<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998, or
[ ] 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 333-41121
FIRST CONSULTING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3539020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 W. OCEAN BLVD. 4TH FLOOR, LONG BEACH, CA 90802
(Address of principal executive offices including zip code)
(562) 624-5200
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
COMMON STOCK, $.001 PAR VALUE 15,880,822 SHARES
----------------------------- -------------------------------
(Class) (Outstanding at March 31, 1998)
<PAGE>
FIRST CONSULTING GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
COVER PAGE 1
TABLE OF CONTENTS 2
PART I. FINANCIAL INFORMATION 3
ITEM 1. FINANCIAL STATEMENTS AND NOTES (UNAUDITED). 3
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997. 3
Consolidated Statements of Operations for the three-
month period ended March 31, 1998 and March 31, 1997. 5
Consolidated Statements of Cash Flows for the three-
month period ended March 31, 1998 and March 31, 1997. 6
Notes to Consolidated Financial Statements. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 9
PART II. OTHER INFORMATION 13
ITEM 1. LEGAL PROCEEDINGS. 13
ITEM 2. CHANGES IN SECURITIES. 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 14
ITEM 5. OTHER INFORMATION. 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 15
SIGNATURES 16
EXHIBIT INDEX 17
</TABLE>
2.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND NOTES (UNAUDITED).
FIRST CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS (unaudited)
Current assets
Cash and cash equivalents ............................ $ 44,822 $ 2,950
Accounts receivable, less allowance of $550 and $500
in the period ended March 31,1998 and 1997,
respectively ......................................... 13,596 11,846
Work in process ...................................... 11,105 8,030
Prepaid expenses ..................................... 1,249 821
Income tax receivables ............................... 1,120 1,114
Current portion of notes receivable--stockholders .... 328 328
------- -------
Total current assets ............................. 72,220 25,089
Notes receivable--stockholders ......................... 1,389 1,368
Property and equipment
Furniture, equipment, and leasehold improvements ..... 1,958 1,874
Information systems equipment ........................ 10,050 9,040
------- -------
12,008 10,914
Less accumulated depreciation and amortization ......... 6,369 5,641
------- -------
5,639 5,273
Other assets
Executive Benefit Trust .............................. 3,163 2,506
Long Term Investments ................................ 2,023 --
Goodwill ............................................. 334 --
Other ................................................ 513 189
------- -------
6,033 2,695
------- -------
Total assets ...................................... $85,281 $34,425
------- -------
------- -------
</TABLE>
See accompanying notes.
3.
<PAGE>
FIRST CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- -----------
<S> <C> <C>
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit ....................................... $ -- $ 2,000
Current portion of long-term debt .................... 561 871
Accounts payable ..................................... 2,663 735
Accrued liabilities .................................. 5,728 2,219
Accrued vacation ..................................... 2,442 1,923
Deferred revenue ..................................... 492 391
Customer advances .................................... 362 1,965
Current income tax liability ......................... 1,219 --
Deferred income taxes ................................ 5,679 5,679
------- -------
Total current liabilities ........................ 19,146 15,783
Non-current liabilities
Long-term debt, net of current portion ............... 241 262
Supplemental executive retirement plan ............... 3,205 2,506
Deferred income taxes ................................ 447 447
------- -------
3,893 3,215
Commitments and contingencies .......................... -- --
Put obligation related to Associate 401(k) and
Stock Ownership Plan (ASOP) and capital stock .......... -- 9,965
Stockholders' equity
Preferred Stock, 10,000,000 shares authorized,
no shares issued and outstanding ................... -- --
Common Stock, 50,000,000 shares authorized,
15,880,822 shares issued and outstanding at
March 31, 1998 and 12,042,664 shares issued
and outstanding at December 31, 1997 ............... 16 12
Additional paid-in capital ........................... 65,842 20,822
Retained earnings .................................... 5,950 4,215
Deferred compensation--stock incentive agreements .... (3,573) (3,635)
Unearned ASOP shares ................................. (853) (853)
Notes receivable--stockholders ....................... (5,140) (5,134)
Put obligation related to ASOP and capital stock ..... -- (9,965)
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Total stockholders' equity ....................... 62,242 5,462
------- -------
Total liabilities and stockholders' equity ....... $85,281 $34,425
------- -------
------- -------
</TABLE>
See accompanying notes.
4.
<PAGE>
FIRST CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 1997
--------- ---------
<S> <C> <C>
Net revenue .......................................... $28,832 $20,155
Cost of services ..................................... 16,254 12,066
--------- ---------
Gross profit ....................................... 12,578 8,089
General and administrative expenses .................. 9,929 6,752
Compensation expenses related to stock issuances ..... -- 523
--------- ---------
Income from operations ............................. 2,649 814
Other income
Interest income (expense), net ..................... 316 (21)
Other income, net .................................. 27 91
--------- ---------
Income before income taxes ....................... 2,992 884
Provision for income taxes ........................... 1,257 490
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Net income ....................................... $ 1,735 $ 394
--------- ---------
--------- ---------
Basic net income per share ........................... $ 0.126 $ 0.041
Diluted net income per share ......................... $ 0.121 $ 0.039
Shares used in computing basic net income per share .. 13,717 9,543
Shares used in diluted net income per share .......... 14,330 10,128
</TABLE>
See accompanying notes.
5.
<PAGE>
FIRST CONSULTING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ......................................... $ 1,735 $ 394
Adjustments to reconcile net income ................ 720 1,178
Change in assets and liabilities ................... (518) 276
--------- ---------
Net cash provided by operating activities ........ 1,937 1,848
--------- ---------
Cash flows from investing activities:
Purchase of Investments ............................ (2,033) --
Furniture and Equipment and Leasehold Improvements.. (84) --
Information Systems Equipment ...................... (1,010) (486)
Notes Receivable Stockholders ...................... (3) (15)
--------- ---------
Net cash used in investing activities ............ (3,130) (501)
--------- ---------
Cash flows used in financing activities:
Long Term Debt ..................................... (21) (203)
Line of Credit ..................................... (2,000)
Proceeds from issuance of Stock .................... 45,024 126
Deferred Compensation Stock Incentive .............. 62 --
--------- ---------
Net cash generated in financing activities ....... 43,065 (77)
--------- ---------
Net increase (decrease) in cash and equivalents ...... 41,872 1,270
Cash and equivalents at beginning of period .......... 2,950 214
--------- ---------
Cash and equivalents at end of period ................ $44,822 $ 1,484
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
6.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated balance sheets of First Consulting Group, Inc. (the
"Company") at March 31, 1998 and consolidated statements of operations and
consolidated statement of cash flows for the three-month periods ended March
31, 1998 and 1997 are unaudited. These financial statements reflect all
adjustments, consisting of only normal recurring adjustments which in the
opinion of management, are necessary to fairly present the financial position
at March 31, 1998 and the results of operations for the three month periods
ended March 31, 1998 and 1997. The results of operations for the three months
ended March 31, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998. For more complete financial
information, these financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1997 included in
the Company's Registration Statement on Form S-1, File No. 333-41121, declared
effective February 12, 1998.
2. STOCKHOLDERS' EQUITY
On November 25, 1997, a certificate of incorporation was filed with the
state of Delaware forming First Consulting Group, Inc. and authorized shares of
common stock to 50,000,000 and authorized shares of preferred stock to
10,000,000. On January 22, 1998, the Board of Directors of FCG Enterprises,
Inc., a California company, approved a 4-for-1 split of common stock in the
form of a stock dividend. On February 10, 1998, FCG Enterprises, Inc., a
California company, merged into First Consulting Group, Inc., a Delaware
company. On February 13, 1998, First Consulting Group, Inc., completed an
initial public offering of its common stock in which 3,801,858 shares were sold
by the Company, resulting in net proceeds of approximately $45.1 million; an
additional 812,384 shares were sold by existing stockholders.
3. INVESTMENTS
The Company has approximately $43.2 million in investments classified as
available for sale. Such investments are currently held in short-term United
States government securities in accordance with the Company's investment
policy.
7.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NET INCOME PER SHARE
The following represents a reconciliation of basic and diluted net income
per share for the quarters ended March 31, 1998 and 1997, respectively (amounts
rounded to thousands, except per share data):
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 1998
---------------------------------------------
Weighted
Income average shares Per share amount
--------- -------------- ----------------
<S> <C> <C> <C>
Basic EPS:
Income available to common stockholders ... $ 1,735 13,717 $ .126
Effect of Dilutive Securities:
Options ................................... 614
------- ------ ------
Diluted EPS:
Income available to common stockholder
and assumed conversions ................... $ 1,735 14,330 $ .121
------- ------ ------
------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 1997
---------------------------------------------
Weighted
Income average shares Per share amount
--------- -------------- ----------------
<S> <C> <C> <C>
Basic EPS:
Income available to common stockholders ... $ 394 9,543 $ .041
Effect of Dilutive Securities:
Options ................................... 585
------- ------ ------
Diluted EPS:
Income available to common stockholder
and assumed conversions ................... $ 394 10,128 $ .039
------- ------ ------
------- ------ ------
</TABLE>
8.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE SET FORTH HEREIN AND UNDER THE CAPTION "RISK
FACTORS" IN THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1, FILE NO. 333-
41121, DECLARED EFFECTIVE ON FEBRUARY 12, 1998.
OVERVIEW
FCG provides information technology and other consulting services to
payors, providers and other healthcare organizations in North America and
Europe. The Company's services are designed to increase its clients'
operations effectiveness in order to reduce cost, improve customer service and
enhance the quality of patient care. The Company's services address the
increasing need of its clients for healthcare-specific information technology
expertise to objectively evaluate, select, implement and manage an optimal set
of information systems and infrastructures. The Company's consultants provide
this expertise through multi-disciplinary teams specifically formed to provide
a unique solution for each client. The Company believes that its success is
attributable to its strong relationships with industry-leading clients, the
healthcare, technology and consulting expertise of the Company's consultants,
and the depth and breadth of its consulting services.
The Company generates substantially all of its revenue from fees for
professional services. The Company typically bills for its services on an
hourly, fixed-fee or fixed-fee per month basis as specified by the agreement
with a particular client. The Company establishes standard hourly rates for
each level of consultant based on several factors including industry and
assignment-related experience, technical expertise, skills and knowledge. For
services billed on an hourly basis, fees are determined by multiplying the
amount of time expended on each assignment by the hourly rate for the
consultant(s) assigned to the engagement. Fixed fees are established on a per-
assignment or monthly basis and are based on several factors such as the size,
scope, complexity and duration of an assignment and the number of consultants
required to complete the assignment. Actual hourly or fixed fees for an
assignment may vary from the standard or historical rates charged by the
Company. For services billed on an hourly basis, the Company recognizes
revenue as services are performed. For services billed on a fixed fee basis,
the Company recognizes revenue using the percentage of completion method based
on the amount of time completed on each assignment versus the projected number
of hours required to complete such assignment. Revenue is recorded as incurred
at assignment rates net of unplanned adjustments for specific engagements.
Unplanned adjustments to revenue are booked at the time they are known. The
Company may obtain payment in advance of providing services. These advances
are recorded as deferred revenue and reflected as a liability on the Company's
balance sheet.
Cost of services primarily consists of the salaries, bonuses and related
benefits of consultants, subcontractor expenses, and the costs of the Company's
supplemental executive
9.
<PAGE>
retirement plan. General and administrative expenses primarily consist of
the costs attributable to office space occupancy; investments in the
Company's information systems, research and practice support and quality
initiatives; salaries and expenses for executive management, financial
accounting and administrative personnel; recruiting fees and professional
development; and marketing, legal and other professional services.
In connection with the Company's Associate 401(k) and Stock Ownership
Plan ("ASOP") and certain non-qualified stock options granted to the
Company's vice presidents, the Company recognizes a compensation expense on
its consolidated statement of operations. The recurring portion of the
Company's compensation expense relating to stock issuances and the
amortization of deferred compensation is reflected in the Company's
consolidated statements of operations as general and administrative expenses
or cost of services based on the function of the employee to whom the charge
relates. Beginning in 1998, the Company has granted all stock options at the
fair market value and, in connection with the Company's ASOP to match
employee 401(k) contributions with shares of Common Stock based on the fair
market value of the shares at the time matching contributions are made.
The Company's most significant expenses are its human resource and
related salary and benefit expenses. As of March 31, 1998, approximately 78%
of the Company's 644 employees are consultants, and the salaries and benefits
of such consultants are recognized in the Company's cost of services.
Non-billable employee salaries and benefits are recognized as a component of
general and administrative expenses. The Company's cost of services as a
percentage of revenue is directly related to its consultant utilization,
which is the ratio of total billable hours to available hours in a given
month. The Company manages consultant utilization by monitoring assignment
requirements and timetables, available and required skills, and available
consultant hours per week and per month. The number of consultants staffed
on an assignment will vary according to the size, complexity, duration and
demands of the assignment. Assignment terminations, completions and
scheduling delays may result in periods in which consultants are not
optimally utilized. An unanticipated termination of a significant assignment
or an overall lengthening of the sales cycle could result in a higher than
expected number of unassigned consultants and could cause the Company to
experience lower margins. In addition, the opening of new offices, expansion
into new markets, and the hiring of consultants in advance of client
assignments have resulted and may continue to result in periods of lower
consultant utilization.
The Company's effective tax rate has varied from period to period due to
differences between book and tax deductions associated with certain
non-deductible operating expenses, including certain compensation expenses
related to the ASOP.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
NET REVENUE. The Company's net revenue increased to $28.8 million, or
43.1%, for the quarter ended March 31, 1998 from $20.2 million for the quarter
ended March 31, 1997. This increase was primarily attributable to an increase
in revenue from the Company's implementation, operations effectiveness, and
integration services and an increase in consultant utilization.
10.
<PAGE>
COST OF SERVICES. Cost of services increased to $16.3 million, or 34.7%,
for the quarter ended March 31, 1998 from $12.1 million for the quarter ended
March 31, 1997. The increase was primarily attributable to an increase in the
number of consultants. Cost of services as a percentage of revenue decreased
to 56.4% for the quarter ended March 31, 1998 from 59.9% for the quarter ended
March 31, 1997. This decrease was primarily attributable to increased
realization of standard fees and increased utilization rates for the Company's
consultants during the quarter ended March 31, 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $9.9 million, or 47.1%, for the quarter ended March 31, 1998
from $6.8 million for the quarter ended March 31, 1997. General and
administrative expenses as a percentage of revenue increased to 34.4% for the
quarter ended March 31, 1998 from 33.5% for the quarter ended March 31, 1997.
This increase was primarily attributable to an increase in the Company's
hiring, including increased hiring from its expansion into Europe.
COMPENSATION EXPENSES RELATED TO STOCK ISSUANCES. Compensation expenses
related to stock issuances decreased to zero for the quarter March 31, 1998
from $523,000 and for the quarter ended March 31, 1997. This decrease was
attributable to the discontinuance of certain compensatory stock and option
issuances.
INTEREST INCOME, NET. Interest income, net of interest expense, increased
to $316,000 for the quarter ended March 31, 1998 from $21,000 net expense for
the quarter ended March 31, 1997. Interest income net of interest expense as a
percentage of revenue increased to 1.1% for the quarter ended March 31, 1998
from (0.1%) for the quarter ended March 31, 1997. This increase was primarily
attributable to the Company's increased amounts in cash and cash equivalents
raised from the Company's initial public offering in February 1998.
A substantial portion of the Company's expenses, particularly personnel and
related costs, depreciation, office rent and occupancy costs, are relatively
fixed. Certain variable costs are assignment-specific and are billed as
incurred. The Company's quarterly operating results may vary significantly in
the future depending on a number of factors, many of which are outside the
control of the Company. These factors may include: the reduction in size,
delay in commencement, interruption or termination of one or more significant
engagements or assignments; fluctuations in consultant hiring and utilization;
the loss of personnel; the loss of one or more significant clients; the
unpredictability of engaging new clients and additional assignments from
existing clients; increased competition; write-offs of client billings;
consolidation of, and subsequent reduction in the number of, healthcare
providers; pricing pressure; the number, timing and contractual terms of
significant client engagements; market demand for the Company's services;
delays or increased expenses incurred in connection with existing assignments;
changes in pricing policies by the Company or its competitors; changes in the
Company's business strategies; variability in the number of business days
within a quarter; and international currency fluctuations. Due to the
foregoing factors, quarterly revenue and operating results are not predictable
with any significant degree of accuracy. In particular, the timing between
initial client contract and fulfillment of the criteria necessary for revenue
recognition can be lengthy and unpredictable. Business practices of clients,
such as deferring commitments on new assignments until after the end of fiscal
periods, could require the
11.
<PAGE>
Company to maintain a significant number of under-utilized consultants which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 1998, the Company generated cash flow
from operations of $1.9 million. During the quarter ended March 31, 1998,
the Company used cash flow of approximately $1.1 million to purchase property
and equipment, including computer and related equipment and office furniture.
Depreciation expense for the quarter ended March 31, 1998 was approximately
$650,000. During the quarter ended March 31, 1998 the Company generated cash
flow of $43.1 million for financing activities. At March 31, 1998, the
Company had working capital of $53.1 million, an increase of $43.8 million
from March 31, 1997. The primary reason for the increase was the
completion of the Company's initial public offering in February 1998.
The Company has a revolving line of credit which allows the Company to
borrow up to $6.0 million at an interest rate of the prevailing prime rate.
The revolving line of credit expires on December 31, 1998. There was no
outstanding balance under the line of credit at March 31, 1998. The Company
has two term loan facilities ("Term Loan A" and Term Loan B"). Term Loan A is
a $305,000 facility under which approximately $271,000 was outstanding as of
March 31, 1998. Term Loan A expires on July 1, 2003. Term Loan B is a $4.0
million facility under which approximately $507,000 was outstanding as of March
31, 1998. Term Loan B expires on December 4, 2001. Term Loan A and Term Loan
B bear interest at a rate per annum equal to the prevailing prime rate plus
0.5%. All borrowings under the Company's credit facilities are secured by the
Company's accounts receivable and other rights to payment, general intangibles
and equipment. The line of credit agreement provides that the Company must
satisfy certain covenants and restrictions.
12.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
The effective date of the Company's registration statement, filed on
Form S-1 under the Securities Act of 1933 (File No. 333-41121), was
February 12, 1998 (the "Registration Statement"). The class of
securities registered was Common Stock. The offering commenced on
February 13, 1998 and all securities were sold in the offering. The
managing underwriters for the offering were Hambrecht & Quist LLC,
BancAmerica Robertson Stephens LLC and UBS Securities LLC.
Pursuant to the Registration Statement, the Company sold 3,801,858
shares of its Common Stock for an aggregate offering price of
$49,424,154. Also pursuant to the Registration Statement, the
Selling Stockholders sold 812,384 shares of Common Stock of the
Company for an aggregate offering price of $10,560,992.
The Company incurred expenses of approximately $4.5 million of which
approximately $3.5 million represented underwriting discounts and
commissions and approximately $1.0 million represented other
expenses related to the offering. All such expenses were direct or
indirect payments to others. The net offering proceeds to the
Company and the Selling Stockholders after total expenses was $45.0
million and $9.8 million, respectively.
On January 13, 1998, pursuant to that certain Share Acquisition
Agreement, dated January 13, 1998, by and among FCG Enterprises,
Inc., a California corporation and predecessor of the Company
("FCG"), Christine Anne Greenhalgh and Jean Mary Roberts, FCG issued
36,300 shares of its Common Stock (the "FCG Shares") in a private
placement to Christine Anne Greenhalgh, one of two selling
stockholders. In the transaction, FCG paid an aggregate of 380,000
British pounds for all of the issued and outstanding capital stock
of Greenhalgh and Company Limited, consisting of 134,231 British
pounds paid in cash and 245,769 British pounds paid in the FCG
Shares, all of which were issued to a "Qualified Regulation S
Selling Stockholder," as such term is defined in Rule 902
promulgated under the Securities Act of 1933, as amended.
The Company used approximately $500,000 of the net proceeds from the
offering for working capital and general corporate purposes. All
net proceeds have been invested in cash, cash equivalents and short-
term investments. The use of the proceeds from the offering does
not represent a material change in the use of the proceeds described
in the prospectus.
13.
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In January 1998, in connection with the preparation for its initial
public offering (the "IPO"), the Company solicited the written
consent of its shareholders with respect to various matters. The
matters for which shareholder consent was solicited were as follows:
PROPOSAL 1: The reincorporation of the Company into Delaware in
connection with its IPO, approval of the Company's Certificate of
Incorporation, to be effective upon the closing of the IPO, to adopt
certain stockholder protection measures, and approval of the
Company's Delaware Bylaws, to be effective upon the closing of the
IPO, to include stockholder protection measures that correspond to
those set forth in the Certificate of Incorporation, and to effect
certain other changes.
PROPOSAL 2: Approval of the form of indemnity agreement to be
entered into between the Company and its officers and directors.
PROPOSAL 3: Approval of the adoption of the Company's 1997 Non-
Employee Directors' Stock Option Plan.
PROPOSAL 4: Approval of the adoption of the Company's 1997 Equity
Incentive Plan.
PROPOSAL 5: Approval of the adoption of the Company's Non-Employee
Director Restricted Stock Plan and Agreement.
PROPOSAL 6: Approval of the amendment and restatement of the
Company's 1994 Restricted Stock Plan and Restricted Stock Agreement.
The voting of shareholders with respect to each of the foregoing
proposals was as follows:
CONSENTS RECEIVED CONSENTS NOT RECEIVED
----------------- ---------------------
10,476,040 754,240
ITEM 5. OTHER INFORMATION.
None.
14.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<TABLE>
<CAPTION>
ITEM DESCRIPTION
---- -----------
<S> <C>
3(i)(1) Certificate of Incorporation
3(ii)(1) Bylaws
4.1(1) Instruments defining the rights of securities holders,
including indentures
10.1(1) Material contracts
11.1(2) Statement of computation of per share earnings
27.1 Financial Data Schedules.
</TABLE>
-----------
(1) Filed with the Company's Registration Statement on Form S-1,
File No. 333-41121, declared effective on February 12, 1998,
incorporated herein by reference.
(2) See Note 4 to Consolidated Financial Statements, "Net Income Per
Share."
(b) REPORTS ON FORM 8-K
None.
15.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
FIRST CONSULTING GROUP, INC.
Date: May 4, 1998 /s/ James A. Reep
-------------------------------------
James A. Reep
Chairman, President
and Chief Executive Officer
Date: May 4, 1998 /s/ Thomas A. Reep
-------------------------------------
Thomas A. Reep
Chief Financial Officer
and Vice President, Finance
(Principal Financial and Accounting Officer)
16.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. OF EXHIBIT DESCRIPTION
-------------- -----------
<S> <C>
3(i)(1) Certificate of Incorporation
3(ii)(1) Bylaws
4.1(1) Instruments defining the rights of securities holders,
including indentures
10.1(1) Material contracts
11.1(2) Statement of computation of per share earnings
27.1 Financial Data Schedules.
</TABLE>
------------
(1) Filed with the Company's Registration Statement on Form S-1,
File No. 333-41121, declared effective on February 12, 1998,
incorporated herein by reference.
(2) See Note 4 to Consolidated Financial Statements, "Net Income
Per Share."
17.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS OF CASH
FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,583,000
<SECURITIES> 43,239,000
<RECEIVABLES> 14,146,000
<ALLOWANCES> (550,000)
<INVENTORY> 0
<CURRENT-ASSETS> 72,220,000
<PP&E> 12,008,000
<DEPRECIATION> 6,369,000
<TOTAL-ASSETS> 85,281,000
<CURRENT-LIABILITIES> 19,146,000
<BONDS> 0
0
0
<COMMON> 16,000
<OTHER-SE> 62,226,000
<TOTAL-LIABILITY-AND-EQUITY> 85,281,000
<SALES> 28,832,000
<TOTAL-REVENUES> 28,832,000
<CGS> 16,254,000
<TOTAL-COSTS> 9,929,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 316,000
<INCOME-PRETAX> 2,992,000
<INCOME-TAX> 1,257,000
<INCOME-CONTINUING> 1,735,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,735,000
<EPS-PRIMARY> .126
<EPS-DILUTED> .121
</TABLE>
