.
8
<PAGE>
OUR OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS AND WE HAVE SIGNIFICANT FIXED
OPERATING COSTS
Our revenue and earnings have fluctuated in the past and may continue
to fluctuate from quarter to quarter based on such factors as:
- the number, timing and scope of projects that we are
undertaking
- the contractual terms and degrees of completion of such
projects
- any delays incurred in connection with projects
- the accuracy of estimates of resources required to complete
ongoing projects
- general economic conditions
Wage costs in India are presently increasing at a faster rate than in
the United States. As of June 30, 1999, 33.5% of our employees reside in India.
Historically, our wage costs in India have been significantly lower than our
wage costs in the United States for comparably skilled employees. However, in
light of the current wage increases in India, we cannot assure you that this
will remain the same.
A high percentage of our operating expenses, particularly personnel and
rent, are fixed in advance of any particular quarter. As a result, unanticipated
variations in the number, or progress toward completion, of our projects or in
employee utilization rates may cause significant variations in operating results
in any particular quarter and could result in losses for such quarter.
Factors that could require us to pay underutilized employees are as
follows:
- an unanticipated termination of a major project
- a client's decision not to pursue a new project
- a client's decision not to proceed to succeeding stages of a
current project
- the completion during a quarter of several major clients'
projects
We may be unable to protect our intellectual property rights and we may
be liable for infringing the intellectual property rights of others.
In order to protect our proprietary rights in our various intellectual
properties, we rely on a combination of copyright and trade secret laws,
nondisclosure and other contractual arrangements, and technical measures. The
United States, India, the U.K., France, Canada, Japan and Australia are members
of the Berne Convention, an international treaty. As a member of the Berne
Convention, these governments have agreed to extend copyright protection under
their domestic laws to foreign works, including works created or produced in the
United States. We believe that laws, rules, regulations and treaties in effect
in these seven countries are adequate to protect us from misappropriation or
unauthorized use of our copyrights. However, we cannot assure you that these
laws will not change in ways that may prevent or restrict the transfer of
software components, libraries and toolsets among these seven countries. We
cannot assure you that the steps we have taken to protect our proprietary rights
will be adequate to prevent misappropriation of our proprietary rights or any of
our other intellectual property. We also cannot assure you that we will be able
to detect unauthorized use and take appropriate steps to enforce our rights.
We presently hold no patents or registered copyrights.
Although we believe that our intellectual property rights do not
infringe on the intellectual property rights of others, we cannot assure you
that such claims will not be asserted against us in the future, that assertion
of such claims will not result in litigation or that we would prevail in such
litigation or be able to obtain a license for the use of any infringed
intellectual property from a third party on commercially reasonable terms.
Additionally, we anticipate that in the future we will license certain
technologies to our clients. We cannot assure you that we will be able to
successfully license these technologies, protect them from infringement or
misuse, or prevent infringement claims against us in connection with our
licensing efforts. We expect that the risk of infringement claims against us
will increase if more of our competitors are able to successfully obtain
patents for software products and processes. Any such claims, regardless of
their outcome, could result in substantial cost to us and divert management's
9
<PAGE>
attention from our operations. Any infringement claim or litigation against
us could, therefore, have a material adverse effect on our financial results.
OUR STOCK PRICE IS SUBJECT TO VOLATILITY
Our common stock was first publicly traded on November 8, 1996 and has
traded from a low of $5.00 per share to a high of $42.17 per share. The market
price of our common stock is likely to continue to fluctuate substantially due
to a variety of factors, including:
- quarterly fluctuations in results of operations
- competitors' announcements of their operating results
- adverse circumstances affecting the introduction or market
acceptance of new products and services
- announcements of new products and services by competitors
- changes in the IT environment
- changes in earnings estimates by analysts
- changes in accounting principles
- sales of common stock by existing holders
- announcement and market acceptance of acquisitions
- loss of key personnel
- worldwide economic and political conditions
The market price for our common stock may also be affected by our
ability to meet analysts' expectations. Any failure to meet analysts'
expectations, even if minor, could adversely affect the market price of our
common stock.
OUR CHIEF EXECUTIVE OFFICER'S STOCK OWNERSHIP PROVIDES SUBSTANTIAL CONTROL OVER
OUR COMPANY
Satish K. Sanan, our Chairman of the Board and Chief Executive Officer,
owns approximately 28% of our outstanding shares of common stock. As a result,
Mr. Sanan retains the voting power to exercise significant control over the
election of directors and other matters requiring a vote of shareholders. Such a
concentration of ownership may delay or prevent a change in control and may
impede or preclude transactions in which shareholders might otherwise receive a
premium for their shares over the then current market prices.
IF WE LOSE OUR KEY PERSONNEL, OUR BUSINESS MAY SUFFER
Our continued success depends in large part upon the continued
availability of key management personnel, particularly the services of Mr.
Sanan. The loss of the services of Mr. Sanan would have a material adverse
effect on us. We do not currently maintain nor do we intend to acquire key man
insurance on the life of Mr. Sanan.
OUR CHARTER DOCUMENTS AND FLORIDA LAW COULD DISCOURAGE ACQUISITION PROPOSALS AND
DELAY OR PREVENT A CHANGE OF CONTROL
We have a number of protective provisions in place designed to provide
our board of directors with time to consider whether a hostile takeover offer is
in our shareholders' best interests. These provisions, however, could discourage
potential acquisition proposals and could delay or prevent a change of control
of our corporation. These provisions could also diminish the opportunities for
our shareholders to participate in tender offers, including tender offers at a
price above the then current market price for our common stock. These provisions
may also inhibit fluctuations in our stock price that could result from takeover
attempts.
10
<PAGE>
These provisions are:
- the requirement that our board of directors be divided into
three classes serving staggered three-year terms with only one
of the three classes being elected each year
- the requirement that members of the board of directors may
only be removed for cause upon the vote of holders of at least
two-thirds of the shares of our stock
- the authority of the board of directors to fix the rights and
preferences and issue shares of preferred stock without
further action by you and the other shareholders
The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire a majority of our outstanding stock,
thereby delaying, deferring or preventing a change in control of our
corporation. Furthermore, such preferred stock may have other rights, including
economic rights senior to our common stock. As a result, the issuance of such
preferred stock could have a material adverse effect on our common stock price.
We currently do not plan to issue shares of preferred stock.
In addition, Florida law also contains provisions that may delay, defer
or prevent a non-negotiated merger or other business combination. These
provisions are intended to encourage any person interested in acquiring us to
negotiate with and obtain the approval from our board of directors. Certain of
these provisions may, however, discourage a future acquisition not approved by
the board of directors in which shareholders might receive an attractive value
for their shares or that a substantial number or even the majority of our
shareholders might believe to be in their best interest. As a result,
shareholders who desire to participate in such a transaction may not have the
opportunity to do so.
THERE ARE SUBSTANTIAL SHARES ELIGIBLE FOR FUTURE SALE. SALES OF THESE SHARES MAY
RESULT IN LOWER MARKET PRICES FOR OUR COMMON STOCK
Sales of a substantial number of our shares into the public market or
the perception that such sales could occur, could materially and adversely
affect the price of our shares and could impair our ability to obtain capital
through future offerings of equity securities.
We had 38,446,696 shares outstanding on June 30, 1999. This number does
not include the 10,522,045 shares we will issue when stock options are exercised
that are outstanding as of the date of this prospectus. Of the shares to be
issued upon exercise of stock options, 6,705,382 are freely tradable and the
remainder are expected to be freely tradable over the next five years.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by
the selling shareholders.
DIVIDEND POLICY
We do not anticipate paying cash dividends on our stock in the
foreseeable future. We anticipate that we will retain our earnings and other
cash resources for reinvestment in our business.
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for the years 1994 through 1998
and for the six months ended June 30, 1998 and 1999, should be read along with
the audited and unaudited financial statements contained in this prospectus.
Such financial information other than for fiscal years 1994 and 1995 was taken
from these financial statements. The financial statements for 1996 through 1998
were audited. The financial statements for the six months ended June 30, 1998
and 1999 are unaudited and we believe that they fairly present our financial
position and results of operations and cash flows for those periods. The
information below should be read together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The comparability of the financial information is affected by
acquisitions accounted for under the purchase method of accounting. The
companies acquired during 1997, 1998 and the first six months of 1999
contributed the following amounts to our revenue:
Year ended December 31, 1997 16%
Year ended December 31, 1998 9%
Six months ended June 30, 1999 5%
Operations from these entities are included in our financial statements
from the date of acquisition. In addition, we incurred nonrecurring charges in
connection with certain acquisitions which include:
- $8.2 million of acquired in-process research and development
costs during the year ended December 31, 1998.
- acquisition costs in connection with pooling-of-interests
transactions of $6.6 million during the six months ended June
30, 1999. These costs include business brokerage, accounting,
legal and other costs.
- a cost of $1.8 million for the acceleration of stock
appreciation rights upon a pooling-of-interests transaction
during the first six months of 1999.
In addition, you should note that pro forma net income and proforma
diluted earnings per share give effect to our conversion in 1996 and Orion
Consulting Inc.'s conversion in 1999 from an S corporation to a C corporation
for United States federal and state income tax purposes. S corporations are not
subject to income taxes but instead are deemed to distribute all of their income
to their shareholders. C corporations are subject to income taxes at corporate
income tax rates. The pro forma data presents net income and diluted earnings
per share as if we had been subject to income taxes at corporate rates for all
periods presented.
12
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
Year ended December 31, June 30,
------------------------------------------------------ -----------------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenue................................... $25,339 $40,757 $55,596 $115,310 $208,211 $92,244 $129,920
Gross profit.............................. 9,897 16,244 23,306 47,958 97,751 42,014 61,651
Income from operations.................... 2,587 7,436 9,312 13,695 31,082 7,114 19,442
Net income................................ 2,613 6,195 6,400 9,014 19,760 3.015 12,716
Pro forma net income...................... 1,736 4,071 4,854 10,090 20,351 3,606 12,476
Diluted earnings per share................ 0.09 0.16 0.19 0.21 0.44 0.07 0.28
Pro forma diluted earnings per share...... 0.06 0.11 0.14 0.24 0.45 0.08 0.28
Cash dividends............................ 1,366 2,109 4,016 2,426 163 -- --
Cash dividends per share.................. 0.05 0.06 0.12 0.06 0.00 -- --
Weighted average common stock and
common stock equivalents outstanding... 27,860 38,314 33,854 41,950 45,056 44,983 45,303
CONSOLIDATED BALANCE SHEET DATA (AT PERIOD
END):
Cash, cash equivalents and marketable securities $ 2,015 $ 3,008 $31,300 $91,777 $115,748 $85,352
Working capital........................... 1,695 5,810 35,100 95,502 122,758 96,421
Total assets.............................. 11,155 15,945 61,444 153,464 249,965 261,967
Long-term debt, net of current portion.... 2,153 1,184 685 2,596 1,791 1,598
Shareholders' equity...................... 3,349 7,327 46,227 114,292 176,990 195,239
Shares outstanding at period end.......... 27,860 27,860 29,194 33,133 37,155 38,447
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Our business has grown significantly during the past two years both
through acquisitions and through internal growth. Before we discuss our results
of operations in detail, we set forth relevant information about recent
developments and the significant acquisitions we have made, clarify income
tax matters and explain conventions we use throughout this section.
CURRENT DEVELOPMENTS
We have experienced sequential revenue and earnings per share growth
for the each of the 11 quarters since our initial public offering. We do not
expect this trend to continue for the three months ended September 30, 1999.
For the three months ended September 30, 1999, we expect revenue to be in the
range of $62 million to $67 million. As a consequence of lower revenue without
a corresponding reduction in costs, we anticipate earnings per share for the
three months ended September 30, 1999 to be in the range of $0.12 to $0.16
compared to $0.18 for the same period last year.
The primary reasons for the anticipated decrease in revenue growth
are as follows:
- slower than anticipated conversion of proof of concept and
advisory engagements to full back-end projects for our IT
consulting and component based development services and our
component based solutions;
- a longer sales cycle, mostly driven by the current market
conditions;
- our attempt to aggressively grow our core business and, at the
same time, position the company to sell and support vertical
industry based solutions; and
- Delays in the start up of several large engagements.
ACQUISITIONS
- LYON CONSULTANTS, S.A. - On May 15, 1998, we acquired 100% of
the outstanding stock of Lyon, a privately held software engineering company
headquartered in Paris, France. Lyon specializes in rapid software application
development, utilizing reusable business and technical software components, and
in information technology consulting. Lyon's shareholders received $16.7 million
in cash and 531,353 shares of our common stock in exchange for their Lyon stock.
In addition, we were obligated to make a contingent payment of approximately
$4.2 million in May 1999 based on our stock price on May 15, 1999. We are
negotiating this contingent payment with the former shareholders of Lyon and
expect to make a payment in May 2000 if our stock price is less than $34.05 per
share. We have accounted for the Lyon acquisition as a purchase, and as a
result, the operating results of Lyon are reflected in the consolidated
financial statements from the date of acquisition.
- RHO TRANSFORMATIONAL TECHNOLOGIES PTY. LIMITED - On June 30,
1998, we acquired 100% of the outstanding stock of RHO, a privately held
software services and engineering company headquartered in Sydney, Australia.
RHO specializes in software application conversion and maintenance services
using proprietary tools. RHO's shareholders received 285,000 shares of our
common stock in exchange for their RHO common stock. We have accounted for the
RHO acquisition as a pooling of interests combination. We have restated our
financial statements for the year ended December 31, 1998 to give effect to the
business combination but prior years have not been restated because the changes
were immaterial. As a result of this acquisition, we have incurred costs of
approximately $145,000 and have charged these costs to acquisition costs in our
income statements.
- VISUAL SYSTEMS DEVELOPMENT CORPORATION - On October 2, 1998,
we acquired 100% of the outstanding stock of Visual, an information technology
company based in Toronto, Canada. Visual specializes in client/server and
Internet application development. Visual's shareholders received $5.5 million in
cash and 400,000 shares of our common stock in exchange for their Visual stock.
Additional payments of up to $3.5 million in the form of our common stock are
payable if Visual achieves certain financial and business objectives specified
in the purchase agreement. We have accounted for the Visual acquisition as a
purchase.
- ATECHSYS S.A. - On January 8, 1999, we acquired 100% of the
outstanding stock of Atechsys, a privately held information technology company
based in Paris, France. Atechsys specializes in business and technology
consulting services to the capital markets industry. Atechsys' shareholders
received 718,859 shares of our common stock in exchange for their Atechsys
common stock. We have accounted for the Atechsys acquisition as a pooling of
interests combination. We have restated prior year financial statements to give
effect to the business combination. As a result of this acquisition, we have
incurred costs of approximately $1.7 million and have charged these costs to
acquisition costs in our income statements.
- ECWERKS, INC. - On January 15, 1999, we acquired 100% of the
outstanding stock of ECWerks, a privately held electronic commerce business and
technology consulting company based in Tampa, Florida. ECWerks' shareholders
received 163,054 shares of our common stock in exchange for their ECWerks common
stock. In addition, we are required to make a contingent payment of up to $28.0
million in cash or shares of our common stock if certain financial goals
specified in the purchase agreement are achieved during 1999. We have accounted
for the ECWerks acquisition as a purchase.
- FUSION SYSTEMS JAPAN CO., LTD. - On March 26, 1999, we acquired 100%
of the outstanding stock of Fusion, a privately held business and technology
consulting company based in Tokyo, Japan. Fusion specializes in capital markets
consulting and technology solutions and provides technology consulting services
from its offices in Tokyo and Boston. Fusion's shareholders received 3,735,536
shares of our common stock in exchange for their Fusion common stock. We have
accounted for the Fusion acquisition as a pooling of interests combination. We
have restated current year and prior year financial statements to give effect to
the business combination. As a result
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<PAGE>
of this acquisition, we have incurred costs of approximately $2.1 million and
have charged these costs to acquisition costs in our income statements.
- PROFESSIONAL PARTNERS, INC. AND LAKEWOOD SOFTWARE TECHNOLOGY
CENTER, INC. - On April 28, 1999, we purchased 100% of the outstanding stock of
Professional Partners and Lakewood Software, which we refer to as PLP, a
privately held provider of information technology services to the property and
casualty insurance industry. PLP's shareholders received $12.0 million in cash
in exchange for their PLP common stock. We have accounted for the PLP
acquisition as a purchase and as a result, the operating results of PLP are
reflected in the consolidated financial statements from the date of acquisition.
- ORION CONSULTING, INC. - On June 15, 1999, we acquired 100% of
the outstanding stock of Orion. Orion was a privately held management-consulting
firm, headquartered in Cleveland, Ohio, that primarily served the healthcare
industry. Orion's shareholders received 3,028,414 shares of our common stock in
exchange for their Orion common stock. We have accounted for the Orion
acquisition as a pooling of interests combination. As a result of this
acquisition, we have incurred costs of approximately $2.8 million and have
charged these costs to acquisition costs in our income statements.
INCOME TAX MATTERS
SUBCHAPTER S ELECTIONS FOR CERTAIN UNITED STATES OPERATIONS - Prior to
November 1996, our stockholders had elected to be taxed as an S Corporation
under the provisions of the Internal Revenue Code. As a result, taxable income
was generally reported by the shareholders on their individual income tax
returns. In connection with our initial public offering, the S Corporation
election was terminated in November, 1996. In addition, Orion, which we acquired
earlier this year, was taxed as an S Corporation since its inception. In
connection with the acquisition, Orion's S Corporation election was terminated
on June 15, 1999. Subsequent to the terminations of the S Corporation elections,
we and Orion, now our wholly-owned subsidiary, became subject to United States
federal and state income taxes.
We have adjusted the provision for income taxes in our financial
statements as if we had been a taxable entity subject to federal and state
income taxes at the marginal rates applicable to such periods to accurately
reflect our pro forma net income. However, the pro forma adjustment to income
tax expense in our financial statements for the year ended December 31, 1996 and
the six month ended June 30, 1999 excludes one-time income tax expense resulting
from the termination of our S Corporation status.
INDIA OPERATIONS - Our subsidiary, IMRglobal-India, is eligible for
certain favorable tax provisions provided under the Indian Income-Tax Act,
including the following:
- an exemption from corporate income taxes for a period of five
consecutive years in the first eight years of operation
- an exemption from income taxes on the profits derived from exporting
computer software or transmitting software from India. The export
exemption remains available after expiration of the tax holiday
described above
The effective tax rate for our India operations has been less than 5% for 1996,
1997, 1998 and 1999 as a result of these exemptions. Recent legislation in India
indicates that these tax exemptions will continue in the near future. However,
we cannot assure you that the Indian government will not significantly modify or
eliminate these tax exemptions.
We will be required to pay taxes in the United States if we repatriate
funds from our operations in India and record a corresponding provision for
income taxes. This would reduce future earnings. However, we consider these
earnings to be permanently invested in India and do not anticipate repatriating
any of these earnings to the United States.
15
<PAGE>
CONVENTIONS
We use the following conventions throughout the discussion of our
results of operations:
REVENUE RECOGNITION. Revenue from services provided on a fixed-price
basis is recognized using the percentage of completion method. We bear the risk
of cost over-runs and inflation with respect to our fixed price projects. In
order to mitigate these risks, we subdivide projects into smaller phases, and we
generally reserve the right to renegotiate fixed-price and fixed-time frame
commitments in the event of any change in scope. Under the percentage of
completion method, we must estimate the percentage of completion of each project
at the end of each financial reporting period. Estimates are subject to
adjustment as projects progress to reflect changes in projected completion costs
or dates.
Revenue from services provided on a time and materials basis is
recognized in the period that the services are provided. Certain services in our
healthcare practice are provided on a contingency basis based on the recovery of
expenses for clients or based on providing litigation support to clients.
Revenue for recovery projects and litigation work is recognized when the
outcomes of the projects are known.
COST OF REVENUE. Cost of revenue consists primarily of salaries and
employee benefits for personnel dedicated to client projects as well as facility
costs at the India and Northern Ireland software development facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Salaries and related
taxes and benefits for employees not dedicated to specific client projects make
up the majority of our selling, general and administrative expenses. Other
significant selling, general and administrative expenses are as follows:
- occupancy costs
- telecommunications
- marketing and promotion
- travel expenses
16
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes several items from our statements of
income expressed as a percentage of revenue.
<TABLE>
<CAPTION>
Six Months ended
Year ended December 31, June 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue 58.1 58.4 53.1 54.5 52.5
----- ----- ----- ----- -----
Gross profit 41.9 41.6 46.9 45.5 47.5
Selling, general and administrative expenses 25.0 27.8 23.9 25.6 22.2
Research and development 0.0 0.9 3.1 2.5 2.2
Goodwill and intangible amortization 0.2 1.0 1.0 0.7 1.6
Costs related to acquisitions 0.0 0.0 4.0 9.0 6.5
----- ----- ----- ----- -----
Income from operations 16.7 11.9 14.9 7.7 15.0
Other income, net 0.3 1.6 2.1 2.4 1.9
Income before provision for income taxes and minority 17.0 13.5 17.0 10.1 16.9
interest
Pro forma provision for income taxes 7.0 4.7 7.2 6.2 7.3
Minority interest 1.3 0.0 0.0 0.0 0.0
----- ----- ----- ----- -----
Pro forma net income 8.7% 8.8% 9.8% 3.9% 9.6%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
During 1999, we acquired Atechsys, Fusion and Orion and accounted for
the acquisitions utilizing the pooling-of-interests method. Accordingly, our
historical financial statements have been restated to include the results of
operations for these three companies. The resulting gross margin percentages
(gross profit divided by revenue) and operating margins (income from operations
divided by revenue) are significantly lower than our reported margins before the
statements of income were restated. These differences are summarized as follows:
<TABLE>
<CAPTION>
----------------------------------------
Percentage of Revenue
Year ended December 31,
----------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Gross margin before restatement 44.0% 45.0% 48.0%
Effect of including operations of
Atechsys, Fusion and Orion (2.1) (3.4) (1.1)
Gross margin after restatement 41.9% 41.6% 46.9%
------- ------ -----
Operating margin before restatement 16.8 18.7 17.0
Effect of including operations of
Atechsys, Fusion and Orion (0.1) (6.8) (2.1)
Operating margin after restatement 16.7% 11.9% 14.9%
------- ------ -----
------- ------ -----
</TABLE>
17
<PAGE>
The primary reasons for the lower gross margin and operating margin are
summarized as follows:
Prior to the Orion merger, Orion paid all of its net income to its
shareholders as bonuses. Bonuses to management for the years ended
December 31, 1996, 1997 and 1998 were approximately $3.0
million, $6.6 million and $4.0 million. As a percentage of
earnings, future bonuses to these employees will be based on
our existing incentive plans and will be significantly less than the
amounts previously paid.
During 1998, Orion recognized a bad debt expense of $1.5 million from
one client who became insolvent.
During 1998, Orion recognized a $1.5 million charge for the issuance of
stock to several key employees.
Fusion's 1996 and 1997 operating margins were considerably lower than
1998 and 1999 levels due to its investments in developing its
capital markets service offerings.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
REVENUE. For the six months ended June 30, 1999, our revenue
increased to $129.9 million, representing a 40.8% increase over revenue of $92.2
million for the six months ended June 30, 1998. Acquisitions accounted for under
the purchase method contributed approximately one-half of the revenue increase.
Revenue from our service offerings not related to our Year 2000 service
offerings, increased to $102.2 million (including purchase acquisitions),
representing an 88.7% increase over non Year 2000 revenue of $54.2 million for
the six months ended June 30, 1998. Revenue from our Year 2000 conversion
services decreased 27.2% to $27.7 million for the six months ended June 30, 1999
compared to $38.1 million for the six months ended June 30, 1998. As a
percentage of total revenue, Year 2000 revenue decreased to 21.3% for the six
months ended June 30, 1999 compared to 41.3% for the six months ended June 30,
1998. In addition, Year 2000 revenue for the three months ended June 30, 1999
was 17.8% of our revenue compared to 25.2% of our revenue for the three months
ended March 31, 1999. We expect that Year 2000 revenue will continue to decrease
over the next three quarters.
COST OF REVENUE. Cost of revenue was $68.3 million, or 52.5% of
revenue, for the six months ended June 30, 1999, compared to $50.2 million, or
54.5% of revenue, for the six months ended June 30, 1998. The decrease in cost
of revenue as a percentage of revenue primarily reflects productivity gains from
the use of our toolsets.
Wage costs continue to increase at a greater rate than general
inflation in each of the countries in which we have operations, and we
anticipate that this trend will continue in the near term. Historically, we have
been able to pass these wage increases on to our clients in the form of
increased prices for our service offerings. However, we cannot assure you that
we will be able to continue to increase prices to our clients to offset future
wage increases.
GROSS PROFIT. Our gross profit increased 46.7% to $61.7 million in the
six months ended June 30, 1999, compared to $42.0 million in the six months
ended June 30, 1998. As a percentage of revenue, our gross profit increased to
47.5% in the six months ended June 30, 1999 compared to 45.5% in the six months
ended June 30, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the six months ended
June 30, 1999, SG&A expenses increased to $28.9 million, compared to $23.7
million for the six months ended June 30, 1998. The dollar increase in SG&A
expenses is attributable to the following:
- purchase acquisitions
- the addition of seven sales offices and expansion of sales
personnel
- the expansion of our general support staff, primarily
recruiting and human resources personnel
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<PAGE>
The above increases were offset by a reduction in bad debt expense.
During 1998, Orion incurred a $1.5 million bad debt from a major client, which
filed for bankruptcy.
As a percentage of revenue, SG&A expenses for the six months ended
June 30, 1999 decreased to 22.2% from 25.6% for the same period in 1998. We
intend to continue to expand our SG&A infrastructure in preparation for
anticipated revenue growth. We do not expect SG&A to decrease as a
percentage of revenue in the near term.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development
expenses increased to approximately $2.9 million for the six months ended
June 30, 1999 from approximately $2.2 million in the six months ended June
30, 1998. As a percentage of revenue, R&D decreased to 2.2% in the six
months ended June 30, 1999 from 2.5% for the six months ended June 30,
1998. We anticipate that R&D expenses will continue to be approximately
2.0% to 2.5% of revenue for the remainder of 1999.
During the first six months of 1999, in accordance with Statement
of Financial Accounting Standard No. 86, we capitalized approximately $1.2
million of software costs related to our component based products for the
insurance industry and our maintenance toolset. There were no software
costs eligible for capitalization during 1998. We anticipate that the
amount of capitalized software will continue to increase through the
remainder of 1999 at levels consistent with the rate of increase for the
first half of 1999.
GOODWILL AND INTANGIBLE AMORTIZATION. Goodwill and intangible
amortization increased to approximately $2.0 million for the six months
ended June 30, 1999 from approximately $653,000 for the six months ended
June 30, 1998. The additional expense primarily reflects goodwill and
intangible assets attributable to purchase business combinations in 1998
and 1999.
ACQUISITION COSTS, ACCELERATION OF STOCK APPRECIATION RIGHTS UPON
ACQUISITION AND IN PROCESS RESEARCH AND DEVELOPMENT. During the six months
ended June 30, 1999, we completed three acquisitions that were accounted
for as poolings of interests. Acquisition costs attributable to these
transactions were approximately $6.6 million. In addition, the acquisition
of Fusion accelerated the settlement of Fusion's stock appreciation rights
plan. This resulted in a one-time and final charge of approximately $1.8
million in accordance with the plan.
During the six months ended June 30, 1998, in connection with our
acquisition of Lyon, we incurred an $8.2 million expense for in process
research and development. This expense was based on an appraisal of the
intangible assets acquired in the Lyon acquisition and is more fully
explained in the comparison of fiscal year 1998 to fiscal year 1997.
INCOME FROM OPERATIONS. Income from operations for the six months
ended June 30, 1999 was $19.4 million compared to $7.1 million for the six
months ended June 30, 1998. As a percentage of revenue, income from
operations for the six months ended June 30, 1999 increased to 15.0% from
7.7% in the six months ended June 30, 1998. Both periods reflect certain
one-time charges related to acquisition costs, acceleration of stock
appreciation rights and in process research and development. Excluding
these one-time charges, as a percentage of revenue, income from operations
for the six months ended June 30, 1999 increased to 21.4% from 16.8% in the
six months ended June 30, 1998. Due to increased infrastructure investments
we do not expect income from operations excluding one-time charges, as a
percentage of revenue, to increase significantly from current levels in the
near term.
OTHER INCOME. We realized approximately $2.5 million of other
income (net of other expenses) in the six months ended June 30, 1999
compared to net other income of approximately $2.2 million in the six
months ended June 30, 1998. Net other income consists primarily of
investment income generated by our cash and marketable securities.
PROVISION FOR INCOME TAXES. A pro forma provision for income
taxes has been calculated due to Orion being a Subchapter S Corporation
until June 1999. The pro forma provision for income taxes increased to
$9.4 million for the six months ended June 30, 1999 from $5.7 million
for the six months ended June 30,
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<PAGE>
1998. Excluding one-time charges, our effective tax rate was 36.8%
for the six months ended June 30, 1999 compared to 32.2% for the six
months ended June 30, 1998. The effective tax rate is calculated by
dividing the provision for income taxes by income before provision
for income taxes and minority interest.
The higher effective tax rate for the six months ended June
30, 1999 is partially attributable to goodwill and intangible
amortization not being fully deductible for income tax purposes.
Intangible amortization has increased 213.8% from the six months ended
June 30, 1998 to the six months ended June 30, 1999. In addition, we
have historically enjoyed a low effective tax rate primarily due to our
industry's low tax rates in India. Accordingly, the effective tax rate
has increased as a result of recent acquisitions in France, Canada,
Japan, Australia and the United States, which have higher tax rates
than India.
We have not recorded deferred income taxes applicable to
undistributed earnings of IMRglobal-India. Those earnings are
considered to be indefinitely reinvested and, accordingly, no provision
for United States federal and state income tax has been provided
thereon.
PRO FORMA NET INCOME. Pro forma net income increased to $12.5
million for the six months ended June 30, 1999 compared to $3.6 million
for the six months ended June 30, 1998. Pro forma net income for the
six months ended June 30, 1999, excluding one-time charges, was
approximately $19.2 million compared to pro forma net income of
approximately $12.0 million for the six months ended June 30, 1998.
Excluding one-time charges, as a percentage of revenue, pro forma net
income for the six months ended June 30, 1999 increased to 14.7% from
13.0% in the six months ended June 30, 1998.
PRO FORMA DILUTED EARNINGS PER SHARE. Pro forma diluted
earnings per share was $0.28 for the six months ended June 30, 1999 and
$0.08 for the six months ended June 30, 1998. Excluding one-time
charges, pro forma diluted earnings per share was $0.42 for the six
months ended June 30, 1999 as compared to $0.27 for the six months
ended June 30, 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUE. Revenue increased to $208.2 million in the year ended
December 31, 1998, representing an 80.6% increase over revenue of
$115.3 million in the year ended December 31, 1997. Of this increase,
approximately $18.4 million was attributable to our acquisition of
Lyon, RHO and Visual. Revenue for the year ended December 31, 1998 from
our services not related to our Year 2000 service offering, increased
to $131.0 million (including purchase acquisitions), representing an
84.9% increase over revenue of $70.8 million for the year ended
December 31, 1997. Year 2000 revenue increased to $77.2 million or
37.1% of total revenue for the year ended December 31, 1998 compared to
$44.5 million or 38.6% of total revenue for the year ended December 31,
1997.
COST OF REVENUE. Cost of revenue was $110.5 million, or 53.1%
of revenue for the year ended December 31, 1998, compared to $67.4
million, or 58.4% of revenue, for the year ended December 31, 1997. The
decrease in cost of revenue as a percentage of revenue reflects the
following:
- productivity gains from Year 2000 service offerings and other
toolsets
- a 17.8% devaluation of the Indian Rupee since September 1997,
which resulted in reduced costs at our Indian software
development centers
- improved utilization of software development personnel in
India and Northern Ireland
- a substantial decrease in Orion's annual bonuses, primarily
resulting from lower earnings due to a $1.5 million bad
debt expense and a $1.5 million compensation charge for the
issuance of stock to key employees
- improved profitability for Fusion due to a significant
increase in its service offerings to capital market
20
<PAGE>
clients. These service offerings utilize components that
are reusable and result in lower costs to new clients
Wage costs continue to increase at a greater rate than general
inflation in each of the countries in which we have operations.
Historically, we have been able to pass these wage increases on to our
clients in the form of increased prices for our service offerings.
However, we cannot assure you that we will be able to continue to
increase prices to our clients to offset future wage increases.
GROSS PROFIT. Gross profit increased to $97.8 million in the
year ended December 31, 1998, compared to $48.0 million in the year
ended December 31, 1997. Our gross profit margin, as a percentage of
revenue, increased to 46.9% in the year ended December 31, 1998,
compared to 41.6% in the year ended December 31, 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses
increased to $49.8 million in the year ended December 31, 1998,
compared to $32.0 million in the year ended December 31, 1997. The
dollar increase in SG&A expenses is attributable to the following:
- the Lyon, RHO and Visual acquisitions
- addition of sales offices
- expansion of sales personnel
- expansion of our delivery capacity
- regionalization of operations
- regionalization of operations
As a percentage of revenue, SG&A expenses decreased to 23.9%
in the year ended December 31, 1998 compared to 27.8% for the year
ended December 31, 1997. We are aggressively expanding our sales force
and marketing efforts, which will generate higher SG&A in the near
term.
RESEARCH AND DEVELOPMENT. Research and development costs
increased to $6.4 million in the year ended December 31, 1998, compared
to $1.1 million in the year ended December 31, 1997. The increase in
dollars is attributable to the following:
- the acquisition of Lyon and the continued development of
Lyon's component technology
- modification of component technology for certain targeted
industries
- expansion of efforts to develop and enhance our transformation
toolsets
GOODWILL AND INTANGIBLE AMORTIZATION. Goodwill and intangible
amortization increased to approximately $2.1 million for the year ended
December 31, 1998 from approximately $1.1 million for the year ended
December 31, 1997. This increase primarily reflects goodwill attributed
to our purchases of Lyon and Visual.
IN PROCESS RESEARCH AND DEVELOPMENT. The purchased assets and
assumed liabilities in connection with the acquisition of Lyon were
recorded at their estimated fair values at the acquisition date. We
received an appraisal of the intangible assets which indicated that
approximately $8.2 million of the acquired intangible assets was
acquired in process research and development that had not yet reached
technological feasibility and
21
<PAGE>
had no alternative future use. To determine the value of the in
process research and development, our appraisal considered several
factors including the following:
- state of development of each project
- time and cost needed to complete each project
- expected income for each project
- expected discounted cash flow for each project
- associated risks which included the inherent difficulties and
uncertainties in completing each project and thereby achieving
technological feasibility
- risks related to the viability of and potential changes to
future target markets
In process research and development was charged to expense in the
quarter ended June 30, 1998. In addition, we recorded a one-time charge
of approximately $145,000 for costs related to the RHO acquisition. We
did not incur in process research and development or acquisition costs
in 1997.
INCOME FROM OPERATIONS. Income from operations for the year
ended December 31, 1998 was $31.1 million compared to $13.7 million in
the year ended December 31, 1997, representing a 127.0% increase. As a
percentage of revenue, income from operations was 14.9% in the year
ended December 31, 1998, compared to 11.9% in the year ended December
31, 1997. The increase reflects higher gross margins and lower SG&A
expenses as described above. These increases were partially offset by
one-time charges totaling approximately $8.3 million related to
acquired in-process research and development and acquisition costs.
Excluding one time charges, income from operations was 18.9% as a
percentage of revenue for the year ended December 31, 1998.
OTHER INCOME. We realized net other income of approximately
$4.3 million in the year ended December 31, 1998 compared to net other
income of approximately $1.8 million in the year ended December 31,
1997. In 1998 we recognized approximately $4.6 million in investment
income primarily from the investment of the remaining net proceeds from
our public offering of common stock in August 1997 and we incurred
approximately $258,000 of interest expense related to credit facilities
in Japan, India and Australia. During 1997, we recognized approximately
$2.0 million in investment income primarily from the investment of
remaining net proceeds from our public offerings of common stock in
November 1996 and August 1997, and we incurred approximately $208,000
of interest expense primarily for credit facilities in Japan, India and
the U.K.
PROVISION FOR INCOME TAXES. A pro forma provision for income
taxes has been calculated due to Orion being a Subchapter S Corporation
until June 1999. The pro forma provision for income taxes increased to
$15.0 million in the year ended December 31, 1998 from $5.4 million in
the year ended December 31, 1997. The effective tax rate based on the
pro forma provision for income taxes and excluding one-time charges for
in process research and development and acquisition costs was 34.3% for
1998 and 34.7% for 1997. We calculate the effective tax rate by
dividing the provision for income taxes by income before provision for
income taxes and minority interest.
We have not recorded deferred income taxes applicable to
undistributed earnings of IMRglobal-India. Those earnings are
considered to be indefinitely reinvested and, accordingly, no provision
for United States federal and state income tax has been provided
thereon.
PRO FORMA NET INCOME. Pro forma net income increased 101.7% to
$20.4 million in the year ended December 31, 1998 from $10.1 million in
the year ended December 31, 1997. As a percentage of revenue, pro forma
net income was 9.8% for 1998 compared to 8.8% for 1997. When we exclude
one-time charges for in process research and development and
acquisition costs, this increase is significantly higher.
22
<PAGE>
PRO FORMA DILUTED EARNINGS PER SHARE. Pro forma diluted
earnings per share increased to $0.45 for the year ended December 31,
1998 from $0.24 for the year ended December 31, 1997. Excluding
one-time charges for in process research and development and
acquisition costs, pro forma diluted earnings per share was $0.64 for
the year ended December 31, 1998 compared to $0.24 for the year ended
December 31, 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUE. Revenue increased to $115.3 million in the year ended
December 31, 1997, representing a 107.4% increase over revenue of $55.6
million in the year ended December 31, 1996. Of this increase,
approximately $18.0 million was attributable to the acquisition of
IMRglobal-U.K. Revenue for the year ended December 31, 1998 from our
services offerings not related to our Year 2000 service offering,
increased to $70.8 million (including purchase acquisitions),
representing a 47.2% increase over revenue of $48.1 million for the
year ended December 31, 1997. Year 2000 revenue increased 494.1% to
$44.5 million for the year ended December 31, 1997 compared to $7.5
million for the year ended December 31, 1996.
COST OF REVENUE. Cost of revenue was $67.4 million, or 58.4%
of revenue for the year ended December 31, 1997, compared to $32.3
million, or 58.1% of revenue, for the year ended December 31, 1996.
GROSS PROFIT. Gross profit increased to $48.0 million in the
year ended December 31, 1997 compared to $23.3 million in the year
ended December 31, 1996. As a percentage of revenue, gross profit
decreased to 41.6% in the year ended December 31, 1997 compared to
41.9% in the year ended December 31, 1996. Our gross profit margin
increased for our United States (excluding Orion), France, Japan and
India operations. However, reduced gross profit margins for Orion,
IMRglobal-U.K. and IMRglobal-Northern Ireland offset this increase.
Orion paid significantly higher bonuses in 1997 than 1996 in accordance
with its practice of paying all earnings to top management, which was
effective since January 1, 1997. IMRglobal-U.K. derived a substantial
portion of its revenue from professional services, which generally
result in lower profit margins. IMRglobal-Northern Ireland experienced
lower gross profit during the start-up phase of its operations (which
began in July 1997) as it hired and trained its workforce.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses
increased to $32.0 million in the year ended December 31, 1997,
compared to $13.9 million in the year ended December 31, 1996. As a
percentage of revenue, SG&A expenses increased to 27.8% in the year
ended December 31, 1997 as compared to 25.0% for the year ended
December 31, 1996. The increase as a percentage of revenue occurred
primarily due to Orion's previous practice of paying bonuses to top
management in amounts equaling earnings. Prior to 1997, earnings were
paid as Subchapter S distributions. Future bonuses to these employees
will be based on our existing incentive plans and, as a percentage of
earnings, will be significantly less than the amounts previously paid.
In addition, Fusion made a significant investment in SG&A expenses in
1997 in anticipation of high revenue growth in 1998. These increases
were partially offset by the rapid increase in revenue in 1997 compared
to a lesser rate of increase in SG&A expenses during the same period
for our United States operations (excluding Orion). The dollar increase
in SG&A expenses is attributable to the following:
- acquisition of IMRglobal-U.K.
- addition of United States sales offices
- expansion of our delivery capacity
- expansion of our general support staff (primarily recruiting
and human resources personnel)
- additional costs associated with reporting and accounting
responsibilities as a public company
GOODWILL AND INTANGIBLE AMORTIZATION. Goodwill and intangible
assets amortization increased to approximately $1.1 million for the
year ended December 31, 1997 from approximately $100,000 for the year
ended December 31, 1996. This increase reflects the goodwill resulting
from our acquisition of 64.0% of IMR-India in the second half of 1996
and our 1997 acquisitions of IMR-U.K. and IMR-Northern Ireland.
23
<PAGE>
INCOME FROM OPERATIONS. Income from operations for the year
ended December 31, 1997 was $13.7 million compared to $9.3 million in
the year ended December 31, 1996. As a percentage of revenue, income
from operations decreased to 11.9% in the year ended December 31, 1997,
compared to 16.7% in the year ended December 31, 1996. This was the
result of increased SG&A expenses, and goodwill and intangible
amortization as described above. In addition, we restarted our research
and development program in 1997, which reduced income from operations
as a percentage of revenue by 1.0%.
OTHER INCOME. We realized net other income of approximately
$1.8 million in the year ended December 31, 1997, compared to net other
income of approximately $175,000 in 1996. During 1997, we recognized
approximately $2.0 million in investment income primarily from the
investment of remaining net proceeds from our public offerings of
common stock in November 1996 and August 1997. Investment income for
1996 was approximately $263,000.
PROVISION FOR INCOME TAXES. A pro forma provision for income
taxes has been calculated due to Orion being a Subchapter S Corporation
until June 1999. The pro forma provision for income taxes increased to
$5.4 million in 1997 from $3.9 million in 1996. The effective tax rate
based on the pro forma provision for income taxes was 34.7% for 1997
and 41.1% for 1996. The decrease in the effective tax rate was due to a
valuation allowance being assessed on Fusion's 1996 deferred tax asset.
The effective tax rate is calculated by dividing the provision for
income taxes by income before provision for income taxes and minority
interest.
MINORITY INTEREST IN NET INCOME. Minority interest in net
income decreased to approximately $48,000 for the year ended December
31, 1997 from approximately $730,000 in the comparable period in the
year ended December 31, 1996. This represents the portion of
IMR-India's net income that is allocated to IMR-India's minority
shareholders. This decrease was a result of our acquisition of 64.0% of
IMR-India during late 1996, and our acquisition of an additional 1.7%
of IMR-India in 1997. On December 31, 1997, we owned approximately
99.9% of IMR-India and the remaining was owned by the three other
individual shareholders.
PRO FORMA NET INCOME. Pro forma net income increased 107.9% to
$10.1 million in the year ended December 31, 1997 from $4.9 million in
the year ended December 31, 1996. As a percentage of revenue, pro forma
net income was 8.8% for 1997 and 8.7% for 1996.
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<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table contains portions of our unaudited quarterly
statements of operations data for each of the ten quarters beginning January 1,
1997 and ending June 30, 1999. The information relating to the quarters
beginning January 1, 1997 and ending on June 30, 1999 is derived from and should
be read along with our financial statements and the related notes appearing
elsewhere in this prospectus. We believe that this table is a fair presentation
of that information but the results of operations for any quarter are not
necessarily indicative of the results to be expected for any future period.
<TABLE>
<CAPTION>
Quarters Ended
(In thousands except per share data)
--------------------------------------------------------------------------------------------------
1997 1998 1999
------------------------------------- --------------------------------------- -----------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31 March 31 June 30
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 22,430 $ 26,625 $ 31,015 $ 35,240 $ 41,938 $ 50,306 $ 55,211 $ 60,756 $ 62,275 $ 67,645
Gross profit 9,279 11,040 12,864 14,775 18,863 23,151 27,061 28,676 29,511 32,140
Income from operations 2,228 3,737 4,844 2,886 6,615 499 11,794 12,174 7,031 12,411
Pro forma diluted earning
(loss) per share $ 0.03 $ 0.06 $ 0.08 $ 0.07 $ 0.13 ($ 0.05) $ 0.18 $ 0.19 $ 0.11 $ 0.17
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------------------------------------------
1997 1998 1999
----------------------------------- ------------------------------------- -----------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31 March 31 June 30
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit 41.4 41.5 41.5 41.9 45.0 46.0 49.0 47.2 47.4 47.5
Income from operations 9.9 14.0 15.6 8.2 15.8 1.0 21.4 20.0 11.3 18.3
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, we had:
- working capital of $96.4 million
- liquid assets including cash, cash equivalents and marketable
securities of approximately $85.4 million
- available bank lines of credit of approximately $13.9 million
Net cash provided by operating activities was $6.6 million for the year
ended December 31, 1996, $18.8 million for the year ended December 31, 1997,
$46.3 million for the year ended December 31, 1998, and $9.8 million for the six
months ended June 30, 1999. The positive cash flow from operations primarily
reflects our continuing profitability and the tax benefits generated through the
exercise of employee stock options.
Net cash used in investing activities was $20.2 million for the year
ended December 1996, $9.6 million for the year ended December 1997, $48.0
million for the year ended December 31, 1998, and $31.6 million for the six
months ended June 30, 1999. During 1996, we acquired a majority interest in
IMR-India for $10.0 million, invested in marketable securities of $5.5 million
and purchased property and equipment for $3.7 million. During 1997, we
25
<PAGE>
invested $3.3 million in the acquisition of two subsidiaries and purchased
property and equipment of $7.8 million. During 1998, we invested $8.9 million
in the acquisition of subsidiaries, invested $26.2 million in marketable
securities and purchased property and equipment for $14.3 million. For the
six months ended June 30, 1999, we invested an additional $20.1 million in
the acquisition of subsidiaries and purchased $14.5 million of property and
equipment.
Net cash provided by or used in financing activities was $36.6 million
for the year ended December 31, 1996, $52.8 million for the year ended December
31, 1997, ($2.0) million for the year ended December 31, 1998 and ($2.8) million
for the six months ended June 30, 1999. During the years ended December 31, 1996
and 1997 we received net proceeds from public offerings of $40.7 million and
$52.5 million. This increase in cash flows from financing activities was
partially offset by the payment of Subchapter S distributions of $3.2 million
for the year ended December 31, 1996 and $2.4 million for the year ended
December 31, 1997.
We maintain an uncollateralized $10.0 million revolving credit facility
which allows us to borrow up to 80% of the book value of our United States
accounts receivable. Our interest rate for this facility varies and is 1% above
the LIBOR rate (currently 6.3%). On June 30, 1999, we had not borrowed any funds
under this facility and the $10.0 million was available to us. Provisions of
this line of credit and certain notes payable contain financial covenants,
including covenants that require us to maintain certain financial ratios. On
June 30, 1999, we were in compliance with these covenants. This credit facility
can be cancelled at any time by the bank or by us.
Certain of our subsidiaries maintain additional revolving credit line
arrangements. Interest rates are based on the lending institution's prime rate
(ranging from 6.5% to 9.0% on June 30, 1999). On June 30, 1999, the amount
outstanding under these facilities was $219,000 and the maximum amount available
was approximately $3.9 million. The respective subsidiary's accounts receivable
and certain property and equipment collateralize these facilities.
During June 1998, we entered into contracts to purchase land and
construct new facilities for our corporate headquarters. The total price of this
project (including furniture, fixtures and equipment) is expected to be
approximately $28.0 million, of which $14.4 million has been expended as of June
30, 1999. Completion of this project is scheduled for January 2000. In addition,
we have a contingent liability of approximately $4.2 million to the former
shareholders of Lyon.
We periodically review our future cash requirements, together with our
available bank lines of credit and internally generated funds. We believe we
have adequate capital resources to meet all working capital obligations and fund
the development of our current business operations, including the following
business objectives:
- Continued expansion of existing business
- Continued funding of research and development initiatives
- Anticipated levels of capital expenditures including the
construction of our corporate headquarters
- Any debt repayment requirements, including those that may be
required pursuant to the integration of our acquisitions
ASSET MANAGEMENT
Our accounts receivable balance was $21.3 million on December 31, 1997,
$40.2 million on December 31, 1998 and $46.3 million on June 30, 1999. The
increase for these periods was primarily due to new acquisitions and revenue
growth. A significant portion of our business is executed on a fixed-price,
fixed-time frame basis. Revenue on fixed-price contracts does not necessarily
correlate to actual billings. Accordingly, accounts receivable may increase
significantly in periods where there are significant increases in deferred
revenue (I.E., billings issued in advance of revenue recognition).
A common financial measure is the calculation of days sales outstanding
in accounts receivable. We refer to days sales outstandings as DSO. We believe
that DSO should be calculated based on our quarterly results of
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<PAGE>
operations to factor in our historic rapid revenue growth rate. Based on the
above, DSO was 55 days on December 31, 1997, 60 days on December 31, 1998 and
62 days on June 30, 1999. The Lyon and Atechsys acquisitions add
approximately 3 days to our DSO as collection practices of accounts
receivable in France have historically been slower than collections in other
geographical areas. In addition, accounts receivable in Canada, France, Japan
and U.K. include value added taxes that are not included in revenue. Without
value added taxes, DSO would be approximately 3 days less than the above
levels.
COSTS ASSOCIATED WITH THE ASSESSMENT AND RESOLUTION OF OUR YEAR 2000 CONVERSION
PROJECTS
INTRODUCTION. Many existing computer systems run software programs
permitting only two-digit entries to reference the year in the date field. For
example, 1999 is read as 99. Software programs that use the two-digit year date
field to perform computations or decision-making functions may fail due to an
inability to correctly interpret dates in the 21st century. For example, many
software systems will misinterpret "00" to mean the year 1900 rather than 2000.
OUR STATE OF READINESS. We are in the process of assessing the impact
the Year 2000 will have on our systems, relationships with our third-party
vendors and relationships with our clients.
Although we continue to review all of our systems for Year 2000
compliance, we have discovered that only our internal accounting system is not
Year 2000 compliant. A new accounting system has been selected and we expect to
replace the non-compliant accounting system by the end of October 1999. The
implementation of a new accounting system was made for reasons other than the
fact that the system is not Year 2000 compliant. To date, we have incurred
expenses approximating $30,000 related to Year 2000 compliance and we anticipate
that the total cost should not exceed $100,000. These estimates primarily
reflect the costs related to our personnel. We do not believe that the costs
associated with the replacement of the accounting system will have a material
impact on our results of operations and financial condition. We have not
identified any other IT or non-IT system that is subject to a material risk of
disruption due to the Year 2000. We do not believe a formal contingency plan is
required for internal systems.
We have assessed whether a system failure experienced by any of our
third-party vendors would negatively impact our operations or financial
condition. We have determined that a Year 2000 system failure experienced by our
satellite and communication vendors could potentially interrupt communications
between client sites and our software development centers. This interruption
could result in loss of revenue, increased costs and project delays. We have
contacted our satellite and communication vendors in order to assess whether
they anticipate any communications failures or interruptions as a result of the
Year 2000. We have been informed that no such failures or interruptions are
presently anticipated. If, however, further analysis determines that one or more
of our satellite or communication vendors may encounter Year 2000 related
failures or interruptions, we will be required to develop a contingency plan. We
anticipate that a contingency plan, if necessary, will be developed by the third
quarter of 1999. We have determined that a system failure experienced by the
satellite and communication vendors could have a material effect on our results
of operations and financial condition. System failure by any other third party
vendor would not have a material affect on our results of operations and
financial condition.
RISKS PRESENTED BY THE YEAR 2000. Many of our client engagements
include Year 2000 conversion services that are critical to the operations of our
clients' businesses. Any failure in a client's system could result in a claim
for substantial damages against us, regardless of our responsibility for such
failure. We have described the risks associated with such claims from our
clients under "Risk Factors -- We may have liability to clients for damages to
their computer systems because our contracts limiting the liability may not be
enforceable or because we may not be covered by insurance."
27
<PAGE>
BUSINESS
GENERAL
We are a leading international provider of innovative business and IT
solutions to Fortune 500 and Global 2000 sized companies. We focus on providing
our comprehensive range of services to companies in the following vertical
industries:
- Insurance
- Capital markets
- Healthcare
- Utilities
- Media and communications
- Retail and manufacturing/distribution
We believe companies in these specific industries are facing unique and
substantial changes and competition that are altering the way they conduct
business. Due to the scope and the pace of these changes, we believe that the IT
solutions needed for these industries rarely lend themselves to packaged "off
the shelf" programs or services. Instead, a customized and technology-based
approach, provided in a short time frame, is needed. However, the development of
customized applications is expensive and time consuming.
Since early 1998, we have been developing component-based, vertical
industry solutions to meet the needs of our clients and have acquired companies
with complementary business knowledge or technology to assist in this
development effort. Our component-based vertical industry solutions combine the
functionality of customized software with the speed of implementation of a
packaged solution. These solutions usually require a relatively low level of
customization and lower maintenance costs and are easily modified to meet
changing business requirements.
Examples of some of our specific vertical market solutions include:
- Our insurance solution includes a suite of component-based
applications that support definition of new products,
acquisition of new businesses, and the administration,
billing, processing and paying of claims and commissions. We
customize these applications for clients in property and
casualty, life and reinsurance sectors of the insurance
business.
- Our capital markets solution includes a number of asset
management and order execution component-based applications
that we market under the name of FOX-TM-. The FOX solution
enables securities firms to manage portfolios of securities,
monitor changing market conditions and send orders to purchase
or sell securities electronically.
- Our healthcare solution allows health insurance companies to
analyze data and identify trends and anomalies in claims,
which can then be targeted for further investigation. This
allows our clients to screen their incoming claims and to
identify erroneous reimbursement claims more efficiently.
We intend to continue to focus on developing component solutions
because we believe that they provide significant benefits to our clients
including a faster deployment time and generally at a lesser total cost than
fully customized solutions. In addition we believe that our component-based
solutions are more reliable and better tailored to the specific needs of our
clients than pre-packaged products.
We offer our customers the following services, separately or in
combination:
- Business consulting - provide vertical industry business
expertise
- IT strategy formulation - plan and develop IT strategies
- E-Business services - design and implement Internet solutions
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<PAGE>
- Component-based application development- build new
applications using components
- Application modernization/transformation - transform older
software to newer technologies
- Application management and support - manage and support
existing computer applications
We provide all of our services on an outsourcing basis. Outsourcing is
the use by a client of third party providers to perform activities traditionally
handled by that company's internal staff. We believe that outsourcing has proven
effective in helping in-house IT departments manage costs while reducing the
time needed to complete projects. We augment the benefits of outsourcing by
providing our clients with a global network of centers with [highly trained and]
qualified technology professionals. We utilize the time differences between our
development centers in our global network to create a 24-hour "virtual workday"
during which our technology professionals can work on projects for our clients.
An important part of our strategy is to offer our services on a
fixed-price, fixed-time basis. We believe that a high percentage of projects
started by internal IT departments are not completed on time or on budget, with
many not completed at all. By offering fixed pricing, we enable our clients to
reduce their exposure to increased costs and by using our "on-site, off-site"
delivery model, which utilizes one or more of our worldwide delivery centers, we
can maintain consistent quality and reduce the project delivery time. Typically,
we split the project team into an "on-site" team and one or more "off-site"
teams. For a typical application management and support engagement,
approximately 20% to 30% of the people are located at the client's site and the
balance at one of our delivery centers. For large-scale development projects we
can deliver projects faster by using multiple delivery centers. Over the past
two years, we have successfully delivered over 100 fixed-price projects while
improving our gross margins.
In addition to fixed-price, fixed-time projects, we provide programming
and IT consulting services at clients' sites as needed, usually on a time and
materials basis. We also help our clients with tactical issues such as Year 2000
conversion services and the transition to the Euro currency. Our Year 2000
service offering was our largest source of revenue in each of 1997 and 1998 as
our clients committed significant financial resources in addressing this issue.
As Year 2000 engagements are completed in 1999, our revenue from this service
offering will decrease and we expect it to be less than 15% of our business for
1999.
Currently, we maintain a staff of approximately 2,700 software
development professionals to serve our clients. We maintain three dedicated
software development centers (Belfast, Mumbai and Bangalore) and operate five
software development centers, in our corporate and international headquarters in
Clearwater, London, Paris, Sydney and Tokyo. We also have 29 domestic
branch/sales offices. We intend to further broaden our geographical reach and
are considering additional locations in Europe, Asia and Eastern Europe. We
expect this expansion to be accomplished primarily through acquisitions.
In addition to seeking acquisitions to broaden our geographical reach,
we intend to continue to acquire companies that have specific industry expertise
in one of our targeted vertical markets and/or significant expertise in new
technologies . For example, in March 1999, we acquired Fusion Systems Japan Co.,
Ltd., headquartered in Tokyo, Japan, which provides asset management and order
execution solutions for companies in the capital markets industry. In April,
1999, we acquired PLP, which provides solutions for companies in the property
and casualty insurance market. In addition, in June 1999 we acquired Orion,
which provides solutions to facilitate transactions with payors and providers in
the healthcare industry.
INDUSTRY OVERVIEW
We believe that the vertical industries for which we are developing
solutions are faced with dramatic business, technological and economic changes
that are forcing them to alter their traditional business methods. These
changes include demutualization and merger and acquisition activities in the
insurance industry, deregulation of the utility industry, merger and
acquisition activity in the financial services industry and privatization in
the healthcare industry. Intense competition and globalization in turn are
driving the development of new products and services which must be made
available on a cost and time efficient basis. In addition, the integration of
e-commerce into companies has become an integral part of the competitive
environment.
29
<PAGE>
These changes require the support of IT solutions. We believe companies
in our targeted industries are faced with competitive pressures to reduce the
time needed to develop and market new products. As a consequence, many companies
can no longer develop new applications relying solely on their internal IT
staff. Moreover, the complexities of the industries in which our clients operate
often preclude the use of packaged solutions. We believe these industries
require customized solutions with the speed of packaged solutions, and the
flexibility to constantly integrate these solutions with updated technologies
and pre-existing systems.
In addition, technology is enabling companies to increase productivity,
shorten product cycles, enhance client services and create new lines of
business. We believe that the rapid pace of these changes has overwhelmed many
internal IT departments and has created a skills gap that IT service providers
help to bridge. By outsourcing IT services, companies can focus on their core
business, access specialized technical skills and implement IT solutions more
rapidly while significantly reducing the costs of recruiting, training and
retaining IT professionals.
The IT services industry has evolved into a highly fragmented
environment with several large, national service providers, a small number of
international providers and a large number of regional service providers. We
believe that, in light of recent globalization trends, IT service providers with
an increasing global presence will be better able to address the IT needs of the
large Fortune 500 and Global 2000 sized companies.
OUR SOLUTIONS MODEL
The model of the traditional IT services provider has long been
three-dimensional, with the level of customer service largely determined by the
caliber of the provider's people, the level of its technology and the process by
which it manages and delivers projects. We have been able to enhance customer
service by adding a fourth dimension to the model utilizing our international
network of software development and sales centers which provide a global
presence while permitting local service and support to our clients. Our offices
are distributed among nine time zones which gives us the ability to offer
24-hours of service per day, and thereby significantly decreases the time needed
to complete clients projects. In addition, we are focusing on the business needs
of companies within our targeted vertical industries and intend to continue to
acquire more industry-specific knowledge. As a result, we have added industry
knowledge as the fifth dimension to our model. We believe this five-dimensional
model represents the ideal IT product and services provider.
[GRAPHIC OMITTED]
Our solutions and service offerings reflect the five-dimensional
approach we have taken to build our business. We provide solutions to selected
vertical markets utilizing advanced tools and technology together with highly
qualified personnel using proprietary methodologies. We deliver these solutions
using an international network of development and support facilities that permit
a lower cost alternative and shorter development times.
30
<PAGE>
- VERTICAL MARKET SOLUTION PROVIDER. We believe that what we
offer our clients within our targeted vertical industries is unique. We act as a
business partner who can provide our clients with industry specific solutions
that reflect a thorough understanding and appreciation of the challenges they
face and the business implications of those challenges. We believe we are one of
the first to market component-based solutions that are tailored to meet industry
specific business requirements, are platform independent, and are deployed using
a rapid application development environment. Our solutions position us to become
a long-term strategic partner and solution provider to our clients in these
industries.
- TOOLS AND TECHNOLOGY. We continue to invest in research and
development of tools and technologies that enable us to increase the overall
quality and productivity and shorten the "time-to-market" for delivering our
services and solutions. For example, our Maintenance Improvement Workbench
enables us to more effectively manage and maintain large software applications.
Our component-based development allows us to deliver software solutions,
including vertical industry specific solutions, significantly faster than
building entirely customized software, and our Systems Evolution Toolset which
is a tool that enables us to transform older software into newer technologies
quickly and cost-effectively.
- GLOBAL BUSINESS MODEL. Our international network of software
development centers provides us with a significant cost advantage and the
ability to provide 24-hour service to our clients. Many of our clients are
linked by satellite communications to our offsite development centers, where we
perform a substantial amount of each project's work.
This global network allows us to take maximum advantage of the time
differences between our clients' offices and ours, creating a seamless, 24 hour
"virtual workday" to speed project completion. Working during our clients'
off-peak hours also often allows us to use the excess capacity of their existing
computing facilities, enabling us to undertake additional projects without
substantial client investment in new hardware and software. For projects with
critically short time frames, our multiple shifts allow us to further accelerate
delivery by "concurrent development" - working on many development phases
simultaneously in different offices. Cost savings and efficiencies are further
enhanced because we are able to spread the costs of satellite communications and
infrastructure at these centers among multiple clients and projects.
Our international network of software development centers is supported
by a separate network of sales and support offices located close to our client.
Currently, we have 29 offices in the United States and 13 international sales
offices, six of which are in Canada with the remainder in London, Paris,
Frankfurt, Luxembourg, Bangalore, Sydney and Tokyo.
- TSQM. We use our proprietary Total Software Quality Management
(TSQM) set of defined software development processes, techniques and tools to
maximize the quality of our operations and client services, and to minimize
project risks. For every project, we implement a two-staged approach that
provides: (a) an extensive initial assessment of the project's scope and risks,
and (b) a fixed-price implementation stage, divided into phases with frequent
deliverables and client feedback. Continuously refined, TSQM allows us to
detect, correct and mitigate quality defects and to establish appropriate
contingencies for each project.
The responsibilities of completing each TSQM phase are allocated
between an on-site and an off-site team to optimize cost savings and accelerate
project delivery. The specific tasks allocated to each team member are
determined principally by the amount of client interaction required. The
initial, front-end phase, which may include business area analysis, technical
strategy development, requirements definition and analysis, and high level
technical architecture design, is completed by the on-site team. The
implementation phase, which may include programming, unit and system testing, is
largely performed via satellite link by our off-site teams.
Our TSQM process is based in part on software standards published by
the Institute of Electrical and Electronic Engineers and the Software
Engineering Institute (SEI) software engineering process models and ISO 9001
quality processes. To position us for future business from companies in Europe,
and from international affiliates of our North American clients, our facilities
in Bangalore and Mumbai, India; London, England; Paris France; and Belfast,
Northern Ireland have achieved ISO 9001 certification. We are currently pursuing
company-wide ISO 9001 and SEI certification.
31
<PAGE>
GROWTH STRATEGIES
To enhance our position in the market, we believe it will be necessary
for us to further develop our industry expertise and expand our component-based
application offerings to those industries. To do that, we have identified
several key strategies we intend to pursue.
- CONTINUE TO DEVELOP EXPERTISE IN SELECTED VERTICAL MARKETS. We
will continue to build a comprehensive understanding of the business needs of
our clients in our targeted vertical industries. We shifted from a traditional
technology-based focus to an industry-based focus beginning in 1998. In part, we
have built on our relationships and integrated the industry knowledge that we
acquired from previous Year 2000 and other engagements into our new service
offerings. Since then, we have continued to build our industry expertise by
investing in industry-specific research and development, by acquiring companies
with industry specific knowledge or technology and by hiring individuals with
proven expertise in these industries. For example, in February 1999, we hired
John Alexander, former CIO of Unum Life Insurance Company, as Director of our
Insurance Vertical Practice. In addition, some of our acquisitions have provided
us with additional expertise in vertical markets.
- ACQUIRE AND DEVELOP PRODUCTIVITY-ENHANCING SOFTWARE TOOLS. We
continue to improve our proprietary software engineering methodologies and
toolsets through a combination of strategic acquisitions and internal research
and development. In May 1998, we acquired Lyon Consultants which provided us
with core technologies in component-based architectures, which, we believe, will
be the dominant development technology over the next several years. We continue
to enhance the technology we use to transform older software into newer
technologies with licensing agreements and continued investments in research and
development.
- DEVELOP LONG-TERM STRATEGIC PARTNERSHIPS WITH CLIENTS. A key
element of our strategy is to expand the scope of the services that we provide
to each client with the goal of forging lasting strategic partnerships with
them. By striving to exceed our client expectations and delivering projects on
time and on budget, we have been successful in retaining clients and converting
projects into additional engagements. Our significant investment in the
technology necessary to support our clients' business strategies and the
addition of new services such as E-business and component-based development,
should help us further to develop their loyalty and trust and should provide us
with the ability to sell additional services to our existing clients as well as
to attract new clients. To underscore our commitment to our clients, we actively
solicit feedback with client satisfaction surveys, consultant performance
surveys and regularly scheduled client meetings with senior management. We also
link a substantial portion of our senior executives' performance based
compensation directly to client satisfaction.
- CONCENTRATE ON KEY TECHNOLOGIES. We continue to focus on
obtaining the most advanced software development technologies. The acquisition
of ECWerks in January 1999 provided us with enhanced capabilities to design,
develop and deliver large-scale solutions in the electronic commerce market. We
also utilize software provided by companies such as Forte Software, Inc., in
addition to our internally developed toolsets in offering the most advanced
technology solutions. We conduct on-going personnel training to ensure that
our employees are up to date in key technology areas.
- EXPAND GEOGRAPHIC PRESENCE. As we continue to expand our
client base, we intend to open additional regional offices in other geographic
areas. We have eight software development facilities around the world and 42
sales offices, of which 22 were added in 1999.
- PURSUE SELECTIVE STRATEGIC ACQUISITIONS. Our acquisition strategy is
to select companies with well- established client bases, a strong cultural fits
and one or more of the following criteria:
- Geography - located where we want to increase our global
presence
- Technology - significant expertise in new technologies
- Vertical - specific industry expertise in one of our targeted
verticals
By acquiring companies that meet these requirements, we believe we can
create opportunities to sell additional products and services throughout our
client base. For example, component development solutions obtained from Lyon
have been sold to our existing clients in the United States, and some of our
core services have been sold to Lyon's clients in France.
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<PAGE>
Our most significant acquisitions over the last two years met our
requirements as follows:
<TABLE>
<CAPTION>
Geography Technology Vertical
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1999
- --------------------------------------------------------------------------------
Orion -- -- --
- --------------------------------------------------------------------------------
PLP -- --
- --------------------------------------------------------------------------------
Fusion -- -- --
- --------------------------------------------------------------------------------
ECWerks --
- --------------------------------------------------------------------------------
Atechsys -- --
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
Visual -- --
- --------------------------------------------------------------------------------
RHO -- --
- --------------------------------------------------------------------------------
Lyon -- --
- --------------------------------------------------------------------------------
</TABLE>
- LEVERAGE TACTICAL OPPORTUNITIES. We intend to continue to
identify tactical opportunities and use them to sell additional products and
services to our clients. Our Year 2000 and European Monetary Union (Euro)
conversion services are examples of tactical opportunities we have used to
develop new business.
OUR SERVICE OFFERINGS
- BUSINESS CONSULTING. We provide vertical industry business
experience such as helping our healthcare clients by simplifying complex
business issues in the healthcare industry, evaluating their financial and
operational performance and supplying advice in the ever-changing healthcare
industry. Our healthcare consultants have a national reputation as experts in
healthcare payment methodologies and help our clients to improve the quality of
their services, increase productivity and reduce costs. We have been
significantly increasing our vertical industry business expertise in each of our
targeted verticals by hiring people with extensive experience in particular
vertical industries and by acquiring companies that focus exclusively on a
particular vertical industry.
- IT STRATEGY FORMULATION. By combining vertical industry
business expertise with our technological experience, we are able to assist our
clients in formulating effective IT strategies that best match the business
objectives of our clients. For example, we assisted Baylor College of Medicine
in a strategic software selection and subsequently established a project
management office that supported the on-time implementation of that selection.
- E-BUSINESS SOLUTIONS. We help clients design and implement
solutions involving the Internet and electronic commerce. This service includes
the development of Internet strategies, management of web content and training.
Our senior E-commerce consultants assist clients in understanding the
opportunities, procedures and technologic challenges associated with conducting
electronic commerce. Our technical staff concurrently design, develop and
implement the underlying technologies supporting the E-business initiative,
using state-of-the-market development technologies. The scope of E-business
projects includes: web retailing, client extranets, online service centers,
supply chain optimization, electronic data interface, corporate intranets, back
office integration, sales force extranets and knowledge base management.
- APPLICATION MODERNIZATION/TRANSFORMATION. We have developed a
proprietary methodology for deploying new technologies and managing the
successful transformation of mainframe systems with new technologies. Our
TRANSFORM series of re-engineering tools automate many of the processes
required, thereby substantially reducing the time and cost to perform these
services. These "productivity tools" enable us to perform source code analysis,
redesign target databases and convert certain programming languages.
- APPLICATION MANAGEMENT AND SUPPORT. We have four distinct
processes for our application management and support services:
- CORRECTIVE MAINTENANCE requires software failures to be
diagnosed and fixed as they occur. These failures can directly
affect business operations and require the highest level of
support. Quick fixes
33
<PAGE>
and poor documentation often result in increased code
complexity and increased future maintenance costs.
- ADAPTIVE MAINTENANCE requires software modification to support
changing business requirements or changing technical
environments. This includes user enhancements, operating
system upgrades and other outside improvements. Enhancement
backlogs are generally the biggest source of concern for IT
management.
- PERFECTIVE MAINTENANCE involves modifications to application
systems to improve performance, without changing the basic
system.
- PREVENTIVE MAINTENANCE identifies and eliminates the
maintenance problems that create the need for corrective
maintenance. Year 2000 compliance services are forms of
preventive maintenance.
- COMPONENT-BASED VERTICAL INDUSTRY SOLUTIONS. Using an approach
similar to the popular Lego-REGISTERED- -building block approach, we utilize
reusable, industry-specific software components to quickly build vertical
industry specific applications for our clients. These pre-built, pre-tested
software components, along with components customized for company specific
purposes, are assembled in significantly less time than building an application
from scratch and provide clients a solution that fits their business better than
a packaged solution. This approach can be used to deliver projects on an
accelerated basis for selected platforms, avoiding the functional shortcomings
of traditional standardized, pre-packaged software solutions or the time and
cost of developing completely new custom solutions.
- COMPONENT-BASED APPLICATION DEVELOPMENT. We utilize reusable
technical and generic business components to quickly build applications for our
clients. This approach can be used to deliver highly customized applications on
an accelerated basis where no pre-packaged software solution exists. For example
we recently built a supply chain management and billing system for CGM, a large
European shipping company, using this approach. We also develop customized
applications using our world wide development centers in significantly less time
than building an application from scratch.
In addition, we provide Year 2000 services to support the ongoing needs
of our clients and Euro conversion services to help large international
companies and organizations transition to the Euro currency. We also provide
programming services on a time and materials basis. In addition to staffing our
client's short-term needs, our objective is to leverage professional staffing
engagements to learn more about the client's business and IT system needs and
position ourselves to provide additional services.
REPRESENTATIVE CLIENTS
<TABLE>
<CAPTION>
INSURANCE CAPITAL MARKETS HEALTHCARE
--------- --------------- ----------
<S> <C> <C> <C>
AMPlus Merrill Lynch Health Plan Services
CGU Insurance Morgan Stanley Blue Cross/Blue Shield
John Hancock Mutual Life Schroders International Foundation Health System
Reliastar Banque National de Paris American Medical Association
RETAIL AND
UTILITIES MEDIA AND COMMUNICATIONS MANUFACTURING/ DISTRIBUTION OTHER
--------- ------------------------ --------------------------- -----
Ameritech EBSCO Industries Blockbuster Amtrak
SAUR Thompson EC Resources Dayton Hudson TWA
Southern California Edison Fingerhut Mitsui
Salt River Project Winn Dixie CGM
Dow Corning
Michelin
Renault
</TABLE>
SALES AND MARKETING
We market and sell our services directly through our professional staff
and senior management operating at our United States and international regional
offices and sales branch offices. We focus our marketing efforts on
34
<PAGE>
large corporations within our six targeted vertical industries that have
significant IT budgets and recurring staffing or software development needs.
Marketing personnel identify prospects and enter the information into a
database which is consistently maintained. Direct sales representatives
utilize these records to initiate the sales cycle from prospect qualification
to closing. As a result, we can prequalify sales opportunities and minimize
the time that direct sales representatives spend on prospect qualification.
Our marketing programs include direct mail campaigns, advertising,
seminars, conferences and other activities. The sales executive and technical
support teams define the scope, deliverables, assumptions and execution
strategies for a proposed project. They also develop project estimates, prepare
pricing, margin, and cash flow analyses, and finalize sales proposals.
Management reviews and approves the proposal, then the sales staff presents the
proposal to the prospective client. Sales personnel are actively involved
throughout the execution phase.
As we expand in Europe and Asia, we will consider establishing branch
sales offices to pursue business opportunities in these regions.
INTELLECTUAL PROPERTY
Our business consists of software applications development and other
deliverables including written specifications and documentation in connection
with specific client engagements. Ownership of these products is generally
retained by or assigned to the client. We also develop reusable software
components and vertical industry component libraries for application
development, as well as certain software toolsets and proprietary methodologies.
Many are developed in one country and subsequently used in another country.
Furthermore, we maintain trademarks and service marks in our various service
offerings. To protect our intellectual properties, we rely on copyright and
trade secret laws, nondisclosure and other contractual arrangements, and
technical measures.
COMPETITION
The IT services market is highly competitive and is served by numerous
national, regional and local firms. Our clients generally consist of large
corporations principally in the insurance, capital markets, utilities,
healthcare, retail, manufacturing and distribution, and media and communications
industries. Many of our competitors are aggressively pursuing business from
these entities. In addition to in-house IT departments, market participants
include systems consulting and integration firms, professional service
companies, applications software firms, temporary employment agencies,
professional services divisions of large integrated manufacturing and other
companies, facilities management and outsourcing companies, accounting and
business consulting firms such as the "Big 5" and related entities.
We believe that many of our competitors have significantly greater
financial, technical and market resources and generate greater revenue than we
do. We compete by offering component-based software products, a successful
services delivery model, excellent referral base, continued focus on client
needs, quality of services, competitive prices and strong project management
capabilities and technical expertise.
HUMAN RESOURCES
As of June 30, 1999, we had approximately 2,900 employees, including
approximately 1,800 people in our United States, U.K., France, Japan, Canada and
Australian headquarters and branch offices, and approximately 1100 in our
software development centers in India and Northern Ireland. Additionally, we had
approximately 200 independent contractors performing various services. None of
our employees are subject to a collective bargaining arrangement, except for
approximately 200 employees in France.
As of the end of July 1999, approximately 500 of our United States
employees were working under the H-1B non-immigration work permitted visa
classification, which we processed for those employees through the United States
Immigration and Naturalization Service. The H-1B visa classification enables
United States
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<PAGE>
employers to hire qualified foreign workers in positions which require
education at least equal to a United States baccalaureate degree in specialty
occupations such as software systems engineering and systems analysis.
We believe that there is a shortage of, and significant competition
for, IT professionals and that our future success will depend in large part upon
our ability to attract, train, motivate and retain highly skilled employees with
the advanced technical skills necessary to perform the services we offer. We
have active recruiting programs in North America, Europe, Australia, India and
certain other countries and have developed a recruiting system and database that
facilitates the rapid identification of skilled candidates. We also have adopted
a career and education management program working with employees to define their
objectives and career plans. Through an intensive orientation and training
program, we introduce new employees to our TSQM software engineering process and
our products and services.
PROPERTIES
The following table sets forth a description of our principal
facilities:
<TABLE>
<CAPTION>
Square Feet Owned/
Location (Approx.) Lease Expiration Date Function
-------- --------- --------------------- --------
<S> <C> <C> <C>
Clearwater, Florida 51,000 Owned Corporate headquarters and
software development facility
London (Chesham),England 12,500 March 2013 U.K. headquarters and software
development facility
Howell, New Jersey 22,700 September 1999 - Insurance facility
July 2003
Bangalore, India 66,000 June 2000 Software development facility
Belfast, Northern Ireland 14,500 September 2002 Software development facility
Cleveland, Ohio 30,900 September 2007 Healthcare industry facility
Mumbai, India 28,000 Owned Software development facility
New Delhi, India 28,000 Owned Future facility
Paris, France 18,900 May 2005 France headquarters and software
development facility
Paris, France 5,600 October 2000 - European Capital Market
November 2001 Industry facility
Sydney, Australia 6,800 May 2002 Australian headquarters and
software development facility
Toronto, Canada 6,300 October 2002 Canada headquarters
Tokyo, Japan 16,200 January 2001 Japan headquarters and software
development facility
Tampa, Florida 20,000 January 2004 ECWerks headquarters
</TABLE>
In 1998, we purchased approximately 15 acres in Clearwater, Florida for
the purpose of constructing a headquarters complex. In July 1999, we took
possession of land and our 51,000 square foot headquarters building. A second
80,000 square foot building is scheduled for completion in January 2000. The
second building will also house the entire research and development team that is
currently housed in Clearwater, France, Australia and India. The property has
room for two additional buildings and a parking garage if further development is
needed. In connection with taking possession of the headquarters building in
Clearwater, the Tampa, Florida ECWerks headquarters is being vacated and
employees are moving to the headquarters in Clearwater.
The leases for our facilities in Bangalore, Belfast, Paris
(headquarters) and Toronto contain options to extend the term for an additional
five years.
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<PAGE>
We own the building at our software development facility in Mumbai,
India and we lease the land through March 2096. We own land and a building in
New Delhi, India which may be renovated to house a future facility.
In addition, we lease branch offices, which are used primarily for
sales and marketing purposes, in Atlanta, Boston, Chicago, Dallas, Detroit, Los
Angeles, Minneapolis, New York, Seattle, Boston, Denver, Greenville,
Jacksonville, Ashburn, Cincinnati, Clifton Park, Deerfield Beach, Harrisburg,
Kansas City, Midlothian, New Iberia, Pittsburg, San Francisco, Saratoga Springs,
St. Louis, Tempe in the United States, Montreal, Quebec City, Winnipeg, Calgary
and Vancouver in Canada, Frankfurt, Germany and Luxembourg.
LEGAL PROCEEDINGS
We are not a party to any pending material litigation.
SELLING SHAREHOLDERS
All of the shares registered for sale under this prospectus are
owned by the selling shareholders who are the former shareholders of either
Atechsys S.A.; ECWerks, Inc.; Fusion Systems, Ltd., or Orion Consulting, Inc.
The shares offered by the selling shareholders were acquired in
connection with the following business combinations:
- the January 8, 1999 merger with Atechsys S.A., headquartered in
Paris, France
- the January 15, 1999 acquisition of ECWerks, Inc., headquartered
in Tampa, Florida
- the March 25, 1999 merger with Fusion Systems, Inc., headquartered
in Tokyo, Japan
- the June 15, 1999 merger with Orion Consulting, Inc., headquartered
in Cleveland, Ohio
Under the terms of the above transactions, we agreed to register the
shares of common stock received by these selling shareholders in connection with
the above business combinations. In the past three years, none of the selling
shareholders has had a material relationship with us, except that certain
selling shareholders have become non-officer employees of our company (or a
subsidiary of our company) after the above transactions were consummated.
The following table sets forth certain information regarding the
beneficial ownership of our common stock by the selling shareholders. The
table organizes the selling shareholders according to the business
combinations pursuant to which they became shareholders. Information provided
in this table is organized as follows in six columns (from left to right):
(1) Selling shareholders names and addresses
(2) Shares owned prior to this offering (number) - The number of shares
of our common stock beneficially owned by each selling shareholder at
September 1, 1999.
(3) Shares owned prior to this offering (percent) - The percentage,
if 1% or more, of the total outstanding shares of our common stock
beneficially owned by each selling shareholder at September 1, 1999.
37
<PAGE>
(4) Shares offered - The number of shares of our common stock
that are being registered under this registration statement for each selling
shareholder. Some or all of these shares may be sold pursuant to this
Prospectus.
(5) Shares owned after this offering (number) - The number of our
common shares that will be beneficially owned following this offering,
assuming all of the shares in the column entitled "Shares Offered" are sold
by the selling shareholder.
(6) Shares owned after this offering (percent) - The percentage, if
1% or more, of our total outstanding common shares that will be beneficially
owned following this offering, assuming all of the shares in the column
entitled "Shares Offered" are sold by the selling shareholder.
38
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
THIS OFFERING (1) THIS OFFERING (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
ATECHSYS ACQUISITION:
ZRH Nominees (0042) Ltd. 231,784 -- 92,714 139,070 --
Zollikerstrasse 181
8034 Zurich
Switzerland
ZRH Nominees (0042) Ltd. 119,403 -- 47,762 71,641 --
Zollikerstrasse 181
8034 Zurich
Switzerland
ZRH Nominees (0043) Ltd. 231,783 -- 92,714 139,069 --
Zollikerstrasse 181
8034 Zurich
Switzerland
ZRH Nominees (0043) Ltd. 119,403 -- 47,762 71,641 --
Zollikerstrasse 181
8034 Zurich
Switzerland
Jacques Bouyssarie 5,495 -- 2,198 3,297 --
46 bis, rue Paul Vaillant Couturier
92140 Clamart, France
Gilles Leprince 5,495 -- 2,198 3,297 --
3, avenue Muret
78470 Saint Remi las Chevreuses, France
Remi Munier 5,495 -- 2,198 3,297 --
11, avenue Junot
75018 Paris, France
------- ------- ------- ------ -------
Total 718,858 1.9% 287,546 431,312 1.1%
ECWERKS ACQUISITION:
Lawrence W. and Janice J. Adams 213 -- 213 -- --
47-110 Lulani Place
Kanoehe, HI 96744
Maureen Babcock 64 -- 64 -- --
8 Beth Drive
Covington, LA 70433
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Scott Barry 213 -- 213 -- --
9241 Brindlewood Drive
Odessa, FL 33556
Daniel J. Boon 2,134 -- 2,134 -- --
7206 Forestedge Court
New Port Richey, FL 34655
Benjamin J. Buckley Irrevocable Trust 1,067 -- 1,067 -- --
199 Harvest Lane
Versailles, IN 47042
Eileen M. Buckley 586 -- 586 -- --
35 Oaklawn Drive
Covington, LA 70433
John J. Buckley 53 -- 53 -- --
72129 Highway 1077
Covington, LA 70433
Kyle M. Buckley Irrevocable Trust 1,067 -- 1,067 -- --
199 Harvest Lane
Versailles, IN 47042
Lawrence C. Buckley, III, Irrevocable Trust 1,067 -- 1,067 -- --
199 Harvest Lane
Versailles, IN 47042
Lawrence C. Buckley, Jr. 24,898 -- 24,898 -- --
11706 Rolling Oaks Drive
Tampa, FL 33624
Lawrence C. Buckley, Sr. 586 -- 586 -- --
35 Oaklawn Drive
Covington, LA 70433
Paul Buckley 53 -- 53 -- --
1148-12th Avenue, NE
St. Petersburg, FL 33704
Ryan P. Buckley Irrevocable Trust 1,067 -- 1,067 -- --
199 Harvest Lane
Versailles, IN 47042
Thomas C. Buckley 53 -- 53 -- --
3299 Greencastle Chase N.E.
Marietta, GA 30062
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Dorothy A. Collier 64 -- 64 -- --
199 Harvest Lane
Versailles, IN 47042
Darrell Damron 106 -- 106 -- --
840 May Street
Raymond, WA 98577
Kimberly Damron 106 -- 106 -- --
840 May Street
Raymond, WA 98577
Julianne Daniels 53 -- 53 -- --
736 W. Oakdale Avenue
Deland, FL 32720
Bruce Eden 32,017 -- 32,017 -- --
3797 Presidential Court
Palm Harbor, FL 34685
James P. Fama 2,668 -- 2,668 -- --
1938 Rockingham Street
McLean, VA 22101
Julia M. Flowers 1,173 -- 1,173 -- --
2030 Riverview Drive
Deland, FL 32720
Mikell Flowers 53 -- 53 -- --
3847 Bell Road
Tallahassee, FL 32303
William B. Flowers 53 -- 53 -- --
1171 Heidi Court
Deland, FL 32720
Kevin A. Franklin 106 -- 106 -- --
4022 Corona Street
Tampa, FL 33629
Douglas A. Gray 853 -- 853 -- --
3616 San Juan Street
Tampa, FL 33629
Elizabeth Grindey 53 -- 53 -- --
806 Seminole Blvd.
Tarpon Springs, FL 34689
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Pamela A. Hagan 106 -- 106 -- --
11403 Suncreek Place
Tampa, FL 33617
Andrea E. Hickson Irrevocable Trust 1,067 -- 1,067 -- --
47-110 Lulani Place
Kanoehe, HI 96744
Armand R. Hickson 106 -- 106 -- --
2215 West Skagway Ave.
Tampa, FL 33604
Betty J. Hickson 106 -- 106 -- --
2215 West Skagway Ave.
Tampa, FL 33604
David W. Hickson 24,759 -- 24,759 -- --
4404 Endicott Place
Tampa, FL 33624
Jacob W. Hickson Irrevocable Trust 1,067 -- 1,067 -- --
47-110 Lulani Place
Kanoehe, HI 96744
Larry D. Iwanowski 106 -- 106 -- --
4836 Cypress Tree Drive
Tampa, FL 33624
Gary K. Landry 32,017 -- 32,017 -- --
13676 Eagle Walk Drive
Clearwater, FL 33762
Edward G. Lipktak 106 -- 106 -- --
7858 Chaucer Dr.
Springhill, FL 34607
Margie T. Lipktak 106 -- 106 -- --
7858 Chaucer Dr.
Springhill, FL 34607
Charles F. Muller, III 213 -- 213 -- --
18935 St. Laurent Drive
Lutz, FL 33549
Michael I. Nelson 320 -- 320 -- --
715 Seagate Drive
Tampa, FL 33602
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Heather D. Pollard 2,134 -- 2,134 -- --
103 Bay Pointe Dr., NE
St. Petersburg, FL 33704
James T. Pollard 27,748 -- 27,748 -- --
3238 S. Newcombe Street
Lakewood, CA 80227
Michael J. Pollard 2,134 -- 2,134 -- --
8000 W. Crestline Ave., # 516
Littleton, CO 80123
Mark A. Staublin 533 -- 533 -- --
8000 N. Crestline Ave., # 516
Littleton, CO 80123
Total 163,054 -- 163,054 -- --
FUSION ACQUISITION:
Michael J. Alfant 1,731,215 4.5% 675,174 1,056,041 2.7%
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Mami Alfant 110,504 -- 43,097 67,407 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Boris Umylny 215,202 -- 83,929 131,273 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Raymond F. Ribble 215,202 -- 83,929 131,273 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Ian L. Chun 215,202 -- 83,929 131,273 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Rajiv Trehan 215,202 -- 83,929 131,273 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Pierre Gaboury 215,202 -- 83,929 131,273 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Huw Rogers 71,734 -- 27,976 43,758 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Gary Hyman 71,734 -- 27,976 43,758 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Gregory Tucker 71,734 -- 27,976 43,758 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Kevin G. English 71,734 -- 27,976 43,758 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Andrew Howells 71,734 -- 27,976 43,758 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
FUSION ACQUISITION (CONTINUED):
Ian Gardner 71,734 -- 27,976 43,758 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Tony Fujii 71,734 -- 27,976 43,758 --
c/o Fusion Systems Japan Co., Ltd.
Daiwa Naka-Meguro Bldg. 5-8F
4-6-1 Naka-Meguro, Meguro-ku
Tokyo, Japan 153-0061
Stephen F. Siegel 172,201 - 67,158 105,043 --
c/o FSJ, Inc.
185 Devonshire Street
Boston, MA 02110
Kevin G. Weber 71,734 -- 27,976 43,758 --
c/o FSJ, Inc.
185 Devonshire Street
Boston, MA 02110
Marvin A. Wolfthal 71,734 -- 27,976 43,758 --
c/o FSJ, Inc.
185 Devonshire Street
Boston, MA 02110
Total 3,735,536 9.7% 1,456,858 2,278,678 5.9%
ORION ACQUISITION:
George M. Arsenault 379,624 -- 75,925 303,699 --
2689 East Overlook
Cleveland, OH 44106
Vincent C. Campanella (2) 1,189,011 3.1% 237,805 951,206 2.5%
900 Andrews Lane
Gates Mills, OH 44040
Leonard S. Brauner 71,916 -- 14,384 57,532 --
Apartment J
11615 Tomahawk Creek Parkway
Leawood, KS 66211
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
----------------- -----------------
Shares
Selling Shareholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
ORION ACQUISITION (CONTINUED):
Roland E. Breunig 57,417 -- 11,484 45,933 --
8976 Cinnabar Drive
Brecksville, OH 44141
Edwin T. Crego, Jr. 25,315 -- 5,063 20,252 --
3450 Lakeshore #5B
Chicago, IL 60613
James C. Dowdell 71,916 -- 14,384 57,532 --
310 Westbury
Coraopolis, PA 15108
J. Scott Earich 28,766 -- 5,754 23,012 --
2267 Meadowood Blvd.
Twinsburg, OH 44087
Linda B. Fisher 5,754 -- 1,151 4,603 --
7200 Northmoor
St. Louis, MO 63105
Joseph J. Frankhauser 7,192 -- 1,439 5,753 --
7285 Ledgewood Drive
Kirtland, OH 44094
Tim W. Herberts 5,754 -- 1,151 4,603 --
507 Ridgemont Road
Collinsville, IL 62234
James W. Kinney 5,754 -- 1,151 4,603 --
16555 N. White Oaks Drive
Strongsville, OH 44136
Edward D. Knell, Jr. 258,894 -- 51,779 207,115 --
5902 Briarmist
St. Louis, MO 63128
Joseph C. Krysh 141,817 -- 28,364 113,453 --
28547 E. Brockway Drive
Westlake, OH 44145
Arthur F. Leyland, Jr. 4,315 -- 863 3,452 --
30 E. Huron #3709
Chicago, IL 60611
Stephen C. MacCormack 35,958 -- 7,192 28,766 --
13 Bradt Road
Rexford, NY 12148
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
Shares
Selling Shareholders Number Percent Offered Number Percent
------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
ORION ACQUISITION (CONTINUED):
Michael J. Mahoney 7,192 -- 1,439 5,753 --
336 Bassett Road
Bay Village, OH 44140
Lance Malkind 7,192 -- 1,439 5,753 --
536 East Kelly Lane
Tempe, AZ 85284
George N. Mansour 57,532 -- 11,507 46,025 --
3131Warren Lane
El Dorado Hills, CA 95762
Randal E. March, M.D. 7,192 -- 1,439 5,753 --
6935 Waterpepper Circle
Solon, OH 44139
Alan J. Mihok 8,630 -- 1,726 6,904 --
9975 Weathersfield Drive
Concord, OH 44060
Timothy M. Mosco 7,192 -- 1,439 5,753 --
125 Brooksmill Road
Grantville, PA 17028
Robert E. Paponetti 4,315 -- 863 3,452 --
2902 Margaretta Drive
Westlake, OH 44145
George E. Pilla 58,971 -- 11,795 47,176 --
16131 Cleviden Road
E. Cleveland, OH 44112
William R. Plato 86,298 -- 17,260 69,038 --
5643 Spring Grove Drive
Solon, OH 44139
Louis M. Primozic 144,406 -- 28,882 115,524 --
6576 Thorntree
Brecksville, OH 44141
Teresa A. Rasch 5,754 -- 1,151 4,603 --
12 Todd Road
Carlisle, PA 17013
Gregory T. Robinson 5,754 -- 1,151 4,603 --
1033 Orchard Lane
Broadview Hts., OH 44147
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned After
this Offering (1) this Offering (1)
Shares
Selling Shareholders Number Percent Offered Number Percent
<S> <C> <C> <C> <C> <C>
ORION ACQUISITION (CONTINUED):
Dean R. Rossiter 7,192 -- 1,439 5,753 --
21593 Cedar Branch
Strongsville, OH 44136
Richard B. Schmitz 100,682 -- 20,137 80,545 --
2469 Nadine Circle
Hinckley, OH 44238
William A. Silverman 14,384 -- 2,877 11,507 --
9515 Greystone Parkway
Brecksville, OH 44141
Stephen H. Smith 35,958 -- 7,192 28,766 --
9320 Mohawk Lane
Leawood, KS 66206
Philip Sneary 7,192 -- 1,439 5,753 --
237 Daniels Avenue
Conneaut, OH 44030
Craig J. Soltis 12,370 -- 2,474 9,896 --
7357 Meadow Creek Drive
Sagamore Hills, OH 44067
---------------------------------------------------------------------------
Gregory S. St. Clair, Sr. 100,682 -- 20,137 80,545 --
1645 Whitley Drive
Harrisburg, PA 17111
Michael L. Sturges 47,177 -- 9,436 37,741 --
180 Brandon Place
Rocky River, OH 44116
Douglas J. Whinnie 5,754 -- 1,151 4,603 --
6760 Rockport Lane
Mentor, OH 44040
George B. Woznak 7,192 -- 1,439 5,753 --
8661 Dunbar Lane
Brecksville, OH 44141
--------- ------------- ---------
Total 3,028,414 7.9% 605,701 2,422,713 6.3%
--------- ------------- ---------
Total all selling shareholders 7,645,862 19.9% 2,513,159 5,132,703 13.3%
--------- ------------ ---------
--------- ------------ ---------
</TABLE>
(1) Beneficial ownership is sole voting and investment power with respect
to the shares beneficially owned.
(2) Includes 630,195 shares held in four irrevocable trusts for which Mr.
Campanella disclaims beneficial ownership.
48
<PAGE>
PLAN OF DISTRIBUTION
Shares covered by this prospectus will be sold by the selling
shareholders as principals for their own account. We will not receive any
proceeds from sales of any shares by selling shareholders.
We are registering the common stock covered by this prospectus for
the selling shareholders. As used in this prospectus, the words "selling
shareholders" include the pledgees, donees, transferees or others who may
later hold the selling shareholders' interests. We will pay the costs and
fees of registering the shares of common stock, but the selling shareholders
will pay any brokerage commissions, discounts or other expenses relating to
the sale of their shares of common stock.
The selling shareholders may sell their shares of common stock in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to the prevailing market prices, or at negotiated
prices. In addition, the selling shareholders may sell some or all of their
shares through:
- a block trade in which a broker-dealer may resell a portion of
the block, as principal, in order to facilitate the
transaction
- purchase by a broker-dealer, as principal, and resale by the
broker-dealer for its account or
- ordinary brokerage transactions and transactions in which a
broker solicits purchasers
When selling the common shares, the selling shareholders may enter into
hedging transactions. For example, the selling shareholders may:
- enter into transactions involving short sales of the shares by
broker-dealers
- sell shares of the common stock short themselves and redeliver
such shares to close out their short positions
- enter into an option or other type of transactions that
requires the selling shareholder to deliver their shares of
common stock to a broker-dealer, who will then resell or
transfer them under this prospectus or
- loan or pledge the shares to a broker-dealer, who may sell the
loaned shares or, in the event of default, sell the pledged
shares
The selling shareholders may negotiate and pay broker-dealers
commissions, discounts or concessions for their services. Broker-dealers engaged
by the selling shareholders may allow other broker-dealers to participate in
resales. However, the selling shareholders and any broker-dealers involved in
the sale or resale of the shares of common stock may qualify as "underwriters"
within the meaning of the Section 2(a)(11) of the Securities Act of 1933 (the
"1933 Act"). In addition, the broker-dealers' commissions, discounts or
concession may qualify as underwriters' compensation under the 1933 Act. If the
selling shareholders qualify as "underwriters," they will be subject to the
prospectus delivery requirements of Section 5(b)(2) of the 1933 Act.
In addition to selling their shares of common stock under this
prospectus, the selling shareholders may:
- agree to indemnify any broker-dealer or agent against certain
liabilities related to the selling of their shares, including
liabilities arising under the 1933 Act
49
<PAGE>
- transfer their common shares in other ways not involving
market makers or established trading markets, including
directly by gift, distribution, or other transfer or
- sell their shares of our common stock under Rule 144 of the
1933 Act rather than under this prospectus, if the transaction
meets the requirements of Rule 144
LEGAL MATTERS
For purposes of this offering, our Co-General Counsel is giving his
opinion on the validity of the common shares.
EXPERTS
The consolidated financial statements of IMRglobal Corp. at December
31, 1998 and 1997, and for each of the three years in the period ended December
31, 1998, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young, LLP, independent auditors, as set forth in their
report thereon appearing and incorporated by reference elsewhere herein which,
as to the years 1997 and 1996, are based in part on the reports of
PricewaterhouseCoopers LLP and as to the years 1998, 1997 and 1996 are based in
part on the reports of Arthur Andersen LLP, independent auditors. The financial
statements referred to above are included in reliance upon such reports given on
the authority of such firms as experts in accounting and auditing.
50
<PAGE>
[GRAPHIC OMITTED]
2,513,159 Shares
of
Common Stock
Prospectus
September __, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses relating to the registration of Shares will be borne by
IMRglobal. Such expenses are estimated to be as follows:
<TABLE>
<S> <C>
Registration Fee - Securities and Exchange Commission................ $ 7,816.59
Accounting Fees and Expenses......................................... 50,000.00
Legal Fees and Expenses.............................................. 50,000.00
Printing Fees........................................................ 5,000.00
Miscellaneous........................................................ 5,000.00
-----------
Total $117,816.59
-----------
-----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act ("FBCA") provides that, in
general, a business Company may indemnify any person who is or was a party to
any proceeding (other than action by, or in the right of, the Company) by reason
of the fact that he or she is or was a director or officer of the Company,
against liability incurred in connection with such proceeding, including any
appeal thereof, provided certain standards are met, including that such officer
or director acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the Company, and provided
further that, with respect to any criminal action or proceeding, the officer or
director had no reasonable cause to believe his or her conduct was unlawful. In
the case of proceedings by or in the right of the Company, the FBCA provides
that, in general, a Company may indemnify any person who was or is a party to
any such proceeding by reason of the fact that he or she is or was a director or
officer of the Company against expenses and amounts paid in settlement actually
and reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof, provided that such person acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interest of the Company, except that no indemnification
shall be made in respect of any claim as to which such person is adjudged liable
unless a court of competent jurisdiction determines upon application that such
person is fairly and reasonably entitled to indemnity. To the extent that any
officers or directors are successful on the merits or otherwise in the defense
of any of the proceedings described above, the FBCA provides that the Company is
required to indemnify such officers or directors against expenses actually and
reasonably incurred in connection therewith. However, the FBCA further provides
that, in general, indemnification or advancement of expenses shall not be made
to or on behalf of any officer or director if a judgment or other final
adjudication establishes that his or her actions, or omissions to act, were
material to the cause of action so adjudicated and constitute: (i) a violation
of the criminal law, unless the director or officer had reasonable cause to
believe his or her conduct was lawful or had no reasonable cause to believe it
was unlawful; (ii) a transaction from which the director or officer derived an
improper personal benefit; (iii) in the case of a director, circumstances under
which the director has voted for or assented to a distribution made in violation
of the FBCA or the Company's Articles of Incorporation; or (iv) willful
misconduct or a conscious disregard for the best interests of the Company in a
proceeding by or in the right of the Company to procure a judgment in its favor
or in a proceeding by or in the right of a shareholder. Article IX of the
Company's Amended and Restated Bylaws provides that the Company shall indemnify
any director or officer or any former director or officer to the fullest extent
permitted by law.
II-1
<PAGE>
ITEM 16. LIST OF EXHIBITS
The exhibits to this registration statement are listed in the Index to
Exhibits on page II-6.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the 1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by IMRglobal pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the 1933 Act,
each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
II-2
<PAGE>
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 9th day of
September, 1999.
IMRGLOBAL CORP.
By: /s/ Satish K. Sanan
-------------------------------------
Satish K. Sanan
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Satish K. Sanan and Dilip Patel, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Report on Form S-3,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Satish K. Sanan
- ----------------------------------- Chief Executive Officer September 9, 1999
Satish K. Sanan (Principal Executive Officer)
and Director
/s/ John R. Hindman
- ----------------------------------- President September 9, 1999
John R. Hindman (Principal Operating Officer)
/s/ Robert M. Molsick
- ----------------------------------- Chief Financial Officer
Robert M. Molsick (Principal Financial and Accounting September 9, 1999
Officer)
/s/ Vincent Addonisio
- ----------------------------------- Senior Vice President and
Vincent Addonisio Director September 9, 1999
/s/ Philip Shipperlee
- ----------------------------------- Senior Vice President-Global Sales
Philip Shipperlee and Director September 9, 1999
/s/ Charles C. Luthin
- ----------------------------------- Director September 9, 1999
Charles C. Luthin
/s/ Jeffrey S. Slowgrowe
- ----------------------------------- Director September 9, 1999
Jeffrey S. Slowgrowe
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3(i)(a) Amendments to the Amended and Restated Articles of
Incorporation
3(i)(b) Amended and Restated Articles of Incorporation*
3(ii) Amended and Restated Bylaws*
5 Opinion of Counsel re: legality
23.1 Consent of Ernst & Young LLP as Independent Certified Public
Accountants
23.2 Consent of PricewaterhouseCoopers LLP as Independent
Certified Public Accountants
23.3 Consent of Arthur Andersen LLP as Independent Public
Accountants
23.4 Consent of Legal Counsel (contained in Exhibit 5)
</TABLE>
- -----------------------------------
*Incorporated by reference to Exhibit of the same number filed with the
company's Registration Statement on Form S-1 (Registration No. 333-12037).
II-5
<PAGE>
Exhibit 3(i)(a)
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
INFORMATION MANAGEMENT RESOURCES, INC.
Pursuant to the provisions of Section 607.1006, Florida Statutes,
INFORMATION MANAGEMENT RESOURCES, INC. a corporation organized and existing
under the laws of the State of Florida (the "Corporation"), does hereby adopt
the following Articles of Amendment to its Articles of Incorporation:
First: Article I of the Articles of Incorporation is hereby amended to
read as follows:
"ARTICLE I
NAME
THE NAME OF THE CORPORATION IS IMRGLOBAL CORP."
Second: The amendment was duly adopted by the Board of Directors on
November 2,1998 EFFECTIVE November 17, 1998.
Third: The amendment was approved and duly adopted by the Board of
Directors without shareholder action and shareholder action was
not required.
Signed this 16th day of November 1998.
By: /s/ Jeffery S. Slowgrove
----------------------------------
Jeffery S. Slowgrove, Director
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
INFORMATION MANAGEMENT RESOURCES, INC.
Pursuant to the provisions of Section 607.1006, Florida Statutes,
INFORMATION MANAGEMENT RESOURCES, INC. a corporation organized and existing
under the laws of the State of Florida (the "Corporation"), does hereby adopt
the following Articles of Amendment to its Articles of Incorporation:
First: Paragraph 4.1 of Article IV of the Articles of Incorporation is
hereby amended to read as follows:
4.1 AUTHORIZED SHARES. THE TOTAL NUMBER OF SHARES OF ALL CLASSES
OF CAPITAL STOCK THAT THE CORPORATION SHALL HAVE THE AUTHORITY TO
ISSUE SHALL BE 110,000,000 SHARES, OF WHICH 100,000,000 SHARES
SHALL BE COMMON STOCK, HAVING A PAR VALUE OF $.10 PER SHARE (THE
"COMMON STOCK") AND 10,000,000 SHARES SHALL BE PREFERRED STOCK,
HAVING A PAR VALUE OF $.10 PER SHARE (THE "PREFERRED STOCK").
Second: The amendment was duly adopted by the Board of Directors on
April 20, 1998.
Third: The amendment was approved and duly adopted by the Shareholders
in accordance with the provisions of Section 607.1003, Florida
Statutes. The number of votes cast for the amendment was
sufficient for approval.
Signed this 26th day of August, 1998.
By: /s/ Dilip Patel
-------------------------------
DILIP PATEL, Vice President-General Counsel
An Officer of the Corporation and its Secretary.
<PAGE>
Exhibit 5
[LETTERHEAD]
September 9, 1999
IMRglobal Corp.
100 South Missouri Avenue
Clearwater, Florida 33756
Re: Validity of Common Stock
------------------------
Ladies and Gentlemen:
I am rendering this opinion in connection with the registration, pursuant
to a registration statement of Form S-3 (the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), of 2,513,159
shares of common stock, par value $0.10 per share, (the "Common Stock") of
IMRglobal Corp., a Florida corporation (the "Company").
In connection with the preparation of this opinion, I have examined the
minute books and stock records as maintained by the Company, the Amended and
Restated Articles of Incorporation and the Amended and Restated By-Laws of
the Company, the Registration Statement, copies of the resolutions duly
adopted by the Board of Directors of the Company relating to the
authorization and issuance of the Common Stock, and certain documents
relating to the issuance of the Common Stock. In addition, I have reviewed
such other documents and have conferred with various officers and directors
of the Company and have ascertained or verified to my satisfaction such
additional facts with respect to the Company as I have deemed necessary or
appropriate for the purposes of this opinion.
I have assumed for purposes of this opinion that all applicable laws,
rules and regulations in effect at the time of the issuance of the Common
Stock will be the same as such laws, rules and regulations in effect as of
the date hereof.
Based on the foregoing, I am of the opinion that, subject to the
effectiveness of the Registration Statement and compliance with applicable
state securities laws, the Common Stock constitutes duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock of the Company.
I hereby consent to all references to me in the Registration Statement
and to the filing of this opinion by the Company as an exhibit to the
Registration Statement. This consent is not to be construed as an admission
that I am a person whose consent is required to be filed with the
Registration Statement under the Securities Act.
<PAGE>
IMRglobal Corp.
September 9, 1999
Page 2 of 2
I am licensed to practice law only in the State of Florida and do not
hold myself out to be an expert on the laws of any jurisdictions other than
the State of Florida, and the Federal Law of the United States of America.
Accordingly, the opinions expressed herein are specifically limited to the
laws of the State of Florida and the Federal Law of the United States of
America.
The opinions expressed herein are as of the date hereof, and I assume no
obligation to update or supplement such opinions to reflect any facts or
circumstances that may hereafter come to my attention or any changes that may
hereafter occur.
This opinion letter has been issued solely for the benefit of the Company
and no other party or entity shall be entitled to rely hereon without my
express written consent. Without my prior written consent, the opinion letter
may not be quoted in whole or in part or otherwise referred to in any
document or report and may not be furnished to any person or entity.
Very truly yours,
/s/ Dilip Patel
-----------------
Dilip Patel
Vice President & Co-General Counsel
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of IMRglobal Corp.
for the registration of 2,513,159 shares of its common stock and to the
incorporation by reference therein of our report dated August 20, 1999, with
respect to the consolidated financial statements of IMRglobal Corp. included
in the Current Report (Form 8-K No. 000-28840) filed with the Securities and
Exchange Commission.
Tampa, Florida
September 8, 1999
/s/ Ernst & Young LLP
------------------------
ERNST & YOUNG LLP
<PAGE>
Exhibit Number 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 13, 1998, relating to the
consolidated financial statements of IMRglobal Corp. as of December 31, 1997
and for the years ended December 31, 1997 and 1996, which appears in the
Current Report (Form 8K) (File No. 000-28840) of IMRglobal Corp. We also
consent to the reference to us under the heading "Experts" in such
Registration Statement.
Tampa, Florida
September 8, 1999
/s/ PricewaterhouseCoopers LLP
----------------------------
PRICEWATERHOUSECOOPERS LLP
<PAGE>
Exhibit Number 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement on Form S-3 of our
report dated January 22, 1999, (relating to the financial statements of Orion
Consulting, Inc., as of December 31, 1998 and 1997 and for the three years
ended December 31, 1998, included in the Current Report on Form (8-K)
(No. 000-28840) of IMRglobal Corp.'s and to all references to our Firm included
in this registration statement.
Cleveland, Ohio
September 8, 1999
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
