<PAGE>
--------------------------------------------------------------------------------
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 ending June 30, 2000
[_] 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 0-23489
Access Worldwide Communications, Inc.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-1309227
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4950 Blue Lake Drive, Suite 300
Boca Raton, Florida 33431
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 1 (800) 437-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class. Name of each exchange on which registered.
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Title of Class
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 as 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 [_]
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
9,740,001 shares of Common Stock, $.01 par value, as of August 10, 2000
--------------------------------------------------------------------------------
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
INDEX
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Part I--Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets--June 30, 2000 and December 31, 1999 ................................ 1
Three and Six Months Ended June 30, 2000 and June 30, 1999 .................................... 2
Consolidated Statements of Cash Flows--Six Months Ended June 30, 2000 and
June 30, 1999 ................................................................................. 3
Notes to Consolidated Financial Statements ...................................................... 4-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ... 7-9
Part II--Other Information
Item 2. Changes in Securities and Use of Proceeds ............................................... 10
Item 4. Submission of Matters to a Vote of Security Holders ..................................... 10
Item 6. Exhibits and Reports on Form 8-K ........................................................ 11
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................................... $ 2,035,810 $ 4,706,380
Accounts receivable, net of allowance for doubtful accounts of $119,134
and $113,082, respectively ......................................................... 17,340,377 15,940,988
Unbilled receivables ................................................................ 3,933,021 2,954,899
Other assets, net ................................................................... 1,970,209 2,026,216
------------ ------------
Total current assets .............................................................. 25,279,417 25,628,483
Property and equipment, net ......................................................... 8,952,890 11,435,983
Other assets, net ................................................................... 952,373 941,291
Intangible assets, net .............................................................. 59,462,208 71,518,273
------------ ------------
Total assets ..................................................................... $ 94,646,888 $109,524,030
============ ============
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of indebtedness ..................................................... $ 4,293,420 $ 3,028,873
Current portion of indebtedness - related parties .................................... 2,373,334 1,990,000
Accounts payable and accrued expenses ............................................... 11,094,295 6,762,870
Accrued interest and other related party expenses ................................... 16,814 1,296,672
Accrued salaries, wages and related benefits ........................................ 1,819,728 2,046,665
Deferred revenue .................................................................... 1,591,665 2,335,705
------------ ------------
Total current liabilities ......................................................... 21,189,256 17,460,785
Long-term portion of indebtedness ..................................................... 28,311,669 37,566,384
Long-term portion of indebtedness -- related parties .................................. 3,067,378 3,802,334
Mandatorily redeemable preferred stock, $.01 par value:
2,000,000 shares authorized, 40,000 shares issued and outstanding .................... 4,000,000 4,000,000
------------ ------------
Total liabilities and mandatorily redeemable preferred stock ...................... 56,568,303 62,829,503
------------ ------------
Commitments and contingencies (Note 7)
Common stockholders' equity:
Common stock, $.01 par value: voting: 20,000,000 shares authorized; 9,740,001 and
9,528,478 shares issued and outstanding, respectively .............................. 97,400 95,285
Additional paid-in capital .......................................................... 63,577,509 62,932,033
Accumulated deficit ................................................................ (25,596,324) (16,332,791)
------------ ------------
Total common stockholders' equity ............................................. 38,078,585 46,694,527
------------ ------------
Total liabilities, mandatorily redeemable preferred stock and
common stockholders' equity ...................................................... $ 94,646,888 $109,524,030
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
----------- ----------- ----------- -----------
Revenues .................................................. $24,729,739 $20,693,796 $50,194,525 $43,436,818
Cost of revenues (exclusive of depreciation) .............. 15,312,035 12,272,071 31,555,630 26,471,955
----------- ----------- ----------- -----------
Gross profit ............................................. 9,417,704 8,421,725 18,638,895 16,964,863
Selling, general and administrative expenses
(selling, general and administrative expenses
paid to related parties are $185,715 and $170,616
and $371,430 and $377,939, respectively) ................. 7,551,745 7,047,415 15,351,096 14,130,737
Amortization expense ...................................... 769,000 786,809 1,554,951 1,553,841
Unusual charge ............................................ -- 509,998 -- 509,998
----------- ----------- ----------- -----------
Income from operations ................................... 1,096,959 77,503 1,732,848 770,287
Interest income ........................................... 71,444 17,643 142,968 51,555
Interest expense--related parties ......................... (164,396) (61,666) (345,532) (135,893)
Interest expense .......................................... (1,611,706) (793,765) (2,853,394) (1,252,849)
Loss on sale of business .................................. (7,863,831) -- (7,863,831) --
----------- ----------- ----------- -----------
Loss before income tax expense (benefit)
and extraordinary charge ................................ (8,471,530) (760,285) (9,186,941) (566,900)
Income tax expense (benefit) .............................. 207,870 (339,847) 76,592 (253,404)
----------- ----------- ----------- -----------
Loss before extraordinary charge ......................... (8,679,400) (420,438) (9,263,533) (313,496)
Extraordinary charge on extinguishment of debt (net
-- -- -- -----------
of applicable income taxes of $82,195) ................... ----------- ----------- ----------- (101,686)
-----------
Net loss .................................................. $(8,679,400) $ (420,438) $(9,263,533) $ (415,182)
=========== =========== =========== ===========
Loss per share of common stock
Basic and diluted:
Loss before extraordinary charge ........................ $ (0.89) $ (0.04) $ (0.96) $ (0.03)
Extraordinary charge .................................... $ -- $ -- $ -- $ (0.01)
Net loss ................................................ $ (0.89) $ (0.04) $ (0.96) $ (0.04)
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................................................... $(9,263,533) $ (415,182)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Loss on sale of business ............................................................ 7,863,831 --
Depreciation and amortization ....................................................... 2,965,031 2,576,919
Extraordinary charge, net of applicable income taxes ................................ -- 101,686
Income tax effect of extraordinary charge ........................................... -- 82,195
Allowance for doubtful accounts ..................................................... 6,052 439,820
Changes in operating assets and liabilities, excluding effects from
Acquisitions and dispositions:
Accounts receivable ................................................................ (1,405,441) (1,330,881)
Unbilled receivables ................................................................ (978,122) 1,722,583
Other assets ........................................................................ 454,218 200,846
Accounts payable and accrued expenses ............................................... 4,331,425 (1,135,439)
Accrued interest and related party expenses ......................................... (1,279,859) (8,437,261)
Accrued salaries, wages and related benefits ........................................ (226,937) (735,548)
Deferred revenue .................................................................... (744,040) (586,407)
----------- -----------
Net cash provided by (used in) operating activities ................................ 1,722,625 (7,516,669)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment...................................................... (888,389) (3,937,246)
Net proceeds from sale of business ..................................................... 4,777,642 --
Business acquisitions, net of cash acquired ............................................ (179,057) (2,629,477)
----------- -----------
Net cash provided by (used in) investing activities ................................. 3,710,296 (6,566,723)
----------- -----------
Cash flows from financing activities:
Deferred stock issuance and loan origination fees ...................................... (409,293) (704,390)
Payments on capital lease .............................................................. (15,395) (47,001)
Proceeds from sale of common and preferred stock ...................................... 647,592 4,498,567
Net (payments) borrowings under line of credit facility ................................ (7,974,773) 14,949,813
Payments on related party debt ......................................................... (351,622) (839,061)
Repurchase of preferred stock .......................................................... -- (2,500,000)
----------- -----------
Net cash (used in) provided by financing activities .................................. (8,103,491) 15,357,928
----------- -----------
Net (decrease) increase in cash and cash equivalents ................................ (2,670,570) 1,274,536
Cash and cash equivalents, beginning of period ........................................ 4,706,380 1,912,219
----------- -----------
Cash and cash equivalents, end of period ............................................... $ 2,035,810 $ 3,186,755
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements. For further information, refer
to the consolidated financial statements and footnotes included in the Company's
Annual Report on Form 10-K.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts included in the consolidated
financial statements. In the opinion of management, all adjustments necessary
for a fair presentation of this interim financial information have been
included. Such adjustments consisted only of normal recurring items. The results
of operations for the six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the year ending December 31, 2000.
2. RECLASSIFICATIONS
Certain reclassifications have been made to the June 30, 1999 consolidated
financial statements to conform to the June 30, 2000 presentation.
3. INCOME TAXES
The Company's effective tax rate of 8.3% in the first half of 2000 differs
from the federal statutory rate primarily due to the deductibility of meals and
entertainment, officers' life insurance, state income taxes, non-deductible
goodwill amortization and nondeductible loss on sale of business (see Note 5).
4. LOSS PER COMMON SHARE
Loss per common share are calculated as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
June 30, 2000 June 30, 1999
------------- -------------
(Loss) Shares Per Share (Loss) Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic and diluted**... ($8,679,400) 9,740,001 ($ 0.89) ($420,438) 9,528,478 $ (0.04)
----------- --------- ------- --------- --------- --------
For the Six Months Ended
------------------------
June 30, 2000 June 30, 1999
------------- -------------
(Loss) Shares Per Share (Loss) Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------ --------- ---------- ------------ ---------
Basic and diluted**... ($9,263,533) 9,634,239 ($ 0.96) ($415,182) 9,278,104 ($ 0.04)
----------- --------- ------- --------- --------- --------
</TABLE>
** Since the effects of the stock options and earnout contingencies are anti-
dilutive for both the three and six months ended June 30, 2000 and June 30,
1999, these effects have not been included in the calculation of dilutive
EPS.
4
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. SALE OF BUSINESS
On June 9, 2000, the Company sold the assets and business of its Plano, Texas
telemarketing call center for $5 million, which included $250,000 held in escrow
for 90 days from closing. The escrowed amount is due to the Company provided
that the buyer makes no claim, as defined in the Purchase and Sale Agreement,
against the Company. After adjusting for the net cost of the assets sold and
expenses associated with the sale, the Company realized a net loss of $7.9
million (excluding the escrow amount and including a write-off of intangible
assets of approximately $10.7). The Plano facility's revenues and operating
income for the three months ended June 30, 2000 was $2,200,000 and $35,000,
respectively, and for the three months ended June 30, 1999 was $2,500,000 and
$218,000, respectively. Revenues and operating loss for the six months ended
June 30, 2000 was $4,500,000 and $63,000, respectively, and for the six months
ended June 30, 1999 was $5,300,000 and $186,000, respectively.
6. INDEBTEDNESS
On April 14, 2000, the Company entered into an Amendment Agreement and Waiver
(the "Amendment") to the Credit Facility with the Bank Group. The Amendment
(a) provides that the Bank Group waive the Events of Default and amend certain
provisions of the Credit Facility, including the reestablishment of financial
covenants, (b) limits the revolving credit facility to $17 million, and (c)
increases the interest rate on the outstanding Credit Facility to prime plus
3.0%, (d) allows certain payments to be made by the Company on its subordinated
promissory notes based on amended or original agreements, (e) requires payment
of a monitoring and amendment fee to the Bank Group equal to approximately
1.0% the sum of (i) the Aggregate Revolving Committed Amount and (ii) the
outstanding principal balance of the Term Loan on such date. The Amendment
expires on July 1, 2001.
The 6.5% subordinated promissory note due to a former stockholder of AM
Medica was amended to allow monthly payments of $150,000 and two payments of
$250,000 in 2000. In addition, the subordinated promissory note as amended,
bears an interest rate of 12% and is due in full on October 1, 2003.
The 6% subordinated promissory note due to former stockholder of TMS was
amended to allow for interest payments at the non-default rate of 6% and a
payment of $433,334 plus accrued interest in excess of the non-default rate of
10% which is due on July 11, 2007.
The remaining subordinated promissory notes will be paid during the year
2000.
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in legal actions arising in the ordinary course of
business. The Company believes that it has adequate legal defenses or reserves
with respect to such litigation and believes that their ultimate outcome will
not have a material adverse effect on the Company's financial position, results
of operations or cash flows.
5
<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. SEGMENTS
In accordance with Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information, the
Company's reportable segments are strategic business units that offer different
products and services to different industries throughout the United States.
The table below presents financial information with respect to the Company
based on segments used by the chief operating decision-maker of the Company:
For the three months ended June 30,
<TABLE>
<CAPTION>
Pharmaceutical Consumer Other Segment Total Reconciliation Total
-------------- ------------ ------------ ------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
2000
Revenues .................. $15,252,104 $ 8,335,106 $1,142,529 $24,729,739 $ -- $24,729,739
Gross profit .............. 5,699,211 3,076,890 641,603 9,417,704 -- 9,417,704
Earnings before
income taxes ............. 1,933,113 254,276 109,699 2,297,088 (1,200,129) 1,096,959
Depreciation expense ...... 375,228 272,311 13,576 661,115 11,010 672,125
Amortization
expense .................. 682,312 64,893 21,795 769,000 -- 769,000
1999
Revenues .................. $11,984,311 $ 7,835,489 $ 873,996 $20,693,796 $ -- $20,693,796
Gross profit .............. 5,480,531 2,541,114 400,080 8,421,725 -- 8,421,725
Earnings (losses) before
income taxes ............. 2,107,676 (650,027) (139,011) 1,318,638 (1,241,135) 77,503
Depreciation expense ...... 217,471 309,718 12,638 539,827 10,882 550,709
Amortization
expense .................. 680,373 84,641 21,795 786,809 -- 786,809
For the six months ended
June 30,
Pharmaceutical Consumer Other Segment Total Reconciliation Total
-------------- ----------- ----------- ------------- -------------- -----------
2000
Revenues .................. $30,740,292 $17,440,408 $2,013,825 $50,194,525 $ -- $50,194,525
Gross profit .............. 10,837,787 6,639,447 1,161,661 18,638,895 -- 18,638,895
Earnings before
income taxes ............. 3,182,444 639,069 80,427 3,901,940 (2,169,092) 1,732,848
Depreciation expense ...... 704,691 656,490 26,931 1,388,112 21,968 1,410,080
Amortization
expense .................. 1,361,827 149,533 43,591 1,554,951 -- 1,554,951
1999
Revenues .................. $24,449,403 $16,845,942 $2,141,473 $43,436,818 $ -- $43,436,818
Gross profit .............. 10,637,686 5,348,824 978,353 16,964,863 -- 16,964,863
Earnings (losses) before
income taxes ............. 3,927,100 (735,007) (117,802) 3,074,291 (2,304,004) 770,287
Depreciation expense ...... 419,423 558,301 25,082 1,002,806 20,272 1,023,078
Amortization
expense .................. 1,340,993 169,282 43,566 1,553,841 -- 1,553,841
</TABLE>
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared to the Three Months Ended June 30,
1999
Revenues for the Company increased $4.0 million, or 19.3%, to $24.7 million
for the three months ended June 30, 2000, compared to $20.7 million for the
three months ended June 30, 1999. Revenues for the Pharmaceutical Segment
increased $3.3 million, or 27.5%, to $15.3 million for the three months ended
June 30, 2000, compared to $12.0 million for the three months ended June 30,
1999. The increase in revenues is primarily due to an increase in sample
fulfillment shipments and medical education programs. Revenues for the Consumer
Segment increased $0.5 million, or 6.4%, to $8.3 million for the three months
ended June 30, 2000, compared to $7.8 million for the three months ended June
30, 1999. The increase is attributable to a net increase in billable hours
worked on behalf of two major clients.
Cost of revenues for the Company increased $3.0 million, or 24.4%, to $15.3
million for the three months ended June 30, 2000, compared to $12.3 million for
the three months ended June 30, 1999. Cost of revenues as a percentage of
revenues increased to 61.9% for the three months ended June 30, 2000, from 59.4%
for the three months ended June 30, 1999. Cost of revenues as a percentage of
revenues for the Pharmaceutical Segment increased to 62.7% for the three months
ended June 30, 2000, from 54.2% for the three months ended June 30, 1999. The
increase was mainly driven by increased international medical meetings, which
had higher pass-through costs, and an increase in AMA database license renewals.
Cost of revenues as a percentage of revenues for the Consumer Segment decreased
to 63.9% for the three months ended June 30, 2000, compared to 67.9% for the
three months ended June 30, 1999. The decrease is primarily due to the
discontinuation of the Boca Raton Consumer operation (``Boca Raton Consumer''),
which was closed at the end of the second quarter of 1999, and the increase in
labor, training and overtime costs incurred in the second quarter of 1999 due to
technical system issues.
Selling, general and administrative expenses (including unusual charge) for
the Company remained at $7.6 million for the three months ended June 30, 2000,
as it was for the three months ended June 30, 1999. Selling, general and
administrative expenses (including unusual charge) as a percentage of revenues
for the Company decreased to 30.8% for the three months ended June 30, 2000,
compared to 36.7% for the three months ended June 30, 1999. Selling, general and
administrative expenses (including unusual charge) as a percentage of revenues
for the Pharmaceutical Segment decreased to 20.3% for the three months ended
June 30, 2000, compared to 22.5% for the three months ended June 30, 1999. The
decrease is a result of continued sales growth while managing costs. Selling,
general and administrative expenses (including unusual charge) as a percentage
of revenues for the Consumer Segment decreased to 33.7% for the three months
ended June 30, 2000, compared to 39.7% for the three months ended June 30, 1999.
The decrease is a result of expenses incurred from the discontinuation of the
Boca Raton Consumer operation, which was closed at the end of the second quarter
of 1999.
The Company recorded the unusual charge referenced above, during the second
quarter of 1999 in the amount of $509,998 as part of its Corporate Plan to
improve future performance. The Company recorded $17,000 and $45,000 in
severance costs for the Pharmaceutical and Consumer Segments, respectively,
$247,607 in costs incurred due to the Company's exploration of strategic
alternatives, and $200,391 in deferred acquisition costs incurred on pending
acquisitions which were no longer being pursued.
Amortization expense for the Company remained unchanged at $0.8 million for
the three months ended June 30, 2000, as compared to the three months ended June
30, 1999.
Net interest expense for the Company was $1.7 million for the three months
ended June 30, 2000, compared to $0.8 million for the three months ended June
30, 1999. The increase is a result of an increase in the borrowing rate to 13.5%
from 6% for the three months ended June 30, 2000 and 1999, respectively, in
accordance with the Amendment Agreement and Waiver (the "Amendment Agreement"),
dated April 14, 2000, to the Credit Facility.
7
<PAGE>
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Revenues for the Company increased $6.8 million, or 15.7%, to $50.2 million
for the six months ended June 30, 2000, compared to $43.4 million for the six
months ended June 30, 1999. Revenues for the Pharmaceutical Segment increased
$6.3 million, or 25.8%, to $30.7 million for the six months ended June 30, 2000,
compared to $24.4 million for the six months ended June 30, 1999. The increase
in revenues is due to an increase in sample fulfillment shipments, American
Medical Association ("AMA") database license renewals, and medical education
programs. Revenues for the Consumer Segment increased $0.6 million, or 3.6%, to
$17.4 million for the six months ended June 30, 2000, compared to $16.8 million
for the six months ended June 30, 1999. The increase was attributable to a net
increase in billable hours worked on behalf of two major clients.
Cost of revenues for the Company increased $5.1 million, or 19.2%, to $31.6
million for the six months ended June 30, 2000, compared to $26.5 million for
the six months ended June 30, 1999. Cost of revenues as a percentage of revenues
increased to 62.9% for the six months ended June 30, 2000, from 61.1% for the
six months ended June 30, 1999. Cost of revenues as a percentage of revenues for
the Pharmaceutical Segment increased to 64.8% for the six months ended June 30,
2000, compared to 56.6% for the six months ended June 30, 1999. The increase was
mainly driven by increased international medical meetings, which resulted in
higher pass through costs and AMA database license renewals. Cost of revenues as
a percentage of revenues for the Consumer Segment decreased to 62.1% for the six
months ended June 30, 2000, compared to 68.5% for the six months ended June 30,
1999. The decrease is a result of the discontinuation of the Boca Raton Consumer
operation, which was closed at the end of the second quarter of 1999 and the
increase in labor, training and overtime costs incurred in the first half of
1999 due to technical systems issues.
Selling, general and administrative expenses (including unusual charges) for
the Company increased $0.8 million, or 5.5%, to $15.4 million for the six months
ended June 30, 2000, compared to $14.6 million for the six months ended June 30,
1999. Selling, general and administrative expenses (including unusual charge) as
a percentage of revenues for the Company decreased to 30.7% for the six months
ended June 30, 2000, compared to 33.6% for the six months ended June 30, 1999.
Selling, general, and administrative expenses (including unusual charge) as a
percentage of revenues for the Pharmaceutical Segment decreased to 20.5% for the
six months ended June 30, 2000, compared to 22.1% for the six months ended June
30, 1999. The decrease is a result of continued sales growth while managing
costs. Selling, general, and administrative expenses (including unusual charge)
as a percentage of revenues for the Consumer Segment decreased to 33.9% for the
six months ended June 30, 2000 compared to 35.1% for the six months ended June
30, 1999. The decrease is attributed to the discontinuation of the Boca Raton
Consumer operation, which was closed at the end of the second quarter of 1999.
The decrease was offset by a decrease in revenues generated at the Arlington
teleservices location, and costs incurred from the sale of the Plano, Texas
facility, while fixed costs remained constant.
The Company recorded the unusual charge referenced above, during the second
quarter of 1999 in the amount of $509,998 as part of its Corporate Plan to
improve future performance. The Company recorded $17,000 and $45,000 in
severance costs for the Pharmaceutical and Consumer Segments, respectively,
$247,607 in costs incurred due to the Company's exploration of strategic
alternatives, and $200,391 in deferred acquisition costs incurred on pending
acquisitions which were no longer being pursued.
Amortization expense for the Company remained unchanged at $1.6 million for
the six months ended June 30, 2000, as compared to the six months ended June 30,
1999.
Net interest expense for the Company was $3.1 million for the six months ended
June 30, 2000, compared to $1.3 million for the six months ended June 30, 1999.
The increase is the result of an increase in the borrowing rate to 13.5% from 6%
for the six months ended June 30, 2000 and 1999, respectively, in accordance
with the Amendment Agreement.
Liquidity and Capital Resources
At June 30, 2000, the Company had working capital of $4.1 million, a decrease
of $4.0 million from $8.1 million at December 31, 1999. Cash and cash
equivalents were $2.0 million at June 30, 2000, compared to $4.7 million at
December 31, 1999.
Net cash provided by operating activities during the first half of 2000 was
$1.7 million, compared to net cash used in operating activities of $7.5 million
during the first half of 1999. The increase in the cash provided by operating
activities
8
<PAGE>
for the first half of 2000, excluding a $7.9 million loss realized on the sale
of the Plano, Texas facility (See Note 5), is primarily attributable to a
decrease in contingent payments due and made to former shareholders of acquired
companies offset by an increase in accounts payable in the second quarter of
2000 versus 1999.
The net cash provided by investing activities during the first half of 2000
was $3.7 million, compared to net cash used in investing activities of $6.6
million during the first half of 1999. The increase of $10.3 million provided by
investing activities is attributable to $4.8 million in net proceeds from the
sale of assets of the Plano, Texas facility, a reduction to additions to
property, plant and equipment of $3.0 for the six months ending June 30, 2000
versus the six months ending June 30, 1999, and a reduction of $2.4 million in
additional purchase price payments due to former owners of acquired businesses
that was paid during the first half of 1999.
Net cash used in financing activities was $8.1 million for the first half of
2000, compared to net cash provided by financing activities of $15.4 million for
the first half of 1999. The increased in cash used in the first half of 2000 is
primarily attributable attributed to $8.0 million in payments made on the Credit
Facility, as compared to $15 million in borrowings made on the Credit Facility
in 1999.
Risk Factors That May Affect Future Results
This report contains certain forward-looking statements, which are based on
management's current views and assumptions. These statements are qualified by
reference to ``Forward-Looking Statements'' in the Company's Annual Report on
Form 10-K, as well as other SEC filings which list important factors that could
cause actual results to differ materially from those discussed in this report.
9
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
On April 7, 2000, as part of the contingent payments due to the seller of
certain assets and liabilities of the TeleManagement Services ("TMS")
business, which the Company acquired in January 1997, the Company issued
an aggregate of 211,524 shares of Common Stock. The shares issued in
connection with this transaction were not required to be registered
because such securities were issued in a transaction not involving any
"public offering" within the meaning of Section 4(2) of the Securities
Act, in reliance on Rule 506 under the Securities Act. In connection
therewith, the Company obtained a representation that the stockholder was
an "accredited investor" as defined in Rule 501(a) under the Securities
Act. In addition, there was no general solicitation or general
advertising in connection with such issuance.
Item 4. Submission of Matters to a Vote of Security Holders
On May 30, 2000, the Company held its 2000 Annual Meeting of Stockholders. At
the Annual Meeting, the following matters were submitted to a vote of
stockholders:
1. The following six individuals, constituting the full Board of
Directors of the Company, were nominated and elected to serve as the Directors
of the Company:
Peter D. Bewley For: 7,699,931
Withhold Authority: 348,350
Liam S. Donohue For: 7,699,931
Withhold Authority: 348,350
Lee H. Edelstein For: 7,699,931
Withhold Authority: 348,350
Michael Dinkins For: 7,699,931
Withhold Authority: 348,350
Randall J. Lewis For: 7,699,931
Withhold Authority: 348,350
Shawkat Raslan For: 7,699,931
Withhold Authority: 348,350
2. The holders of 4,075,489 shares of common stock voted in favor of, the
holders of 436,488 shares of common stock voted against, and the holders of
31,450 shares of common stock abstained, with respect to approval of a
classified Board of Directors whereby the Board would be divided into three
classes of directors serving staggard three-year terms. This matter did not
pass as it requires a 50% majority vote.
3. The holders of 8,018,742 shares of common stock voted in favor of, and
the holders of 27,614 shares of common stock voted against, and the holders of
1,925 shares of common stock abstained, with respect to the ratification of
the selection of PricewaterhouseCoopers LLP, independent certified public
accountants, to serve as independent accountants for the Company for the year
ended December 31, 2000.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
10(gg) Asset Purchase Agreement
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACCESS WORLDWIDE COMMUNICATIONS, INC.
Date:
By: /s/ Michael Dinkins
------------------------------------------
Michael Dinkins, Chairman, President and
Chief Executive Officer
(principal executive officer)
Date:
By: /s/ Richard Lyew
-----------------------------------------
Richard Lyew, Senior Vice President
and Corporate Controller
(principal financial and accounting officer)
12
