<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 000-22097
---------
SPR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3932665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2015 Spring Road, Suite 750
Oak Brook, Illinois 60523
(Address, including zip code, of principal executive offices)
(630) 575-6200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
As of November 9, 1998 the registrant had 13,723,682 outstanding shares of
common stock, par value $.0067 per share.
===============================================================================
<PAGE> 2
SPR INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,1998
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets - December 31, 1997
and September 30, 1998
Unaudited Condensed Statements of Operations - Three
Months and Nine Months Ended September 30, 1997 and 1998
Unaudited Condensed Statements of Stockholders' Equity - For The Year
Ended December 31, 1997 and Nine Months Ended September 30, 1998
Unaudited Condensed Statements of Cash Flows - Nine Months
Ended September 30, 1997 and 1998
Notes to Unaudited Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 3
SPR INC.
UNAUDITED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,133 $ 5,382
Accounts receivable, net 7,833 12,160
Short-term investments 19,043 43,440
Prepaid expenses and other 476 969
------------ --------------
Total current assets 29,485 61,951
------------ --------------
Property and equipment, net 2,274 4,077
Deferred income taxes and other 184 2,133
------------ --------------
Total assets $ 31,943 $ 68,161
============ ==============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other $ 2,917 $ 1,717
Accrued expenses:
Payroll and payroll relates costs 2,777 4,606
Other 364 551
Deferred income - 2,975
Deferred income taxes 356 105
------------ --------------
Total current liabilities 6,414 9,954
------------ --------------
Stockholders' equity
Common stock 81 91
Additional paid in capital 24,544 49,737
Retained earnings 904 8,379
------------ --------------
Total stockholders' equity 25,529 58,207
------------ --------------
Total liabilities and stockholders' equity $ 31,943 $ 68,161
============ ==============
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 4
SPR INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months Nine months
Ended September 30, Ended September 30,
----------------------- -----------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 14,180 $ 22,376 $ 36,903 $ 62,815
Cost of services 8,329 13,018 22,319 36,942
--------- --------- --------- ---------
Gross profit 5,851 9,358 14,584 25,873
--------- --------- --------- ---------
Costs and expenses
Selling 1,232 1,389 3,325 3,843
Recruiting 478 456 1,176 1,392
General and administrative expenses 2,053 3,332 6,156 9,672
--------- --------- --------- ---------
Total costs and expenses 3,763 5,177 10,657 14,907
--------- --------- --------- ---------
Operating income 2,088 4,181 3,927 10,966
--------- --------- --------- ---------
Other income (expense)
Interest expense (60) (1) (170) (4)
Interest income 8 725 17 1,500
--------- --------- --------- ---------
Total other income (expense) (52) 724 (153) 1,496
--------- --------- --------- ---------
Income before income taxes 2,036 4,905 3,774 12,462
Provision for income taxes 39 1,962 40 4,985
--------- --------- --------- ---------
Net income $ 1,997 $ 2,943 $ 3,734 $ 7,477
========= ========= ========= =========
Historical basic net income per share $ 0.21 $ 0.21 $ 0.38 $ 0.58
========= ========= ========= =========
Historical diluted net income per share $ 0.20 $ 0.21 $ 0.37 $ 0.56
========= ========= ========= =========
Proforma income data:
Net income as reported $ 1,997 $ 3,734
Proforma adjustment to recognize
"C" corporation provision for income taxes 775 1,470
--------- ---------
Proforma net income $ 1,222 $ 2,264
========= =========
Proforma basic net income per share $ 0.13 $ 0.23
========= =========
Proforma diluted net income per share $ 0.12 $ 0.23
========= =========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 5
SPR Inc.
Unaudited Condensed Statements of Stockholders' Equity
For the Year Ended December 31, 1997 and
the Nine Months Ended September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Total
--------------------- Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 9,701 $ 65 $ 46,735 $(44,292) $ 2,508
Employee stock purchase plan 36 - 324 - 324
Capitalization of S-Corp earnings - - (45,444) 45,444 -
Net Income - - - 4,638 4,638
Distributions - - - (4,886) (4,886)
Employee stock option plan - - 459 - 459
Initial public offering 2,400 16 22,470 - 22,486
------ ----- -------- -------- -------
Balance at December 31, 1997 12,137 $ 81 $ 24,544 $ 904 $25,529
------ ----- -------- -------- -------
Net Income - - - 7,477 7,477
Employee stock purchase plan 47 - 441 - 441
Secondary offering 1,350 9 23,092 - 23,101
Employee stock option plan 158 1 1,680 - 1,681
Treasury stock retired (2) - (21) (2) (23)
Other 31 - 1 - 1
------ ----- -------- -------- -------
Balance at September 30, 1998 13,721 $ 91 $ 49,737 $ 8,379 $58,207
====== ===== ======== ======== =======
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 6
SPR Inc.
Unaudited Condensed Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Nine months
Ended September 30,
-----------------------
1997 1998
<S> <C> <C>
Cash flows from operating activities:
Net income for the period $ 3,734 $ 7,477
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 299 970
Deferred taxes - (2,200)
Expense related to grant of stock options 421 113
Impairment loss on equipment - 240
Increase in accounts receivable, net (2,671) (4,327)
Increase in prepaid expenses and other (784) (493)
Increase/(decrease) in accounts payable and other 814 (1,182)
Increase in accrued expenses and deferred income 1,291 4,991
--------- ---------
Net cash provided by operating activities 3,104 5,589
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (910) (3,013)
Purchases of short-term investments - (66,082)
Sales/Maturity of short-term investments - 41,685
--------- ---------
Net cash used in investing activities (910) (27,410)
--------- ---------
Cash flows from financing activities:
Payments on note payable - related party (721) -
Distributions (2,136) -
Proceeds from employee stock purchase and
option plans 1,247
Proceeds from the issuance of common stock,
net of issuance costs 23,101
Tax benefit from employee stock option plan 762
Net borrowings on line of credit and term loan 1,211 -
Other cash flows from financing activities - (40)
--------- ---------
Net cash used in financing activities (1,646) 25,070
--------- ---------
Net increase in cash and cash equivalents 548 3,249
Cash and cash equivalents, beginning of period 356 2,133
--------- ---------
Cash and cash equivalents, end of period $ 904 $ 5,382
========= =========
Supplemental disclosure of cash payments made for:
Interest $ 170 $ 3
Income taxes 40 7,763
========= =========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 7
SPR INC.
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
Note 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim condensed financial statements of
SPR Inc. (the "Company") have been prepared by the Company in accordance with
generally accepted accounting principles for interim financial information and
in conjunction with the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
annual financial statements have been condensed or omitted pursuant to those
rules and regulations. However, the Company believes that the disclosures
contained herein are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the Company's
audited financial statements and notes thereto for the year ended December 31,
1997 in the Company's annual report on Form 10-K.
The financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to present fairly the Company's financial position and results of operations.
Certain items previously reported have been reclassified to conform with the
1998 presentation. The results of operations for the three months and nine
months ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the full year.
Note 2. DEFERRED INCOME
The determination of deferred income is based on management's estimate
of the services to be performed related to completing the Company's Century Date
Compliance projects and Software Quality Services, and is adjusted as additional
or new information becomes available.
Note 3. CHANGE IN ESTIMATE
During the first quarter of 1998, the Company changed its estimate of
depreciable lives for computer equipment and software from five years to three
years as a result of continued improvements in technology. This change in
estimate reduced third quarter net income by $73,672, or approximately $0.01 per
diluted common share, and net income for the first nine months by $208,468, or
$0.02 per diluted common share.
Note 4. CAPITAL STOCK AND EARNINGS PER SHARE
The company's basic and diluted per share amounts for the three months
and nine months ended September 30, 1997 and 1998 are as follows:
<PAGE> 8
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
SEPTEMBER 30,1997 SEPTEMBER 30,1998
---------------------------------- -----------------------------------
INCOME PER SHARE INCOME PER SHARE
(IN THOUSANDS) SHARES AMOUNT (IN THOUSANDS) SHARES AMOUNT
------------ ------ --------- ------------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL
Historical Basic EPS: $ 1,997 9,701,100 $ 0.21 $ 2,943 13,692,946 $ 0.21
Income available to
Common Stockholders
Effect of Dilutive Securities:
Employee Compensation Plans - 358,511 (0.01) - 514,994 -
========== ========== ========== ========== ========== ==========
Historical Dilutive EPS:
Income available to
Common Stockholders
plus assumed exercises $ 1,997 10,059,611 $ 0.20 $ 2,943 14,207,940 $ 0.21
========== ========== ========== ========== ========== ==========
NINE MONTHS ENDED
---------------------------------------------------------------------------
SEPTEMBER 30,1997 SEPTEMBER 30,1998
---------------------------------- -----------------------------------
INCOME PER SHARE INCOME PER SHARE
(IN THOUSANDS) SHARES AMOUNT (IN THOUSANDS) SHARES AMOUNT
------------ ------ --------- ------------ ------ ---------
HISTORICAL
Historical Basic EPS: $ 3,734 9,701,100 $ 0.38 $ 7,477 12,938,937 $ 0.58
---------- ---------- ---------- ---------- ---------- ----------
Income available to
Common Stockholders
Effect of Dilutive Securities:
Employee Compensation Plans - 358,511 (0.01) - 520,054 (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Historical Dilutive EPS:
Income available to
Common Stockholders
plus assumed exercises $ 3,734 10,059,611 $ 0.37 $ 7,477 13,458,991 $ 0.56
========== ========== ========== ========== ========== ==========
</TABLE>
On May 5, 1998 the Company completed a follow-on offering of 3,315,000
shares of the Company's Common Stock. Of the amount of shares offered, 1,350,000
shares were sold by the Company and 1,965,000 shares were sold by certain
shareholders of the Company. The Company received net proceeds (net of the
underwriters' discounts and estimated offering expenses) of $23.1 million from
the follow-on offering.
On August 3, 1998 the Company declared a three-for-two share
common stock split. Shareholders received one additional share for every two
shares held on the record date of August 14, 1998. Distributions of the
additional shares began on August 28, 1998. Cash was paid in lieu of fractional
shares. All shares and per share amounts reported in this filing have been
restated to reflect the three-for-two share common stock split.
NOTE 5 -- LEASE AGREEMENTS
The company leases its office facilities under operating lease agreements which
expire at various times through 2004. In addition, the Company leases certain
equipment under operating lease agreements.
In addition to the minimum future rental payments, the Company is obligated to
pay certain operating expenses relating to its leased properties and equipment.
Total expense under operating leases was approximately $472,153 and $776,380
for the nine months ended September 30, 1997 and 1998, respectively.
<PAGE> 9
The following is a schedule of minimum future rental payments required under the
operating leases:
<TABLE>
<CAPTION>
Year Ending December 31,
<S> <C>
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,085,494
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,183,241
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,132,839
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054,077
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811,905
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,884
----------
Total minimum payments required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,760,440
==========
</TABLE>
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations as a percentage of revenues:
<TABLE>
<CAPTION>
Three months Nine months
Ended September 30, Ended September 30,
--------------------- ------------------------
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Cost of services 59 58 60 59
--------- --------- ----------- -----------
Gross profit 41 42 40 41
--------- --------- ----------- -----------
Costs and expenses
Selling 9 6 9 6
Recruiting 3 2 3 2
General and administrative expenses 14 15 17 15
--------- --------- ----------- -----------
Total costs and expenses 26 23 29 23
--------- --------- ----------- -----------
Operating income 15 19 11 18
Other income (0) 3 (1) 2
--------- --------- ----------- -----------
Income before income taxes 15 22 10 20
Provision for income taxes 6 9 4 8
========= ========= =========== ===========
Net income 9% 13% 6% 12%
========= ========= =========== ===========
</TABLE>
REVENUES. Revenues increased 58% to $22.4 million and 70% to $62.8
million in the third quarter and first nine months of 1998, respectively, from
$14.2 million and $36.9 million for the comparable 1997 periods. The increases
in the 1998 periods, versus 1997, were primarily the result of a significant
increase in the number of consultants employed by the Company, many of whom
completed the entry-level phase of the Information Technology Consultant (ITC)
Training Program in 1996, 1997, and 1998 and an increased number of engagements
for both new and existing clients. In 1998, a higher proportion of these
engagements encompassed project-focused, strategic planning projects yielding
higher rates, as compared with 1997.
GROSS PROFIT. Gross profit increased 60% to $9.4 million in the third
quarter of 1998 from $5.9 million in the third quarter of 1997. Gross profit in
the first nine months of 1998 increased 77% to $25.9 million from $14.6 million
in the first nine months of 1997. Gross profit as a percentage of revenues
increased to 42% and 41% in the third quarter and first nine months of 1998,
respectively, from 41% and 40% for the comparable 1997 periods. The increases in
gross profit were primarily attributable to higher billing rates and higher
billing-to-consultant cost ratios, partially offset by management's estimates of
the services to be performed related to completing the
<PAGE> 11
Company's projects and Software Quality Services. The higher billing rates were
realized as a result of the increase in project-focused, strategic planning
projects. The higher billing-to-consultant cost ratio was attributable to both
the placement of additional consultants who completed the entry-level phase of
the ITC Training Program and additional project managers.
SELLING EXPENSES. Selling expenses increased 13% to $1.4 million in the
third quarter of 1998 from $1.2 million for the comparable 1997 quarter. For the
first nine months of 1998, selling expenses increased 16% to $3.8 million from
$3.3 million for the comparable 1997 period. This increase was primarily the
result of increased sales compensation due to the 58% and 70% increases in sales
in the third quarter and first nine months of 1998, respectively. The Company's
selling expenses as a percentage of revenues decreased to 6% in both the third
quarter and the first nine months of 1998 from 9% in both of the comparable 1997
periods, as a result of a change in the sales commission plan on January 1,
1998.
RECRUITING EXPENSES. Recruiting expenses remained constant at $0.5
million in the third quarter of 1998, versus the third quarter of 1997. For the
first nine months of 1998, recruiting expenses increased 18% to $1.4 million
from $1.2 million for the first nine months of 1997. The increase during the
nine month period was primarily attributable to the hiring of an increased
number of consultants as compared with the corresponding 1997 period.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased 62% to $3.3 million and 57% to $9.7 million in the third
quarter and first nine months of 1998, respectively, from $2.1 million and $6.2
million for the comparable 1997 periods. The increases were primarily
attributable to employees added during the 1998 periods, increased general
salaries and management bonuses, expenses related to upgrading and utilizing the
Company's network and telecommunications systems, increased professional fees
for legal, accounting and investor relations, training costs associated
primarily with outside instructors for the entry-level phase of the ITC Training
Program, employee functions, and depreciation. The increases in the nine month
period were partially offset by charges in the second quarter of 1997, that did
not recur in 1998, for non-cash compensation related to the June 2, 1997 grant
of employee stock options, and bad-debt expense relating to a client that filed
for Chapter 11 bankruptcy.
OTHER INCOME (EXPENSE). The increase in other income in each of the
third quarter and first nine months of 1998, as compared to the equivalent
periods in 1997, is primarily attributable to interest earned on investments of
available net proceeds from the Company's initial and follow-on public
offerings.
PROVISION FOR INCOME TAXES. The Company's effective tax rate was 40%
for both the third quarter and first nine months of 1998. Prior to the initial
public offering, the Company elected to be taxed as an S Corporation. As a
result, income of the Company was taxable to the shareholders. On October 1,
1997, the Company's S Corporation status was terminated and the Company became a
C Corporation.
LIQUIDITY AND CAPITAL RESOURCES
<PAGE> 12
On October 2, 1997, the Company completed an initial public offering of
4,485,000 shares of the Company's Common Stock. The Company sold 2,400,000
shares in the initial public offering. Net proceeds to the Company from the sale
of the 2,400,000 shares were approximately $22.5 million, after deducting
underwriting discounts and commissions of $1.8 million and offering expenses of
$1.3 million paid by the Company. The Company did not receive any of the
proceeds from the sale of shares by the selling stockholders.
On May 5, 1998, the Company completed a follow-on public offering of
3,315,000 shares of the Company's Common Stock. The Company sold 1,350,000
shares in the follow-on public offering and received $23.1 million in net
proceeds from the sale of such shares.
The remaining net proceeds of approximately $10.7 million from the
initial public offering, together with the $23.1 million from the follow-on
public offering, and cash from operations, are being temporarily invested in
short-term investment grade securities, certificates of deposit or direct or
guaranteed obligations of the United States Government. The Company believes
such funds will provide adequate cash to fund its anticipated cash needs for the
foreseeable future.
At September 30, 1998, the Company had approximately $48.8 million of
cash and short-term investments and no debt. Receivables were 48 days of
revenues at September 30, 1998, versus 42 days of revenues at December 31, 1997.
On August 3, 1998, the Company declared a three-for-two share common
stock split. Shareholders received one additional share for every two shares
held on the record date of August 14, 1998. Distribution of the additional
shares began on August 28, 1998. Cash was paid in lieu of fractional shares. All
shares and per share amounts reported in this filing have been restated to
reflect the three-for-two share common stock split.
YEAR 2000
The Company has established a Year 2000 project team to review the
Company's computer hardware, operating system software, computer programs and
communications systems for any Year 2000 issues. The Year 2000 plan includes
testing the readiness of the Company's Virtual Insourcing Centers.
The test plan was designed using the same methodology used by the
Company in completing its Century Date Compliance engagements. The methodology
incorporates four phases including preparation, surveying, planning, and
implementation.
The process of completing the preparation phase has produced the
following items for Year 2000 compliance consideration: 1) the Company's
internal financial system suite, 2) software that is ancillary to the financial
suite, 3) the Company's local and wide area network hardware and software, 4)
telecommunications equipment and software, 5) equipment and software used in
connecting from the Company's Virtual Insourcing Centers to its clients, and 6)
third-party vendors, including building managers and communication line
providers.
<PAGE> 13
The following table reflects the methodology phases, and the completion status
of each phase as it applies to the items identified by the preparation phase:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
Preparation Surveying Planning Implementation
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
Financial Systems Complete Complete Complete Est. Q1 - 1999
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
Ancillary Software Complete Est. Q4 - 1998 Est. Q4 - 1998 Est. Q1 - 1999
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
LAN/WAN Complete Est. Q4 - 1998 Est. Q4 - 1998 Est. Q2 - 1999
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
Telecommunications Complete Est. Q4 - 1998 Est. Q4 - 1998 Est. Q4 - 1998
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
VIC Connectivity Complete Est. Q4 - 1998 Est. Q4 - 1998 Est. Q2 - 1999
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
Third-party Vendors Complete Complete Complete Est. Q4 - 1998
- ---------------------------- ------------------- ----------------------- ----------------------- -----------------------
</TABLE>
As to the Company's financial system suite, the Company has purchased
Year 2000 compliant software which will replace its current financial suite. The
financial suite is the only information technology system that is expected to
have a material impact on the Company's operations. Expected future costs of
implementing this system, along with the ancillary systems are expected to be
less than $100,000.
During the remainder of 1998 and into the second quarter of 1999, the
project team will continue to employ the Company's methodology to address the
Year 2000 issue. Since most of the Company's infrastructure was deployed within
the last two years, costs of any remediation for the Year 2000 issues are
expected to be immaterial.
After completion of the described activities, the Company will prepare
a contingency plan that will include a designated team to resolve any unforeseen
problems that arise as a result of Year 2000 issues.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
The statements contained in the section captioned Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are not historical are "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
represent the Company's present expectations or beliefs concerning future
events. The Company cautions that such statements are qualified by important
factors that could cause actual results to differ materially from those in the
forward looking statements including statements pertaining to: (i) the expected
continued success of the Company's ITC Training Program, (ii) the Company's
future ability to effectively manage its consultant utilization rates and its
hourly consultant billing rates, (iii) the Company's ability to leverage its
Century Date Compliance expertise into providing other mass change and project
management services to its clients, (iv) successful management of engagement and
contract risks, and (v) the Company's ability to expand and develop additional
branch offices and Virtual Insourcing Centers. Results actually achieved thus
may differ materially from expected results included in these statements.
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
On October 2, 1997, the Company completed an initial public offering
of 4,485,000 shares of the Company's Common Stock. The Company sold 2,400,000
shares in the initial public offering. Net proceeds to the Company from the
sale of the 2,400,000 shares were approximately $22.5 million, after deducting
underwriting discounts and commissions of $1.8 million and offering expenses of
$1.3 million paid by the Company. The Company did not receive any of the
proceeds from the sale of shares by the selling stockholders.
The remaining net proceeds of approximately $10.7 million from the
initial public offering together with the $23.1 million from the May 5, 1998
follow-on public offering, and cash from operations, are being temporarily
invested in short-term investment grade securities, certificates of deposit or
direct or guaranteed obligations of the United States Government.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1998.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
SPR Inc.
<S> <C>
Date: November 13, 1998 By: /s/ ROBERT M. FIGLIULO
----------------------------- --------------------------------
Robert M. Figliulo
Chief Executive Officer and
Chairman of the Board of
Directors
Date: November 13, 1998 By: /s/ STEPHEN J. TOBER
----------------------------- --------------------------------
Stephen J. Tober
Chief Operating Officer
Date: November 13, 1998 By: /s/ STEPHEN T. GAMBILL
----------------------------- --------------------------------
Stephen T. Gambill
Chief Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 5,382
<SECURITIES> 43,440
<RECEIVABLES> 12,160
<ALLOWANCES> 925
<INVENTORY> 0
<CURRENT-ASSETS> 61,951
<PP&E> 4077
<DEPRECIATION> 1610
<TOTAL-ASSETS> 68,161
<CURRENT-LIABILITIES> 9,954
<BONDS> 0
0
0
<COMMON> 91
<OTHER-SE> 58,116
<TOTAL-LIABILITY-AND-EQUITY> 68,161
<SALES> 0
<TOTAL-REVENUES> 62,815
<CGS> 0
<TOTAL-COSTS> 36,942
<OTHER-EXPENSES> 14,907
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,496)
<INCOME-PRETAX> 12,462
<INCOME-TAX> 4,985
<INCOME-CONTINUING> 7,477
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,477
<EPS-PRIMARY> .58
<EPS-DILUTED> .56
</TABLE>
