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As filed with the Securities and Exchange Commission on December 15, 2000
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 15, 2000
FIRST CONSULTING GROUP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 000-23651 95-3539020
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
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111 WEST OCEAN BOULEVARD, 4TH FLOOR
LONG BEACH, CALIFORNIA 90802
(Address of Principal Executive Offices including Zip Code)
(562) 624-5200
(Registrant's Telephone Number, Including Area Code)
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ITEM 5. OTHER EVENTS
The Registrant is filing this current report on Form 8-K to make
generally available certain information concerning the risk factors affecting
the business, financial condition or operating results of the Registrant and for
purposes of enabling the Registrant to incorporate the following information in
its Registration Statement on Form S-3 (File No. 333-51948). The following
information set forth below is substantially similar to the information
contained in such Registration Statement.
RISK FACTORS
OUR BUSINESS FACES SIGNIFICANT RISKS. THE RISKS DESCRIBED BELOW MAY NOT
BE THE ONLY RISKS WE FACE. ADDITIONAL RISKS THAT WE DO NOT YET KNOW OF OR THAT
WE CURRENTLY THINK ARE IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. IF
ANY OF THE EVENTS OR CIRCUMSTANCES DESCRIBED IN THE FOLLOWING RISKS ACTUALLY
OCCURS, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE
MATERIALLY ADVERSELY AFFECTED AND THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE. YOU SHOULD CAREFULLY CONSIDER AND EVALUATE ALL OF THE INFORMATION IN
THIS PROSPECTUS, INCLUDING THE RISK FACTORS LISTED BELOW.
THERE ARE VARIOUS FACTORS WHICH MAY CAUSE OUR NET REVENUES, OPERATING RESULTS
AND CASH FLOWS TO FLUCTUATE.
Our net revenue, operating results and cash flows may fluctuate significantly
because of a number of factors, many of which are outside our control. These
factors may include:
- Losing one or more significant clients
- Fluctuations in market demand for our services, consultant hiring and
utilization
- Delays in securing and completing client engagements
- Timing and collection of payments and new client engagements
- Increased competition and pricing pressures
- Losing key personnel and other employees
- Changes in our, and our competitor's, business strategy, pricing and
billing policies
Timing of certain general and administrative expenses
- Consummating an acquisition and the costs of integrating acquired
operations
- Variability in the number of billable days in each quarter
- Availability of foreign net operating losses and other credits against
our earnings
- International currency fluctuations
A substantial portion of our expenses, particularly personnel and related costs,
depreciation, office rent and occupancy costs, are relatively fixed. One or more
of the foregoing factors may cause our operating expenses to be relatively high
during any given period. In addition, we bill certain of our services on a
fixed-price basis, and any assignment delays or expenditures of time beyond that
projected for the assignment could result in write-offs of client billings.
Significant write-offs could materially adversely effect our business, financial
condition and results of operations. Based on the preceding factors, we may
experience a shortfall in revenue or earnings or otherwise fail to meet public
market expectations,
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which could materially adversely effect our business, financial condition and
the market price of our common stock.
In particular, for the fiscal quarters ended December 31, 1999, March 31, 2000,
June 30, 2000 and September 30, 2000, we reported net losses (including
non-recurring items) of $354,000, $1,707,000, $3,864,000 and $6,178,000,
respectively. We cannot assure you that we will return to profitability in the
future, which could materially adversely affect our business, financial
condition and the market price of our common stock.
THE LENGTH OF TIME REQUIRED TO ENGAGE A CLIENT AND TO COMPLETE AN ASSIGNMENT MAY
BE UNPREDICTABLE AND COULD NEGATIVELY IMPACT OUR NET REVENUES AND OPERATING
RESULTS.
The timing of client engagements and service fulfillment is not predictable with
any degree of accuracy. Prior engagement cycles are not necessarily an
indication of the timing of future client engagements or revenues.
Prior to client engagements, we typically spend a substantial amount of time and
resources
- identifying strategic or business issues facing the client,
- defining engagement objectives,
- gathering information,
- preparing proposals and
- negotiating contracts.
We may be required to hire new consultants before securing a client engagement.
Clients may defer committing to new assignments for any length of time and for
any reason. Such deferrals could require us to maintain a significant number of
under-utilized consultants during any given period. In addition, failing to
procure an engagement after spending such time and resources could materially
adversely effect our business, financial condition and results of operations.
In particular, the outsourcing business which we conduct through our subsidiary,
FCG Management Services, has very long lead times, requiring us to spend a
substantial amount of time and resources in attempting to secure an outsourcing
engagement. We cannot predict whether the investment of time and resources will
result in a new outsourcing engagement or, if the engagement is secured, that
the engagement will be on terms favorable to us.
The length of time required to complete an assignment often depends on factors
outside our control, including:
- Existing information systems at the client site;
- Changes or the anticipation of changes in the regulatory environment
affecting healthcare and pharmaceutical organizations;
- Changes in the management or ownership of the client;
- Budgetary cycles and constraints;
- Availability of personnel and other resources; and
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- Consolidation in the healthcare and pharmaceutical industries.
IF WE ARE UNABLE TO GENERATE ADDITIONAL REVENUE FROM OUR EXISTING CLIENTS, OUR
BUSINESS MAY BE NEGATIVELY AFFECTED.
Our success depends on obtaining additional engagements from our existing
clients. A substantial portion of our revenue is derived from services provided
to our existing clients. The loss of a small number of clients may result in a
material decline in revenues and cause us to fail to meet public market
expectations of our financial performance and operating results. If we
materially fail to generate additional revenues from our existing clients it may
materially adversely effect our business, financial condition and results of
operations.
IF WE FAIL TO MEET CLIENT EXPECTATIONS IN THE PERFORMANCE OF OUR SERVICES, OUR
BUSINESS COULD SUFFER.
Our services often involve complex information systems and software, which are
critical to the clients' operations. Our failure to meet client expectations in
the performance of our services, including the quality, cost and timeliness of
our services, may damage our reputation in the healthcare and pharmaceutical
industries and adversely affect our ability to attract and retain clients. If a
client is not satisfied with our services, we will generally spend additional
human and other resources at our own expense to ensure client satisfaction. Such
expenditures will typically result in a lower margin on such engagements and
could materially adversely effect our business, financial condition and results
of operations.
In the course of providing our services, we will often recommend the use of
other software and hardware products. These products may not perform as expected
or contain defects. If this occurs, our reputation could be damaged and we could
be subject to liability. We attempt contractually to limit our exposure to
potential liability claims. Such limitations may not be effective. A successful
liability claim brought against us may adversely affect our reputation in the
healthcare and pharmaceutical industries and could have a material adverse
effect on our business, financial condition and results of operations. Although
we maintain liability insurance, such insurance may not provide adequate
coverage for successful claims against us.
OUR OUTSOURCING ACTIVITIES ENTAIL SIGNIFICANT ENGAGEMENTS IN WHICH WE WILL
COMMIT TO SPECIFIC SERVICE LEVEL AGREEMENTS THAT DEFINE OUR RESPONSIBILITIES
OVER THE CONTRACTED PERIOD.
Any failure on the part of us to meet contracted service levels may result in
financial penalty or default of the contract, and may have a material adverse
effect on us. Our outsourcing engagements are typically performed on a fixed
price basis where we hire part or all of a client's information technology
personnel. We cannot assure you that we will be able to retain these
individuals, and effectively hire additional personnel as needed to meet the
obligations of our contract. Our ability to achieve profitability in our
outsourcing activities is dependent upon the accuracy of our forecasting and our
ability to deliver the contracted scope of services within the constraints of
the fixed price contract. Any failure by us in these areas may have a material
adverse effect on the profitability of our outsourcing business.
In addition, our outsourcing agreements require that we invest significant
amounts of time and resources in order to win the engagement, transition the
client's information technology department to our management and complete the
initial transformation of our client's information technology functioning to
meet agreed-upon service levels. Often, we recover this investment through
payments over the life of the outsourcing agreement. If we are unable to achieve
agreed-upon service levels or otherwise breach the terms of our outsourcing
agreements, the clients may have rights to terminate the agreements and we may
be unable to recover our investments. In the case of our outsourcing agreement
with the New York &
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Presbyterian Hospital, this investment amounts to almost $10 million, which we
will recover over the seven-year term of that agreement. Any failure by us to
recover these investments may have a material adverse effect on our financial
condition, results of operations and price of our common stock.
WE MAY BE UNABLE TO ATTRACT AND RETAIN A SUFFICIENT NUMBER OF QUALIFIED
EMPLOYEES.
Our business is labor-intensive and requires highly skilled employees. Most of
our consultants possess extensive expertise in healthcare, insurance,
pharmaceutical, information technology and consulting fields. To serve a growing
client base, we must continue to recruit and retain qualified personnel with
expertise in each of these areas. Competition for such personnel is intense. We
compete for such personnel with management consulting firms, healthcare and
pharmaceutical organizations, software firms and other businesses. Many of these
entities have substantially greater financial and other resources than we do or
can offer more attractive compensation packages to candidates, including salary,
bonuses, stock and stock options. We may not be able to recruit and retain a
sufficient number of qualified personnel to serve existing and new clients. If
we fail to recruit and retain a sufficient number of qualified personnel, our
ability to expand our client base or services could be impaired and our
business, financial condition and results of operations could be adversely
effected.
THE LOSS OF OUR VICE PRESIDENTS AND EXECUTIVE OFFICERS COULD NEGATIVELY AFFECT
US.
Our performance depends on the continued service of our vice presidents,
executive officers and senior managers. In particular, we depend on such persons
to secure new clients and engagements and to manage our business and affairs.
The loss of such persons could result in disruption of our business and stock
price volatility and could have a material adverse effect on our business,
financial condition and results of operations. We have not entered into
long-term employment contracts with any of our employees and do not maintain key
employee life insurance.
CONTINUED OR INCREASED EMPLOYEE TURNOVER COULD NEGATIVELY AFFECT OUR BUSINESS.
We have experienced employee turnover as a result of:
- dependence on lateral hiring of consultants,
- travel demands imposed on our consultants,
- loss of employees to competitors and clients, and the
growth in the number of internet-related companies.
Continued or increased employee turnover could materially adversely affect our
business, financial condition and results of operations. In addition, many of
our consultants develop strong business relationships with our clients. We
depend on these relationships to generate additional assignments and
engagements. The loss of a substantial number of consultants could erode our
client base and decrease our revenue.
IF WE ARE UNABLE TO MANAGE OUR GROWTH, OUR BUSINESS MAY BE NEGATIVELY IMPACTED.
Our business has grown rapidly in recent years. This growth has placed new and
increased demands on our vice presidents and other management personnel. This
growth has also placed significant and increasing demands on our financial,
technical and operational resources and on our information systems. To manage
any future growth, we must (1) extend our financial reporting and information
management
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systems to a growing number of offices and employees, and (2) develop and
implement new procedures and controls to accommodate new operations, services
and clients. Increasing operational and administrative demands may make it
difficult for our vice presidents to engage in business development activities.
Adding a significant number of new employees and offices may also impair our
ability to maintain our service delivery standards and corporate culture. In
addition, we have in the past changed, and may in the future change, our
organizational structure and business strategy. Such changes may result in
operational inefficiencies and delays in delivering our services. Such changes
could also cause a disruption in our business and could have a material adverse
effect on our business, financial condition and results of operations. If we
fail to effectively manage our growth, our business, financial condition and
results of operations could be adversely affected.
WE COULD BE NEGATIVELY IMPACTED IF WE FAIL TO SUCCESSFULLY INTEGRATE THE
BUSINESSES WE ACQUIRE.
We intend to grow, in part, by acquiring complementary professional practices
within the healthcare and pharmaceutical industries. In 1998, we completed three
acquisitions; in 1999, we completed two more acquisitions; and through July 31,
2000 we have completed one additional acquisition. Integrating acquired
operations is a complex, time-consuming and expensive process. All acquisitions
involve risks that could materially and adversely effect our business and
operating results. These risks include
- distracting management from our business,
- losing key personnel and other employees,
- losing clients,
- costs, delays and inefficiencies associated with integrating acquired
operations and personnel, and
- amortizing the cost of acquired assets and goodwill.
Acquired businesses may not enhance our services, provide us with increased
client opportunities or result in growth. Combining acquired operations with us
may result in lower overall operating margins, greater stock price volatility
and quarterly earnings fluctuations. Cultural incompatibilities, career
uncertainties and other factors associated with such acquisitions may result in
the loss of employees and clients. Failing to acquire and successfully integrate
complementary practices could materially adversely effect our business,
financial condition and results of operations.
OUR INTERNATIONAL OPERATIONS CREATE SPECIALIZED RISKS THAT CAN NEGATIVELY AFFECT
US.
We provide our services to international clients. Expanding into international
markets will require us to
- spend a significant amount of management, human and financial resources,
- hire additional personnel, and
- establish international offices.
We may be unable to recruit and retain a sufficient number of qualified
consultants in each country in which we intend to conduct our business. If we
fail to recruit and retain qualified employees, our ability to expand
internationally may be impaired and our business, financial condition and
results of operations could be adversely effected. Our international operations
are subject to a variety of risks, including:
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- Difficulties in creating international market demand for our services;
- Difficulties and costs of tailoring our services to each individual
country's healthcare and pharmaceutical market needs;
- Unfavorable pricing and price competition;
- Currency fluctuations;
- Longer payment cycles in some countries and difficulties in collecting
international accounts receivables;
- Difficulties in enforcing contractual obligations and intellectual property
rights;
- Adverse tax consequences;
- Increased costs associated with maintaining international marketing efforts
and offices;
- Adverse changes in regulatory requirements; and
- Economic instability.
We have been performing services in Europe for international clients for three
years, and we have not yet been profitable in providing those services. We have
recently announced that we will cease performing healthcare consulting services
in Europe, although we will continue to provide our services in Europe to our
pharmaceutical clients. We cannot assure you that we will be able to achieve
profitability in our European pharmaceutical services, which may materially
adversely effect our financial condition, results of operations and price for
our common stock.
Any one or all of these factors may cause increased operating costs, lower than
anticipated financial performance and may materially adversely effect our
business, financial condition and results of operations.
IF WE DO NOT COMPETE EFFECTIVELY IN THE HEALTHCARE AND PHARMACEUTICAL
INFORMATION SERVICES INDUSTRIES, THEN OUR BUSINESS MAY BE NEGATIVELY IMPACTED.
The market for healthcare and pharmaceutical information technology consulting
is very competitive. We have competitors that provide some or all of the
services we provide. In strategic consulting services, we compete with
international consulting firms, regional and specialty consulting firms and the
consulting groups of international accounting firms such as KPMG LLP, Ernst &
Young LLP, Deloitte & Touche LLP, PricewaterhouseCoopers, LLP and Andersen
Consulting.
In integration and co-management services, we compete with:
- information system vendors such as HBO & Company, Inc., Shared Medical
Systems Corporation and Integrated Systems Solution Corporation, a division
of International Business Machines Corporation,
- service groups of computer equipment companies,
- systems integration companies such as Electronic Data Systems Corporation,
Perot Systems Corporation, CAP Gemini America, Inc. and Computer Sciences
Corporation,
- clients' internal information management departments,
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- other healthcare consulting firms such as DAOU Systems Inc. and Superior
Consultant Holdings Corporation and
- other pharmaceutical consulting firms such as Andersen Consulting,
Technology Solutions Corporation, Cap Gemini America, Computer Sciences
Corporation's consulting division, and Cambridge Technology Partners, Inc.
In e-health and e-commerce related services, we compete with the traditional
competitors outlined above, as well as newer Internet product and service
companies such as Razorfish, Scient, TriZetto, and Viant.
Many of our competitors have significantly greater financial, human and
marketing resources than us. As a result, such competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
demands, or to devote greater resources to the development, promotion, sale, and
support of their products and services than we do. In addition, as healthcare
organizations become larger and more complex, our larger competitors may be
better able to serve the needs of such organizations. If we do not compete
effectively with current and future competitors, we may be unable to secure new
and renewed client engagements, or we may be required to reduce our rates in
order to complete effectively. This could result in a reduction in our revenues,
resulting in lower earnings or operating losses, and otherwise materially
adversely effecting our business, financial condition and results of operations.
IF WE FAIL TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH VENDORS OF SOFTWARE AND
HARDWARE PRODUCTS, IT COULD HAVE A NEGATIVE EFFECT ON OUR ABILITY TO SECURE
ENGAGEMENTS.
We have a number of relationships with vendors. For example, we have established
a non-exclusive partnership arrangement with Documentum, Inc. Documentum markets
document management software applications largely to the pharmaceutical
industry. We believe that our relationships with this vendor and others are
important to our sales, marketing, and support activities. We often are engaged
by vendors or their customers to implement or integrate vendor products based on
our relationship with that vendor. If we fail to maintain our relationships with
Documentum and other vendors or fails to establish additional new relationships,
our business could be materially adversely effected.
OUR RELATIONSHIPS WITH AND INVESTMENTS IN VENDORS OF SOFTWARE AND HARDWARE
PRODUCTS COULD HAVE A NEGATIVE IMPACT ON OUR ABILITY TO SECURE CONSULTING
ENGAGEMENTS.
Our growing number of relationships with software and hardware vendors could
result in clients perceiving that we are not independent from those software and
hardware vendors. Our ability to secure assessment and other consulting
engagements is often dependent, in part, on our being independent of software
and hardware solutions that we may review, analyze or recommend to clients. If
clients believe that we are not independent of those software and hardware
vendors, clients may not engage us for certain consulting engagements relating
to those vendors, which could materially adversely effect our business,
financial condition and results of operations.
This is particularly true since we announced the formation of our First Ventures
venture capital fund. First Ventures has made initial investments for us in
software vendors such as Confer Software, Inc., Sentillion, Inc. and Rover
Software, Inc. First Ventures will invest in other companies during 2000 and
beyond. Any of First Ventures' investments may be in software or hardware
vendors who sell and license products to healthcare, pharmaceutical and other
companies that may be our clients. If clients believe that we are not
independent of the companies that First Ventures invests in, clients may not
engage us for certain consulting engagements relating to those companies, which
could materially adversely effect our business, financial condition and results
of operations.
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WE MAY EXPERIENCE LOSSES IN OUR INVESTMENTS IN FIRST VENTURES.
We have committed up to $15 million to invest through First Ventures, our
venture capital fund formed in 1999. First Ventures invests in early-stage
companies with limited capitalization and no public market for their shares.
Many of these companies have never earned profits or, in some cases, realized
any revenues on sales of products or services. We are not assured that these
companies will be successful or that we will earn any returns on our
investments, and could suffer a loss of our entire investment in First Ventures.
Even if the companies in which First Ventures invests are successful, we are not
assured that it will be able to sell our shares in those companies or otherwise
realize any value in the investments, or that any sale will be on terms
favorable to First Ventures and us. If we experience investment losses in First
Ventures, this could materially adversely effect our business, financial
condition and results of operations.
IF WE FAIL TO KEEP PACE WITH REGULATORY AND TECHNOLOGICAL CHANGES OUR BUSINESS
COULD BE MATERIALLY ADVERSELY AFFECTED.
The healthcare and pharmaceutical industries are subject to regulatory and
technological changes that may affect the procurement practices and operations
of healthcare and pharmaceutical organizations. During the past several years,
the healthcare and pharmaceutical industries have been subject to an increase in
governmental regulation and reform proposals. These reforms could increase
governmental involvement in the healthcare and pharmaceutical industries, lower
reimbursement rates or otherwise change the operating environment of our
clients. Healthcare and pharmaceutical organizations may react to these
proposals by curtailing or deferring investments, including those for our
services. We cannot predict with any certainty what impact, if any, such
legislative reforms could have on our business.
Technological change in the network and application markets has created high
demand for consulting, implementation and integration services. If the pace of
technological change were to diminish, we could experience a decrease in demand
for our services. Any material decrease in demand would materially adversely
effect our business, financial condition and results of operations.
CHANGES IN THE HEALTHCARE AND PHARMACEUTICAL INDUSTRIES COULD NEGATIVELY IMPACT
OUR REVENUES.
We derive a substantial portion of all of our revenue from clients in the
healthcare industry. As a result, our business, financial condition and results
of operations are influenced by conditions affecting this industry, particularly
current trends towards consolidation among healthcare and pharmaceutical
organizations. Such consolidation may reduce the number of existing and
potential clients for our services. In addition, the resulting organizations
could have greater bargaining power, which could erode the current pricing
structure for our services. The reduction in the size of our target market or
our failure to maintain our pricing strategies could have a material adverse
effect on our business, financial condition and results of operations.
A substantial portion of our revenues has come from companies in the
pharmaceutical business. Our revenues are, in part, linked to the pharmaceutical
industry's research and development expenditures. Should any of the following
events occur in the pharmaceutical industry, our business could be negatively
affected in a material way:
- The industry's general economic environment changes adversely;
- Companies continue to consolidate; or
- Research and development expenditures or pharmaceutical companies'
expenditures on technology in general decrease.
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A trend in the pharmaceutical industry is for companies to "outsource" either
large information technology-dependent projects or their information systems
staffing requirements. Outsourcing means that, rather than utilize its own
employees, a company contracts with a third party to undertake an entire project
or to provide technical personnel to augment its own staff. We benefit when
pharmaceutical companies outsource to us, but may lose significant future
business when pharmaceutical companies outsource to our competitors. If this
outsourcing trend slows down or stops, or if pharmaceutical companies direct
their business away from us, our financial condition and results of operations
could be impacted in a materially adverse way.
WE MAY BE UNABLE TO EFFECTIVELY PROTECT OUR PROPRIETARY INFORMATION AND
PROCEDURES.
We must protect our proprietary information, including our proprietary
methodologies, research, tools, software code and other information. To do this,
we rely on a combination of copyright and trade secret laws and confidentiality
procedures to protect our intellectual property. These steps may not protect our
proprietary information. In addition, the laws of certain countries do not
protect or enforce proprietary rights to the same extent, as do the laws of the
United States. We are currently providing our services to clients in
international markets. Our proprietary information may not be protected to the
same extent as provided under the laws of the United States, if at all. The
unauthorized use of our intellectual property could have a material adverse
effect on our business, financial condition or results of operations.
WE MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
Our success depends, in part, on not infringing patents, copyrights and other
intellectual property rights held by others. We do not know whether patents held
or patent applications filed by third parties may force us to alter our methods
of business and operation or require us to obtain licenses from third parties.
If we attempt to obtain such licenses, we do not know whether we will be granted
licenses or whether the terms of those licenses will be fair or acceptable to
us. Third parties may assert infringement claims against us in the future. Such
claims may result in protracted and costly litigation, penalties and fines,
regardless of the merits of such claims.
OUR MANAGEMENT MAY BE ABLE TO EXERCISE CONTROL OVER MATTERS REQUIRING
STOCKHOLDER APPROVAL.
Our current officers, directors, and others affiliates beneficially own
approximately 50% of our outstanding shares of common stock. As a result, our
existing management, if acting together, may be able to exercise control over or
significantly influence matters requiring stockholder approval, including the
election of directors, mergers, consolidations, sales of all or substantially
all of our assets, issuance of additional shares of stock and approval of new
stock and option plans.
THE PRICE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED BY MARKET VOLATILITY.
The trading price of our common stock fluctuates significantly. Since our common
stock began trading publicly, the reported sale price of our common stock on the
Nasdaq National Market has been as high as $29.13 and as low as $4.06 per share.
This price may be influenced by many factors, including:
- our performance and prospects;
- the depth and liquidity of the market for our common stock;
- investor perception of us and the industries in which we operate;
- changes in earnings estimates or buy/sell recommendations by analysts;
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- general financial and other market conditions; and
- domestic and international economic conditions.
In addition, public stock markets have experienced, and are currently
experiencing, extreme price and trading volume volatility, particularly in high
technology sectors of the market. This volatility has significantly affected the
market prices of securities of many companies for reasons frequently unrelated
to or disproportionately impacted by the operating performance of these
companies. These broad market fluctuations may adversely affect the market price
of our common stock. As a result, we may be unable to raise capital or use our
stock to acquire businesses on attractive terms and investors may be unable to
resell their shares of our common stock at or above their purchase price.
IF OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES LITIGATION
WHICH IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF RESOURCES.
If our stock price experiences periods of volatility, our security holders may
initiate securities class action litigation against us. If we become involved in
this type of litigation it could be very expensive and divert our management's
attention and resources, which could materially and adversely affect our
business and financial condition.
OUR CHARTER DOCUMENTS, DELAWARE LAW AND STOCKHOLDERS RIGHTS PLAN WILL MAKE IT
MORE DIFFICULT TO ACQUIRE US AND MAY DISCOURAGE TAKE-OVER ATTEMPTS AND THUS
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Our Board of Directors has the authority to issue up to 10,000,000 shares of
undesignated preferred stock, to determine the powers, preferences and rights
and the qualifications, limitations or restrictions granted to or imposed upon
any unissued series of undesignated preferred stock and to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by our stockholders. The preferred stock could be issued
with voting, liquidation, dividend and other rights superior to the rights of
our common stock. Furthermore, any preferred stock may have other rights,
including economic rights, senior to our common stock, and as a result, the
issuance of any preferred stock could depress the market price of our common
stock.
In addition, our certificate of incorporation eliminates the right of
stockholders to act without a meeting and does not provide cumulative voting for
the election of directors. Our certificate of incorporation also provides for a
classified board of directors. The ability of our Board of Directors to issue
preferred stock and these other provisions of our certificate of incorporation
and bylaws may have the effect of deterring hostile takeovers or delaying
changes in control or management.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which could delay or prevent a change in control of us, impede
a merger, consolidation or other business combination involving us or discourage
a potential acquirer from making a tender offer or otherwise attempting to
obtain control. Any of these provisions which may have the effect of delaying or
preventing a change in control could adversely effect the market value of our
common stock.
In 1999, our Board of Directors adopted a share purchase rights plan that is
intended to protect our stockholders' interests in the event we are confronted
with coercive takeover tactics. Pursuant to the stockholders rights plan, we
distributed "rights" to purchase shares of a newly created series of preferred
stock. Under some circumstances these rights become the rights to purchase
shares of our common stock or securities of an acquiring entity at one-half the
market value. The rights are not intended to prevent
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our takeover, rather they are designed to deal with the possibility of
unilateral actions by hostile acquirers that could deprive our Board of
Directors and stockholders of their ability to determine our destiny and obtain
the highest price for our common stock.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
Not applicable.
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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.
FIRST CONSULTING GROUP, INC.
By: /s/ Robert R. Holmen
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Name: Robert R. Holmen
Title: General Counsel
(Principal financial and accounting officer)
Date: December 15, 2000
