<PAGE>
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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 ending September 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 Identification No.)
Incorporation or Organization)
33431
4950 Blue Lake Drive, Suite 300 Boca
Raton, Florida
(Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number, including area code 1 (800) 437-5200
2200 Clarendon Blvd., 11th Floor
Arlington, Virginia 22201
(Former address, if changed since last year)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class. Name of each exchange on which registered.
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 November 1, 2000
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<PAGE>
ACCESS WORLDWIDE COMMUNICATIONS, INC.
INDEX
Part I--Financial Information
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets--September 30, 2000 and December 31, 1999.. 1
Consolidated Statements of Operations--
Three Months Ended September 30, 2000 and September 30, 1999
Nine Months Ended September 30, 2000 and September 30, 1999...... 2
Consolidated Statements of Cash Flows--Nine Months Ended September 30,
2000 and September 30, 1999...................................... 3
Notes to Financial Statements.......................................... 4-6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 7-9
Item 3. Quantitative and Qualitative Disclosure About Market Risk.......... 10
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K................................... 10
Signatures............................................................. 11
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCESS WORLDWIDE COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September
30,
2000 December 31,
(Unaudited) 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 1,045,733 $ 4,706,380
Accounts receivable, net of allowance for
doubtful accounts of $124,370 and $113,082,
respectively................................... 14,683,279 15,940,988
Unbilled receivables............................ 3,701,315 2,954,899
Other assets, net............................... 2,290,077 2,026,216
------------ ------------
Total current assets.......................... 21,720,404 25,628,483
Property and equipment, net..................... 9,107,450 11,435,983
Other assets, net............................... 825,769 941,291
Intangible assets, net.......................... 58,759,499 71,518,273
------------ ------------
Total assets.................................. $ 90,413,122 $109,524,030
============ ============
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
STOCK AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of indebtedness................. $ 31,224,819 $ 3,028,873
Current portion of indebtedness--related
parties........................................ 2,483,334 1,990,000
Accounts payable and accrued expenses........... 9,401,480 6,762,870
Accrued interest and other related party
expenses....................................... -- 1,296,672
Accrued salaries, wages and related benefits.... 1,137,264 2,046,665
Deferred revenue................................ 2,941,313 2,335,705
------------ ------------
Total current liabilities..................... 47,188,210 17,460,785
Long-term portion of indebtedness................. 111,806 37,566,384
Long-term portion of indebtedness--related
parties.......................................... 2,614,235 3,802,334
Mandatorily redeemable preferred stock, $.01 par
value, 2,000,000 shares authorized, 40,000 issued
and outstanding.................................. 4,000,000 4,000,000
------------ ------------
Total liabilities and mandatorily redeemable
preferred stock.............................. 53,914,251 62,829,503
------------ ------------
Commitments and contingencies
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............................. (27,176,038) (16,332,791)
------------ ------------
Total common stockholders' equity............. 36,498,871 46,694,527
------------ ------------
Total liabilities, mandatorily redeemable
preferred stock and common stockholders'
equity....................................... $ 90,413,122 $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 Nine Months Ended
------------------------ -------------------------
September 30, September 30,
------------------------ -------------------------
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues................. $18,398,557 $16,761,284 $ 68,593,082 $60,198,102
Cost of revenues (exclu-
sive of depreciation)... 11,049,228 11,090,108 42,604,858 37,562,063
----------- ----------- ------------ -----------
Gross profit............ 7,349,329 5,671,176 25,988,224 22,636,039
Selling, general and ad-
ministrative expenses
(selling, general and
administrative expenses
paid to related parties
are $185,714, $214,465,
$557,144 and $592,404,
respectively) 6,785,448 7,392,497 22,136,544 21,523,594
Amortization expense..... 702,709 778,345 2,257,660 2,332,186
Unusual charge........... -- 1,016,533 -- 1,526,351
----------- ----------- ------------ -----------
(Loss) income from
operations............. (138,828) (3,516,199) 1,594,020 (2,746,092)
Interest income.......... 91,459 46,131 234,427 97,686
Interest expense-related
parties................. (127,150) (48,562) (472,682) (184,455)
Interest expense......... (1,224,957) (1,154,867) (4,078,351) (2,407,536)
Gain (loss) on sale of
business................ 250,000 -- (7,613,831) --
----------- ----------- ------------ -----------
Loss before income tax
expense (benefit) and
extraordinary charge... (1,149,476) (4,673,497) (10,336,417) (5,240,397)
Income tax expense (bene-
fit).................... 430,238 (1,423,523) 506,830 (1,676,927)
----------- ----------- ------------ -----------
Loss before
extraordinary charge... (1,579,714) (3,249,974) (10,843,247) (3,563,470)
Extraordinary charge on
extinguishment of debt
(net of applicable in-
come taxes of
$82,195)................ -- -- -- (101,686)
----------- ----------- ------------ -----------
Net loss................ $(1,579,714) $(3,249,974) $(10,843,247) $(3,665,156)
=========== =========== ============ ===========
Loss per share of common
stock
Basic and diluted:
Loss before
extraordinary charge.. $ (0.16) $ (0.34) $ (1.12) $ (0.38)
Extraordinary charge... -- -- -- (0.01)
Net loss............... $ (0.16) $ (0.34) $ (1.12) $ (0.39)
</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 NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
2000 1999
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(10,843,247) $(3,665,156)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Net loss on sale of business.................... 7,613,831 --
Depreciation and amortization................... 4,349,338 4,030,240
Allowance for doubtful accounts................. 11,288 675,119
Extraordinary charge, net of applicable income
taxes.......................................... -- 101,686
Income tax effect of extraordinary charge....... -- 82,195
Changes in operating assets and liabilities,
excluding effects from acquisitions and
dispositions:
Accounts receivable............................. 1,246,421 (286,089)
Unbilled receivables............................ (746,416) (240,567)
Other assets, net............................... 354,092 317,192
Accounts payable and accrued expenses........... 2,638,610 (1,674,616)
Accrued interest and related party expenses..... (1,296,673) (8,413,476)
Accrued salaries, wages and related benefits.... (909,401) (237,000)
Deferred revenue................................ 605,608 1,063,429
------------ -----------
Net cash provided by (used in) operating
activities .................................... 3,023,451 (8,247,043)
------------ -----------
Cash flows from investing activities:
Additions to property and equipment............... (1,338,616) (4,877,297)
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..................................... 3,259,969 (7,506,774)
------------ -----------
Cash flows from financing activities:
Deferred stock issuance and loan origination
fees............................................. (502,431) (737,535)
Borrowings under Credit Facility.................. 22,827,175 14,949,813
Payments under Credit Facility.................... (32,187,436) --
Proceeds from sale of common and preferred stock.. 647,592 4,498,567
Repurchase of mandatorily redeemable preferred
stock............................................ -- (2,500,000)
Payments on related party debt.................... (694,765) (879,061)
Payments on capital lease......................... (34,202) (19,652)
------------ -----------
Net cash (used in) provided by financing
activities................................... (9,944,067) 15,312,132
------------ -----------
Net decrease in cash and cash equivalents..... (3,660,647) (441,685)
Cash and cash equivalents, beginning of period
............................................... 4,706,380 1,912,219
------------ -----------
Cash and cash equivalents, end of period........ $ 1,045,733 $ 1,470,534
============ ===========
</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 a complete set of 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 three and nine months ended September 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 September 30, 1999
consolidated financial statements to conform to the September 30, 2000
presentation.
3. INCOME TAXES
The Company's effective tax rate differs from the Federal statutory rate 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
--------------------------------------------------------------------------
September 30, 2000 September 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 **.... ($ 1,579,714) 9,740,001 ($0.16) ($3,249,974) 9,528,478 ($0.34)
============ ========= ====== =========== ========= ======
<CAPTION>
For the Nine Months Ended
--------------------------------------------------------------------------
September 30, 2000 September 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 **.... ($10,843,247) 9,669,493 ($1.12) ($3,665,156) 9,361,562 ($0.39)
============ ========= ====== =========== ========= ======
</TABLE>
--------
** Since the effects of the stock options and earnout contingencies are anti-
dilutive for both the three and nine months ended September 30, 2000 and
September 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. LOSS ON 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. The escrowed amount was returned to the Company, and as
such, the Company recognized a $250,000 gain in the third quarter of 2000.
After adjusting for the net cost of the assets sold and expenses associated
with the sale, the Company realized a net loss of $7.6 million (including the
escrow amount and the write-off of intangible assets of approximately $10.7
million). The Plano facility's revenues and operating loss for the three
months ended September 30, 2000 was $ 0 and ($134,000), respectively, and for
the three months ended September 30, 1999 was $1,666,000 and ($340,000),
respectively. Revenues and operating loss for the nine months ended September
30, 2000 was $4,465,000 and ($47,000), respectively, and for the nine months
ended September 30, 1999 was $6,974,000 and ($154,000), respectively.
6. 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.
7. CREDIT FACILITY
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, (c) increases the interest rate on the outstanding Credit Facility to
prime plus 3%, (d) allows certain payments to be made by the Company on its
subordinated promissory notes based on amended original agreements, and (e)
requires payments of a monitoring and amendment fee to the Bank Group equal to
approximately 1.0% of 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.
As of September 30, 2000, the long-term portion of indebtedness has been
reclassified to current portion of indebtedness since there are less than
twelve months remaining until the expiration of the Amendment. The Company is
engaged in ongoing discussions with potential investors or lenders to
restructure the debt. Several productive meetings have been held and the
discussions continue. As of September 30, 2000, the Company has been current
on all payments pursuant to the Amendment. However, if the Company is
unsuccessful in restructuring the debt the cost of financing could increase.
The Company is exploring further options to ensure the availability of
adequate working capital.
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 information about the segments used by the chief
operating decision-maker of the Company:
For the three months ended September 30,
<TABLE>
<CAPTION>
Segment
Pharmaceutical Consumer Other Total Reconciliation Total
-------------- ----------- ---------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
2000
Revenues................ $11,101,472 $ 6,071,374 $1,225,711 $18,398,557 $ -- $18,398,557
Gross profit............ 4,627,634 2,152,606 569,089 7,349,329 -- 7,349,329
EBIT.................... 656,089 97,681 89,526 843,296 (982,124) (138,828)
Depreciation expense.... 430,361 224,450 13,648 668,459 13,140 681,599
Amortization expense.... 680,914 -- 21,795 702,709 -- 702,709
1999
Revenues................ $ 9,219,641 $ 6,481,332 $1,060,311 $16,761,284 $ -- $16,761,284
Gross profit............ 3,681,089 1,405,968 584,119 5,671,176 -- 5,671,176
EBIT.................... (579,246) (1,261,987) 35,695 (1,805,538) (1,710,661) (3,516,199)
Depreciation expense.... 417,339 234,082 12,691 664,112 10,864 674,976
Amortization expense.... 671,909 84,641 21,795 -- 778,345 778,345
</TABLE>
For the nine months ended September 30,
<TABLE>
<CAPTION>
Segment
Pharmaceutical Consumer Other Total Reconciliation Total
-------------- ----------- ---------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
2000
Revenues................ $41,841,764 $23,511,782 $3,239,536 $68,593,082 $ -- $68,593,082
Gross profit............ 15,465,421 8,792,053 1,730,750 25,988,224 -- 25,988,224
EBIT.................... 3,838,533 736,750 169,953 4,745,236 (3,151,216) 1,594,020
Depreciation expense.... 1,135,050 880,940 40,580 2,056,570 35,108 2,091,678
Amortization expense.... 2,042,740 149,535 65,385 2,257,660 -- 2,257,660
1999
Revenues................ $33,669,044 $23,327,274 $3,201,784 $60,198,102 $ -- $60,198,102
Gross profit............ 14,318,775 6,754,792 1,562,472 22,636,039 -- 22,636,039
EBIT.................... 3,347,854 (1,996,994) (82,107) 1,268,753 (4,014,845) (2,746,092)
Depreciation expense.... 857,034 772,112 37,773 1,666,919 31,135 1,698,054
Amortization expense.... 2,012,877 253,924 65,385 2,332,186 -- 2,332,186
</TABLE>
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 Compared to the Three Months Ended
September 30, 1999
Revenues for the Company increased $1.6 million, or 9.5%, to $18.4 million
for the three months ended September 30, 2000, compared to $16.8 million for
the three months ended September 30, 1999. Revenues for the Pharmaceutical
Segment increased $1.9 million, or 20.7%, to $11.1 million for the three
months ended September 30, 2000, compared to $9.2 million for the three months
ended September 30, 1999. The increase in revenues is primarily attributable
to an increase in sample fulfillment shipments. Revenues for the Consumer
Segment decreased $0.4 million, or 6.2%, to $6.1 million for the three months
ended September 30, 2000, compared to $6.5 million for the three months ended
September 30, 1999. The decrease is a result of the sale of the Plano, Texas
call center in the second quarter of 2000, offset by a net increase in
billable hours worked for both new and existing clients.
Cost of revenues for the Company decreased $0.1 million, or 0.9%, to $11.0
million for the three months ended September 30, 2000, compared to $11.1
million for the three months ended September 30, 1999. Cost of revenues as a
percentage of revenues decreased to 59.8% for the three months ended September
30, 2000, compared to 66.1% for the three months ended September 30, 1999.
Cost of revenues as a percentage of revenues for the Pharmaceutical Segment
decreased to 58.6% for the three months ended September 30, 2000, from 59.8%
for the three months ended September 30, 1999. The decrease is mainly due to
more medical meetings, which had lower pass through costs, offset by an
increase in labor costs to support increased sample fulfillment business. Cost
of revenues as a percentage of revenues for the Consumer Segment decreased to
63.9% for the three months ended September 30, 2000, compared to 78.5% for the
three months ended September 30, 1999. The decrease is due to higher personnel
turnover in 1999, which caused higher recruiting, training and floor
management costs in the third quarter of 1999 as compared to the third quarter
of 2000.
Selling, general and administrative expenses (including unusual charge) for
the Company decreased $1.6 million, or 19.0%, to $6.8 million for the three
months ended September 30, 1999, compared to $8.4 million for the three months
ended September 30, 1999. Selling, general and administrative expenses
(including unusual charge) as a percentage of revenues for the Company
decreased to 37% for the three months ended September 30, 2000, compared to
50% for the three months ended September 30, 1999. Selling, general and
administrative expenses as a percentage of revenues for the Pharmaceutical
Segment decreased to 29.7% for the three months ended September 30, 2000,
compared to 39.1% for the three months ended September 30, 1999. The decrease
is primarily attributable to a reduction in bad debt expense resulting from
contract disputes during 1999, as well as improved collection procedures
during the third quarter of 2000, and a decrease in professional fees. The
decrease was partially offset by an increase in salaries to support continued
growth in medical education meetings. Selling, general and administrative
expenses as a percentage of revenues for the Consumer Segment decreased to
34.4% for the three months ended September 30, 2000, compared to 40% for the
three months ended September 30, 1999. The decrease is attributable to the
Company changing its focus in June of 1999 from Business-to-Consumer to
Business-to-Business which is less costly. This was partially offset by a
decrease in revenues generated at the Company's Arlington, VA teleservices
location, while fixed costs remained constant.
The Company recorded the unusual charge referenced above, during the third
quarter of 1999 in the amount of $1,017,000, as part of its Corporate Plan to
improve future performance. The Company recorded $868,000 in severance costs
and $149,000 in costs associated with restructuring the Company's Credit
Facility.
Amortization expense for the Company decreased $0.1 million, or 12.5%, to
$0.7 million for the three months ended September 30, 2000, compared to $0.8
million for the three months ended September 30, 1999. The decrease was due to
the sale of the Plano, Texas call center in the second quarter of 2000.
Net interest expense for the Company increased $0.1 million, or 8.3%, to
$1.3 million for the three months ended September 30, 1999, compared to $1.2
million for the three months ended September 30, 1999. The
7
<PAGE>
increase is the result of a lower debt balance at a higher effective borrowing
rate of 13.5% for the three months ended September 30, 2000 as compared to a
higher debt balance at a lower borrowing rate of 11% for the three months
ended September 30, 1999.
Nine Months Ended September 30, 2000 Compared to the Nine Months Ended
September 30, 1999
Revenues for the Company increased $8.4 million, or 14%, to $68.6 million
for the nine months ended September 30, 2000, compared to $60.2 million for
the nine months ended September 30, 1999. Revenues for the Pharmaceutical
Segment increased $8.1 million, or 24%, to $41.8 million for the nine months
ended September 30, 2000, compared to $33.7 million for the nine months ended
September 30, 1999. The increase in revenues is due to increased sample
fulfillment shipments, American Medical Association ("AMA") database renewals,
and medical education programs. Revenues for the Consumer Segment increased
$0.2 million, or 0.9%, to $23.5 million for the nine months ended September
30, 2000, compared to $23.3 million for the nine months ended September 30,
1999. The increase is due to a net increase in billable hours worked for both
new and existing clients, partially offset by a decrease in revenues as a
result of the sale of the Plano, Texas call center in the second quarter of
2000.
Cost of revenues for the Company increased $5.0 million, or 13.3%, to $42.6
million for the nine months ended September 30, 2000, compared to $37.6
million for the nine months ended September 30, 1999. Cost of revenues as a
percentage of revenues decreased to 62.1% for the nine months ended September
30, 2000, from 62.5% for the nine months ended September 30, 1999. Cost of
revenues as a percentage of revenues for the Pharmaceutical Segment increased
to 63.2% for the nine months ended September 30, 2000, compared to 57.6% for
the nine months ended September 30, 1999. The increase is due to increased
international medical meetings, which had higher pass-through costs, AMA
database license renewals, and an increase in labor costs to support increased
sample fulfillment business. Cost of revenues as a percentage of revenues for
the Consumer Segment decreased to 62.6% for the nine months ended September
30, 2000, compared to 71.2% for the nine months ended September 30, 1999. The
decrease is due to higher personnel turnover in 1999, which caused higher
recruiting, training and floor management costs for the nine months ended
September 30, 1999 as compared to the nine months September 30, 2000. Another
contributor to the decrease was due to certain inefficiencies relating to the
expansion of the Consumer Segment in early 1999, which have subsequently been
corrected.
Selling, general and administrative expenses (including unusual charge) for
the Company decreased $0.9 million, or 3.9%, to $22.1 million for the nine
months ended September 30, 2000, compared to $23.0 million for the nine months
ended September 30, 1999. Selling, general and administrative expenses
(including unusual charge) as a percentage of revenues for the Company
decreased to 32.2% for the nine months ended September 30, 2000, compared to
38.2% for the nine months ended September 30, 1999. Selling, general, and
administrative expenses (including unusual charge) as a percentage of revenues
for the Pharmaceutical Segment decreased to 23% for the nine months ended
September 30, 2000, compared to 26.7% for the nine months ended September 30,
1999. The decrease is due to continued sales growth while managing costs, and
a reduction in bad debt expense resulting from contract disputes during the
nine months ended 1999, as well as improved collection procedures during the
nine months ended 2000. Selling, general, and administrative expenses
(including unusual charge) as a percentage of revenues for the Consumer
Segment decreased to 33.6% for the nine months ended September 30, 2000,
compared to 36.5% for the nine months ended September 30, 1999. The decrease
is attributable to the Company changing its focus in June of 1999 from
Business-to-Consumer to Business-to-Business which is less costly. This was
partially offset by a decrease in revenues generated at the Company's
Arlington, VA teleservices location, while fixed costs remained constant.
The Company recorded the unusual charge referenced above during the second
and third quarter of 1999 in the amount of $1,526,000 as part of its Corporate
Plan to improve future performance. The Company recorded $929,000 in
severance, $248,000 in costs incurred due to the Company's exploration of
strategic alternatives, $200,000 in deferred acquisition costs incurred on
pending acquisitions which were no longer being pursued, and $149,000 in costs
associated with the restructuring of the Company's Credit Facility.
Amortization expense for the Company remained unchanged at $2.3 million for
the nine months ended September 30, 2000 and 1999.
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Net interest expense for the Company increased $1.8 million, or 72% to $4.3
million for the nine months ended September 30, 2000, compared to $2.5 million
for the nine months ended September 30, 1999. The increase is the result of an
increase in the blended borrowing rate to 13.5% from 9.5% for the nine months
ended September 30, 2000 and 1999, respectively, in accordance with the
Amendment.
Liquidity and Capital Resources
The Company's working capital decreased $33.6 million, to ($25.5) million at
September 30, 2000, compared to $8.1 million at December 31, 1999. The
decrease in working capital is primarily attributed to the reclassification of
the Company's long-term portion of indebtedness to a current portion of
indebtedness since there are less than twelve months remaining until the
expiration of the Amendment. The Company is engaged in ongoing discussions
with potential investors or lenders to restructure the debt.
As of September 30, 2000, the Company has been current on all payments
pursuant to the Amendment. The Company has reduced its debt to its lowest
level in 15 months, achieved four quarters of record revenues, increased
EBITDA by $3.3 million, quarter over quarter, and nearly doubled its previous
12 month record of 31 million sample units shipped in only nine months from
the Company's Drug Enforcement Administrations approved sampling facility.
Management believes that all of these positive factors should place the
Company in a better position as discussions to restructure the debt progress.
However, if the Company is unsuccessful in restructuring the debt, the cost of
financing could increase. The Company is exploring all options to ensure
adequate working capital.
As of September 30, 2000, the Company had cash and cash equivalents of $1.0
million, compared to $4.7 million as of December 31, 1999.
Net cash provided by operating activities was $3.0 million for the nine
months ended September 30, 2000, as compared to net cash used in operating
activities of $8.2 million for the nine months ended September 30, 1999. The
increase in cash provided by operating activities, excluding a $7.6 million
non cash adjustment relating to a net loss realized on the sale of the Plano,
Texas facility (see Note 5), is primarily due to a decrease in accounts
receivable and an increase in accounts payable, partially offset by a decrease
in contingent payments due and made to former shareholders of acquired
companies in the nine months ended September 30, 2000, as compared to the nine
months ended September 30, 1999.
The net cash provided by investing activities was $3.3 million for the nine
months ended September 30, 2000, compared to net cash used in investing
activities of $7.5 million for the nine months ended September 30, 1999. The
increase of $10.8 million cash provided by investing activities is
attributable to $4.8 million in net proceeds received from the sale of assets
of the Plano, Texas facility in June of 2000, a reduction in additions to
property and equipment of $3.6 million for the nine months ending September
30, 2000 as compared to the nine months ending September 30, 1999, and a
reduction of $2.4 million in additional purchase price payments due to former
owners of acquired business that was paid during the first half of 1999.
Net cash used in financing activities was $9.9 million for the nine months
ended September 30, 2000, compared to net cash provided by financing
activities of $15.3 million for the nine months ended September 30, 1999. The
increase in cash used in financing activities is primarily attributable to the
borrowing of $22.8 million, which was offset by payments totaling $32.2
million on the Credit Facility, as compared to $14.9 million in borrowings
made on the Credit Facility in 1999.
Risk Factors That May Affect Future Results
This release contains forward-looking statements that are subject to risk
and uncertainty. Access Worldwide's actual results could differ materially
from those discussed in such forward-looking statements due to various factors
which are outside the Company's control, such as a reliance on a limited
number of major customers, the need for growth management, acquisition risk,
competition, industry consolidation, potential consumer saturation, the need
to refinance the current debt and the possible limited duration of significant
agreements. For a more detailed discussion of these factors and others that
could affect the Company's results, see the risk factors section of Access
Worldwide's Annual Report on Form 10-K for the year ended December 31, 1999
filed with the Securities and Exchange Commission.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company's Credit Facility is subject to market risk and interest rate
changes. The Credit Facility bears interest at prime plus 3%. The outstanding
principal balance on the Credit Facility was approximately $31.2 million at
September 30, 2000. Considering the total outstanding balance under the Credit
Facility at September 30, 2000 of approximately $31.2 million, a 1% change in
interest rate would result in an impact to pre-tax earnings of approximately
$0.3 million per year.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
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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: November 20, 2000
/s/ Michael Dinkins
By: ___________________________________
Michael Dinkins, President and
Chief Executive Officer
(principal executive officer)
Date: November 20, 2000
/s/ John Hamerski
By: ___________________________________
John Hamerski, Senior Executive and
Chief Financial Officer (principal
financial officer)
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