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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File Number: 000-24193
ATLANTIC DATA SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
MASSACHUSETTS 04-2696393
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
ONE BATTERYMARCH PARK
QUINCY, MASSACHUSETTS 02169
(Address of Principal Executive Offices) (Zip Code)
(617) 770 - 3333
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of November 9, 2000, there were 13,009,461 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.
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ATLANTIC DATA SERVICES, INC.
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000 (Unaudited)
and March 31, 2000 3
Condensed Consolidated Statement of Operations for the Three and Six Months
Ended September 30, 2000 and 1999 (Unaudited) 4
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended September 30, 2000 and 1999 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk 13
PART II - OTHER INFORMATION
ITEM 2: Changes in Securities and Use of Proceeds 15
ITEM 4: Submission of Matters to Vote of Security Holders 15
ITEM 6: Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
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PART I
ITEM 1: FINANCIAL INFORMATION
ATLANTIC DATA SERVICES, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
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September 30, March 31,
2000 2000
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $34,235 $38,347
Accounts receivable, net of allowances for doubtful accounts of
$590 at September 30, 2000 and $650 at March 31, 2000 7,094 5,514
Costs and estimated earnings in excess of billings 82 --
Prepaid expenses 174 103
Deferred taxes 695 845
------- -------
Total current assets 42,280 44,809
Long-term investment 3,000 --
Property and equipment, net 781 919
Other assets 352 387
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TOTAL ASSETS $46,413 $46,115
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 835 $ 757
Accrued expenses and other liabilities 3,173 3,997
Billings in excess of costs and estimated earnings -- 42
Income taxes payable 385 343
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Total current liabilities 4,393 5,139
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Commitments
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 authorized, no shares
issued or outstanding -- --
Common stock, $.01 par value, 60,000,000 shares authorized,
13,121,461 shares issued and 13,009,461 outstanding at
September 30, 2000 and 13,087,599 shares issued and
12,975,599 outstanding at March 31, 2000 131 131
Additional paid-in capital 26,870 26,737
Retained earnings 15,044 14,133
Treasury stock (112,000 shares carried at cost) (25) (25)
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Total stockholders' equity 42,020 40,976
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $46,413 $46,115
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See accompanying Notes to Condensed Consolidated Financial Statements.
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ATLANTIC DATA SERVICES, INC.
Condensed Consolidated Statement of Operations
(in thousands, except per share data)
(Unaudited)
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Three Months Ended Six Months Ended
September 30, September 30,
------------------------- --------------------------
2000 1999 2000 1999
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Revenues $ 10,467 $ 6,789 $19,995 $17,040
Cost of revenues 6,783 6,037 13,476 13,617
-------- -------- ------- -------
Gross profit 3,684 752 6,519 3,423
-------- -------- ------- -------
Operating expenses:
Sales and marketing 1,294 721 2,299 1,400
General and administrative 1,796 1,812 3,622 3,850
-------- -------- ------- -------
Total operating expenses 3,090 2,533 5,921 5,250
-------- -------- ------- -------
Income (loss) from operations 594 (1,781) 598 (1,827)
Interest income, net 571 439 1,107 845
-------- -------- ------- -------
Income (loss) before provision (credit)
for income taxes 1,165 (1,342) 1,705 (982)
Provision (credit) for income taxes 544 (537) 794 (381)
-------- -------- ------- -------
Net income (loss) $ 621 $ (805) $ 911 $ (601)
======== ======== ======= =======
Basic earnings per share $ 0.05 $ (0.06) $ 0.07 $ (0.05)
======== ======== ======= =======
Diluted earnings per share $ 0.05 $ (0.06) $ 0.07 $ (0.05)
======== ======== ======= =======
Shares used in computing earnings per
share (basic) 12,987 12,907 12,986 12,907
======== ======== ======= =======
Shares used in computing earnings per
share (diluted) 13,228 12,907 13,231 12,907
======== ======== ======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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ATLANTIC DATA SERVICES, INC.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
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Six Months Ended
September 30,
------------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 911 $ (601)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 250 327
Deferred taxes 150 --
Change in assets and liabilities:
Accounts receivable (1,580) 3,018
Costs and estimated earnings in excess of billings (82) --
Prepaid expenses and other assets (36) (792)
Accounts payable 78 (254)
Accrued expenses and other liabilities (824) (1,126)
Billings in excess of costs and estimated earnings (42) --
Federal and state income taxes 42 (417)
-------- --------
Net cash provided by (used in) operating activities (1,133) 155
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term investment (3,000)
Purchase of property and equipment (112) (177)
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Net cash provided by (used in) investing activities (3,112) (177)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligation -- (11)
Proceeds from exercise of stock options under stock option and
employee stock purchase plans 133 112
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Net cash provided by financing activities 133 101
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Net increase (decrease) in cash and cash equivalents (4,112) 79
Cash and cash equivalents, beginning of period 38,347 37,326
-------- --------
Cash and cash equivalents, end of period $ 34,235 $ 37,405
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Taxes $ 735 $ 776
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</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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ATLANTIC DATA SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by Atlantic Data Services, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended September 30, 2000
are not necessarily indicative of the results that may be expected for future
periods of the full fiscal year. These Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated Financial
Statements and related notes included in the Company's Annual Report on Form
10-K for the year ended March 31, 2000.
The balance sheet at March 31, 2000 has been derived from the audited financial
statements at that date, but does not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company primarily derives its revenue from consulting services under time
and material billing arrangements. Under these arrangements, revenue is
recognized as the services are provided. Deferred revenue pertains to time and
material billing arrangements and represents cash collected in advance of the
performance of services.
Revenue on fixed price contracts is recognized using the percentage of
completion method of accounting and is adjusted monthly for the cumulative
impact of any revision in estimates. The Company determines the percentage of
its contracts by comparing costs incurred to date to total estimated costs.
Contract costs include all direct labor and expenses related to the contract
performance. An asset, "Costs and estimated earnings in excess of billings,"
represents revenues recognized in excess of amounts billed. The liability,
"Billings in excess of costs and estimated earnings," represents billings in
excess of revenues recognized.
Included in revenues are reimbursable contract-related travel and entertainment
expenses, which are separately billed to clients.
Earnings Per Share
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"). FAS 128 requires the presentation of two
amounts, basic earnings per share and diluted earnings per share.
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3. EARNINGS PER SHARE
The following table sets forth the computation of basic earnings per share and
diluted earnings per share for the three and six months ended September 30, 2000
and 1999:
<TABLE>
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Three Months Ended
September 30,
---------------------------
2000 1999
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(in thousands, except
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per share data)
Numerator:
Net income (numerator for basic earnings per share and
diluted earnings per share) $ 621 $ (805)
-------- ---------
Denominator:
Denominator for basic earnings per share - weighted average
shares 12,987 12,907
Effect of dilutive securities:
Employee stock options 241 --
-------- ---------
Denominator for diluted earnings per share - adjusted
weighted average and assumed conversions 13,228 12,907
-------- ---------
Basic earnings per share $ 0.05 $ (0.06)
======== =========
Diluted earnings per share $ 0.05 $ (0.06)
======== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-------------------------------
2000 1999
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(in thousands, except
per share data)
<S> <C> <C>
Numerator:
Net income (numerator for basic earnings per share and
diluted earnings per share) $ 911 $ (601)
-------- ---------
Denominator:
Denominator for basic earnings per share - weighted average
shares 12,986 12,907
Effect of dilutive securities:
Employee stock options 245 --
-------- ---------
Denominator for diluted earnings per share - adjusted
weighted average and assumed conversions 13,231 12,907
-------- ---------
Basic earnings per share $ 0.07 $ (0.05)
======== =========
Diluted earnings per share $ 0.07 $ (0.05)
======== =========
</TABLE>
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In addition, as of September 30, 2000, there were options outstanding to
purchase 1,846,875 shares that are potentially dilutive.
4. MAJOR CUSTOMERS
The nature of the Company's services results in the Company deriving significant
amounts of revenue from certain customers in a particular period. For the
quarter ended September 30, 2000, two customers accounted for 27.1% and 14.9% of
the Company's revenues. For the quarter ended September 30, 1999, two customers
accounted for 32.6% and 11.5% of the Company's revenues.
5. LONG-TERM INVESTMENT
During the quarter ended September 30, 2000, we made a $3 million preferred
stock investment, representing a minority interest, in S2 Systems, Inc., a
software solution provider in the banking and diversified financial services
markets.
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ATLANTIC DATA SERVICES, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Atlantic Data Services, Inc. ("We" or "ADS") provides information technology
("IT") strategy consulting and systems integration services to customers
exclusively in the financial services industry, primarily banks. We offer IT
solutions to the business challenges faced by financial services companies
through our in-depth financial services experience, technological expertise and
project management skills. Our service offerings are organized around four
practice areas: e-Business, Customer Relationship Management ("CRM"), IT
Strategy and Consulting, and Conversions and Consolidations.
Our revenues are derived primarily from professional fees billed to customers on
a time and materials basis, or, in certain instances, on a fixed price basis.
Included in revenues are reimbursable contract-related travel and entertainment
expenses, which are separately billed to customers. Substantially all of our
contracts, other than fixed price contracts, are terminable by the customer
following limited notice and without significant penalty to the customer.
Revenues from fixed price contracts represented approximately 3.1% and 0% of our
revenues for the quarters ended September 30, 2000 and 1999, respectively.
We have derived, and expect to continue to derive, a significant portion of our
revenues from a relatively limited number of customers. Revenues from our five
largest customers for the quarters ended September 30, 2000 and 1999 were 69.7%
and 66.1%, respectively, as a percentage of revenues. For the quarter ended
September 30, 2000, FleetBoston Financial Corporation, Citizens Banking
Corporation, Corillian Corp., Brokat Financial and NBT Bancorp accounted for
approximately 27.1%, 14.9%, 9.8%, 9.0% and 8.9%, respectively, of revenues. For
the quarter ended September 30, 1999, FleetBoston Financial Corporation,
Corillian Corp., Bank of Hawaii, UST Data Services, Inc. and SunTrust Services
Corporation accounted for approximately 32.6%, 11.5%, 8.4%, 7.2% and 6.3%,
respectively, of revenues.
Cost of revenues consists primarily of salaries and employee benefits for
personnel dedicated to customer assignments, fees paid to subcontractors for
work performed in connection with customer assignments, and reimbursable
contract-related travel and entertainment expenses incurred by us in connection
with the delivery of our services.
Sales and marketing expenses consist primarily of salaries, employee benefits,
travel expenses and promotional costs. General and administrative expenses
consist primarily of expenses associated with our management, finance and
administrative groups, including recruiting, training, depreciation and
amortization and occupancy costs.
OUTLOOK
Fiscal year 2001 continues to be a transition year for ADS and, due to the
impending completion of several conversion and consolidation projects, we
currently expect revenue in the third quarter of fiscal year 2001 to be in the
range of $8 million to $10 million. At these revenue levels, we currently expect
that net income (loss) would be in the range of $(.03) to $.03 per share. We
intend to address this revenue shortfall through a number of actions, including
continued investment in our practice areas, the roll out of our practice
offerings, and infrastructure changes. We also will continue to focus our
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recruitment and employment practices on attracting and retaining professionals
who are highly skilled in leading edge technologies.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Report on Form 10-Q includes forward-looking statements which are made
pursuant to the safe-harbor of the Private Securities Litigation Reform Act of
1995. You can identify these forward-looking statements when you see us using
words such as "expect," "anticipate," "believe," "intend," "may," "predict," and
other similar expressions. These forward-looking statements cover, among other
items: events, conditions and financial trends that may effect the Company's
future plans of operation, business strategy, growth of operations and financial
position, including statements relating to our revenue and net income (loss)
projections for the third quarter, sources of revenues, timing of revenues,
potential revenue shortfalls, capital expenditures, levels of professional
staff, investment in our practice areas and recruitment practices, and
sufficiency of cash and cash equivalent balances and the Year 2000 issue.
Forward-looking statements are not guarantees of future performance and are
necessarily subject to a number of risks and uncertainties, some of which are
beyond our control. Actual results could differ materially from those
anticipated as a result of any of the following factors:
* variations in our revenues and operating results which could cause our
results of operations to be below the expectations of public market analysts
and investors;
* our dependence on the financial services industry;
* the concentration of our revenues from a relatively limited number of
customers;
* the loss of a significant customer;
* our dependence on key personnel;
* the availability of professional staff as our business involves the delivery
of professional services which is labor-intensive;
* competition from other companies in the information technology and systems
integration market;
* rapid technological change and our ability to develop information technology
solutions that keep pace with such changes;
* our potential for contract liability;
* the risks associated with fixed price contracts; and
* equity control by management.
Because of these risks and uncertainties, the forward-looking events discussed
in this Report might not transpire.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in our revenues and operating results have occurred from quarter to
quarter and may continue to occur as a result of a number of factors. Quarterly
revenues and operating results can depend on:
* the number, size and scope of customer projects commenced and completed
during a quarter;
* changes in employee utilization rates;
* changes in average billing rates;
* the number of working days in a quarter;
* the timing of introduction of new service offerings, both by us and our
competitors;
* changes in pricing, both by us and our competitors;
* loss of a significant customer;
* loss of key personnel;
* other factors that adversely impact the financial services industry; and
* general economic conditions.
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The timing of revenues is difficult to forecast because our sales cycle is
relatively long, ranging from one to six months for new projects with existing
customers and three to six months for new customers, and may depend on factors
such as the size and scope of projects or other factors that adversely impact
the financial services industry and general economic conditions. In addition,
the relatively long length of our sales cycle may negatively impact the
operating results for any particular quarter as a result of increased sales and
marketing expenses without associated increases in revenues in the particular
quarter. Furthermore, many of our projects are, and may be in the future,
terminable without customer penalty. An unanticipated termination of a major
project or loss of a major customer could require us to maintain or terminate
underutilized employees, resulting in a higher than expected number of
unassigned persons or higher than expected severance expenses.
QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1999
REVENUES
Revenues increased 54.2% for the quarter ended September 30, 2000 over the
quarter ended September 30, 1999, from $6.8 million to $10.5 million. This
increase was predominantly due to an increase in volume of services delivered to
customers, as well as increased utilization rates.
COST OF REVENUES
Cost of revenues increased 12.4% to $6.8 million from $6.0 million for the
quarter ended September 30, 2000 compared to the quarter ended September 30,
1999, representing 64.8% and 88.9%, respectively, of revenues in each quarter.
The dollar increase in cost of revenues was primarily due to increased travel
expenses related to additional business activity. The decrease in cost of
revenues as a percentage of revenue is due to an increase in utilization rates.
SALES AND MARKETING
Sales and marketing expenses increased 79.5% to $1.3 million from $.7 million
for the quarter ended September 30, 2000 compared to the quarter ended September
30, 1999, representing 12.4% and 10.6% of revenues, respectively. This increase
resulted primarily from an increase in our sales and marketing group from 14
employees at September 30, 1999 to 23 employees at September 30, 2000, increased
investments in marketing initiatives and travel related expenses for the group.
GENERAL AND ADMINISTRATIVE
General and administrative expenses remained at $1.8 million for the quarter
ended September 30, 2000 and 1999, representing 17.2% and 26.7% of revenues,
respectively. The percentage change is due to increased revenues.
INTEREST INCOME, NET
Interest income, net increased $132,000 from $439,000 for the quarter ended
September 30, 1999 to $571,000 for the quarter ended September 30, 2000. This
increase was principally due to interest rate increases.
PROVISION FOR INCOME TAXES
The provision for income taxes increased $1.1 million to $544,000 from a credit
of $(537,000) for the quarter ended September 30, 2000 compared to the quarter
ended September 30, 1999, resulting in effective tax rates of 46.7% and (40.0)%,
respectively. The increase in the effective tax rate percentage
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is primarily due to permanent differences relating to meals and entertainment
expenses. Our rate may vary from period to period based on doing business in
areas with varying state and local statutory income tax rates and based on our
levels of profitability.
SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES
Revenues increased 17.3% for the six months ended September 30, 2000 over the
six months ended September 30, 1999, from $17.0 million to $20.0 million. This
increase was predominantly due to an increase in volume of services delivered to
customers, as well as increased utilization rates.
COST OF REVENUES
Cost of revenues decreased 1.0% to $13.5 million from $13.6 million for the six
months ended September 30, 2000 compared to the six months ended September 30,
1999, representing 67.4% and 79.9%, respectively, of revenues in each period.
The dollar decrease in cost of revenues was primarily due to a decrease in
billable personnel from 178 at September 30, 1999 to 162 at September 30, 2000,
partially offset by an increase in travel expenses related to additional
business activity. The decrease in cost of revenues as a percentage of revenues
is due to an increase in utilization rates.
SALES AND MARKETING
Sales and marketing expenses increased 64.2% to $2.3 million from $1.4 million
for the six months ended September 30, 2000 compared to the six months ended
September 30, 1999, representing 11.5% and 8.2% of revenues, respectively. This
increase resulted primarily from an increase in our sales and marketing group
from 14 employees at September 30, 1999 to 23 employees at September 30, 2000,
increased investments in marketing initiatives and travel related expenses for
the group.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased 5.9% to $3.6 million from $3.9
million for the six months ended September 30, 2000 and the six months ended
September 30, 1999, representing 18.1% and 22.6% of revenues, respectively. The
dollar decrease is primarily due to decreases in compensation expense, the
percentage change is primarily due to increased revenues.
INTEREST INCOME, NET
Interest income, net increased $262,000 from $845,000 for the six months ended
September 30, 1999 to $1.1 million for the six months ended September 30, 2000.
This increase was principally due to interest rate increases.
PROVISION FOR INCOME TAXES
The provision for income taxes increased $1.2 million to $794,000 from a credit
of $(381,000) for the six months ended September 30, 2000 compared to the six
months ended September 30, 1999, resulting in effective tax rates of 46.6% and
(38.7)%, respectively. The increase in the effective tax rate percentage is
primarily due to permanent differences relating to meals and entertainment
expenses. Our rate may vary from period to period based on doing business in
areas with varying state and local statutory income tax rates and based on our
levels of profitability.
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LIQUIDITY AND CAPITAL RESOURCES
We have no long-term debt and continue to operate primarily debt-free. Working
capital was $37.9 million at September 30, 2000. Our days sales in accounts
receivable at September 30, 2000 was 62 compared to 53 days at September 30,
1999. While we believe that the risk with respect to collection of accounts
receivable is minimized by the creditworthiness of our customers, primarily
banks and other financial institutions, and because of our credit and collection
policies, there can be no assurance that we will not encounter collection
problems in the future. We attempt to further minimize this risk by performing
ongoing credit valuations of our customers and maintaining an allowance for
potential credit losses. We believe that our allowance for doubtful accounts and
collection policies are adequate.
Capital expenditures for the six months ended September 30, 2000 of $112,000
were primarily to support our existing employees. Capital expenditures for the
remainder of fiscal 2001 are expected to be approximately $600,000 and will be
used principally for computers and other equipment.
We expect that existing cash and cash equivalent balances, together with cash
provided from operations, will be sufficient to meet the Company's working
capital and capital expenditure requirements for at least the next twelve
months.
To date, inflation has not had a material impact on the Company's financial
results.
LONG-TERM INVESTMENT
During the quarter ended September 30, 2000, we made a $3 million preferred
stock investment, representing a minority interest, in S2 Systems, Inc., a
software solution provider in the banking and diversified financial services
markets.
IMPACT OF YEAR 2000
To date, we have not experienced any significant problems with our service
offerings and products or internal information systems as it relates to the Year
2000 date change. We are not presently aware of any significant exposure arising
from potential third party failures. However, there can be no assurance that the
systems of other companies on which our systems or operations rely have been
successfully converted or that any failure of such parties to achieve Year 2000
compliance could not have an adverse effect on our results of operations.
We have expensed all costs to address the Year 2000 date change, which were not
material.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. As of September 30, 2000, we did
not use derivative financial instruments for speculative or trading purposes.
Interest Rate Risk
We invest our cash in corporate money market accounts and collateralized
repurchase agreements. These securities are not subject to interest rate risk
and will not fall in value if market interest rates increase.
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Foreign Currency Exchange Risk
The majority of our sales are denominated in U.S. dollars and take place in
North America. We do not believe foreign currency exchange rates or the
introduction of the Euro will have an impact on us.
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PART II
OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) Use of Proceeds
On May 22, 1998, we commenced an initial public offering of 2,500,000 shares of
common stock pursuant to our final prospectus dated May 22, 1998. As part of the
initial public offering, certain stockholders of ADS granted the several
underwriters, for whom BancAmerica Robertson Stephens, BT Alex Brown and Adams,
Harkness & Hill, Inc., acted as representatives, an overallotment option to
purchase up to an additional 375,000 shares of common stock, which was exercised
on June 22, 1998.
The aggregate amount of expenses incurred by us through March 31, 2000 in
connection with the issuance and distribution of the shares of common stock
offered and sold in the initial public offering were approximately $3,084,000,
including $2,275,000 in underwriting discounts and approximately $809,000 in
other expenses. No further expenses have been incurred.
None of the expenses paid by us in connection with the initial public offering
or the exercise of the underwriters' overallotment option were paid, directly or
indirectly, to directors, officers, persons owning ten percent or more of the
our equity securities, or affiliates of ADS.
The net proceeds to us from the initial public offering, after deducting
underwriting discounts and commissions and other expenses, were approximately
$23,371,000.
From May 21, 1998 through September 30, 2000, we have applied approximately
$4,380,000 of the net proceeds from the initial public offering to working
capital. We invested the balance of such net proceeds primarily in money market
accounts.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our Annual Meeting of Stockholders was held on July 27, 2000. Holders of an
aggregate of 12,906,391 shares at the close of business on June 21, 2000 were
entitled to vote at the meeting. At such meeting, the Company's stockholders
voted as follows:
Proposal 1. To elect two directors to Class II of the Company's Board of
Directors, each to serve for a term of three years or until his successor is
elected and qualified.
<TABLE>
<CAPTION>
Total Vote
Total Vote Withheld
for Each for Each Broker
Director Name Nominee Nominee Abstentions Non-Votes
------------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
William H. Gallagher 11,950,664 63,999 N/A N/A
Lee M. Kennedy 11,950,664 63,999 N/A N/A
</TABLE>
Messrs. George F. Raymond and Robert W. Howe will continue to hold office until
the 2001 Annual Meeting of Stockholders or until their successors have been duly
elected and qualified or until their
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<PAGE> 16
earliest resignation or removal. Messrs. David C. Hodgson and Richard D.
Driscoll will continue to hold office until the 2002 Annual Meeting of
Stockholders or until their successors have been duly elected and qualified or
until their earlier resignation or removal.
Proposal 2. To ratify the selection of the firm of PricewaterhouseCoopers LLP,
independent public accountants, as auditors for the fiscal year ending March 31,
2001.
<TABLE>
<CAPTION>
Total Vote for Total Vote Against Abstentions for
Proposal 2 Proposal 2 Proposal 2 Broker Non-Votes
-------------- ----------------- --------------- ----------------
<S> <C> <C>
11,958,944 53,746 1,973 N/A
</TABLE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
16
<PAGE> 17
SIGNATURES
Pursuant to the requirement 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.
ATLANTIC DATA SERVICES, INC.
Date: November 13, 2000 By: /s/ Robert W. Howe
------------------------------------
Robert W. Howe
Chairman and Chief Executive Officer
Date: November 13, 2000 By: /s/ Paul K. McGrath
------------------------------------
Paul K. McGrath
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
17
<PAGE> 18
EXHIBIT INDEX
Page
----
27.1 - Financial Data Schedule 19
18
