<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
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For the quarter ended: Commission file number:
September 30, 1996 0-4090
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ANALYSTS INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Minnesota 41-0905408
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
7615 Metro Boulevard
Minneapolis, MN 55439
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone Number: (612) 835-5900
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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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
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As of October 30, 1996, 14,676,944 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Balance Sheets
September 30, 1996 (Unaudited) and June 30, 1996 1
Condensed Consolidated Statements of Income
Three months ended September 30, 1996 and 1995 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows
Three months ended September 30, 1996 and 1995 (Unaudited) 3
Notes to Condensed Consolidated Financial
Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-6
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
(IN THOUSANDS) 1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $12,918 $17,018
Accounts receivable, less allowance
for doubtful accounts 54,600 49,494
Other current assets 2,540 2,567
------ ------
Total current assets 70,058 69,079
Property and equipment, net 5,867 5,715
Other assets 10,808 6,651
------ ------
$86,733 $81,445
------ ------
------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,380 $11,049
Dividend payable 1,319 1,099
Salaries and vacations 6,976 7,524
Other, primarily self-insured health care reserves 1,744 1,677
Income taxes payable 2,856 382
------ ------
Total current liabilities 24,275 21,731
Long-term liabilities 6,176 5,996
Shareholders' equity (Note 2) 56,282 53,718
------ ------
$86,733 $81,445
------ ------
------ ------
</TABLE>
Note: The balance sheet at June 30, 1996 has been taken from the audited
financial statements at that date, and condensed.
See notes to condensed consolidated financial statements.
1
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(DOLLARS IN THOUSANDS Three Months Ended
EXCEPT PER SHARE AMOUNTS) September 30
----------------------------
1996 1995
---- ----
Revenues $98,022 $73,071
Expenses:
Salaries, contracted
services and direct charges 75,653 55,312
Selling, administrative and other
operating costs 16,120 13,373
------ ------
Total expenses 91,773 68,685
------ ------
Operating income 6,249 4,386
Other income 254 258
------ ------
Income before income taxes 6,503 4,644
Income taxes 2,635 1,835
------ ------
Net income $ 3,868 $ 2,809
------ ------
------ ------
PER COMMON SHARE:*
Net income $ .26 $ .19
------ ------
------ ------
Dividends paid $ .075 $ .065
------ ------
------ ------
Average common and common
equivalent shares outstanding* 14,897,000 14,760,000
---------- ----------
---------- ----------
*Adjusted to reflect the 2 for 1 common stock split in the form of a stock
dividend distributed September 30, 1996.
See notes to condensed consolidated financial statements.
2
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
----------------------------
(DOLLARS IN THOUSANDS) 1996 1995
---- ----
Net cash provided by operating activities $ 2,807 $ 4,156
Cash flows from investing activities:
Property and equipment additions (580) (764)
Increase in annuities and cash surrender values (90) (72)
Payments for acquisitions (5,153) -
------- -------
Net cash used in investing activities (5,823) (836)
Cash flows from financing activities:
Cash dividends (1,099) (943)
Proceeds from exercise of stock options 15 49
------- -------
Net cash used in financing activities (1,084) (894)
Net change in cash and equivalents (4,100) 2,426
Cash and equivalents at beginning of period 17,018 12,615
------- -------
Cash and equivalents at end of period $ 12,918 $ 15,041
------- -------
------- -------
See notes to condensed consolidated financial statements.
3
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Consolidated Financial Statements - The condensed consolidated
balance sheet as of September 30, 1996, the condensed consolidated
statements of income for the three month periods ended September 30, 1996
and 1995 and the condensed consolidated statements of cash flows for the
three month periods then ended have been prepared by the Company, without
audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and the cash flows at September 30, 1996
and for the periods then ended have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's June 30, 1996 annual
report to shareholders.
2. SHAREHOLDERS' EQUITY
Three Months Ended
September 30, 1996
------------------
(In thousands)
Balance at beginning of period $53,718
Cash dividends declared:
August 15, 1996 at $.09 per share (1,319)
Proceeds upon exercise of stock options 15
Net income 3,868
------
Balance at end of period $56,282
------
------
4
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 and 1995
CHANGES IN FINANCIAL CONDITION
On July 1, 1996, the Company acquired specific assets and assumed certain
liabilities of DPI, Inc. and DPI Services, Inc., its wholly owned subsidiary,
both of which were primarily engaged in the business of providing software
services in the San Jose (California) market. At the closing, the company paid
$5.2 million of the $5.7 million adjusted purchase price in cash, with the
remaining $.5 million, subject to certain deductions, being payable in cash in
one year. Assets acquired included approximately $1.5 million of current assets
(accounts receivable) net of current liabilities assumed in the transaction.
Other assets acquired in the transaction (including goodwill, reflecting the
excess of the adjusted purchase price over the fair value of the assets
acquired) are shown on the balance sheet as long term assets. The 3.2%
reduction in the Company's working capital and the reduction in the current
ratio from 3.18 to 2.89 are the consequence of this acquisition.
The Company's primary need for working capital is to support accounts receivable
resulting from the growth in its business and to fund the time lag between
payroll disbursement and receipt of fees billed to clients. Over the past
years, the Company has been able to support the growth in its business with
internally generated funds. The Company's outsourcing contracts with two major
customers are not expected to burden working capital.
On August 15, 1996 the Board of Directors increased the Company's regular
quarterly cash dividend to $.09 per share and declared the dividend payable
November 15, 1996 to shareholders of record as of October 31, 1996. The
previous dividend rate was $.075 per share.
The Company believes funds generated from its business and current cash balances
are adequate to meet demands placed upon its resources by its operations and the
payment of quarterly dividends.
5
<PAGE>
RESULTS OF OPERATIONS
Revenues for the quarter ended September 30, 1996 were $98.0 million, an
increase of 34.1% over the same period a year ago. This revenue increase
resulted primarily from increases in billable hours of service rendered to
clients and approximately $20.0 million of pass-through billings on the
Company's two major outsourcing contracts which compares with $13.0 million
for the same period a year ago. Rate increases have not contributed
significantly to the revenue increase because prevailing competitive
conditions in the industry have made it difficult for the Company to increase
the hourly rates it charges for services.
Personnel totalled 4,050 at September 30, 1996, compared to 3,350 at September
30, 1995, an increase of 20.9%. Substantially all of the increase consists of
billable technical staff.
Salaries, contracted services and direct charges, which represent primarily the
Company's direct labor cost, were 77.2% of revenues for the three months
ended September 30, 1996 compared to 75.7% for the same period a year ago. By
comparison, these costs were 77.4% of revenues for the fourth quarter of fiscal
1996. This category of expense also includes the fees for the contracted
services of subcontractors who are necessary to support the Company with the
major outsourcing contracts referred to above and these fees typically are
higher per hour than the labor costs for its own employees. The Company's
efforts to control these costs involve controlling labor costs, passing on labor
cost increases through increased billing rates where possible, and maintaining
productivity levels of its billable technical staff. Labor costs, however, are
difficult to control because the highly skilled technical personnel the Company
seeks to hire and retain are in great demand and intense competition in the
industry makes it difficult to pass cost increases on to customers, while
unfavorable economic conditions could adversely affect productivity. Although
the Company has taken steps to control this category of expense, there can be no
assurance the Company will be able to maintain or improve this level.
Selling, administrative and other operating costs, which include commissions,
employee fringe benefits and location costs, represented 16.4% of revenues for
the three months ended September 30, 1996 compared to 18.3% for the same period
a year ago. While the Company has been successful in controlling selling,
administrative and other operating costs and is committed to careful cost
management, there can be no assurance the Company will be able to maintain these
costs at their current relationship to revenues.
6
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Computation of Net Income Per Share
Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months ended
September 30, 1996.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
ANALYSTS INTERNATIONAL CORPORATION
(Registrant)
Date November 8, 1996 By /s/ Gerald M. McGrath
----------------- -------------------------------------
Gerald M. McGrath
Treasurer and Chief Financial Officer
Date November 8, 1996 By /s/ Marti R. Charpentier
----------------- -------------------------------------
Marti R. Charpentier
Controller and Assistant
Treasurer (Chief Accounting Officer)
8
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit Page No.*
- -------------- ------- ---------
11 Computation of Net Income Per Share
27 Financial Data Schedule
* Page numbers in the sequential numbering system of the manually signed
original report.
<PAGE>
EXHIBIT NO. 11
ANALYSTS INTERNATIONAL CORPORATION
COMPUTATION OF NET INCOME PER SHARE
Three Months Ended
September 30
(IN THOUSANDS EXCEPT -----------------------
PER SHARE AMOUNTS) 1996 1995
---- ----
PRIMARY:
Weighted average number of common
shares outstanding 14,652 14,528
Dilutive stock options after application
of treasury stock method 245 232
------ ------
Weighted average number of common and
common equivalent shares outstanding 14,897 14,760
------ ------
------ ------
Net income $ 3,868 $ 2,809
------ ------
------ ------
Per share amount $ .26 $ .19
------ ------
------ ------
FULLY DILUTED:
Weighted average number of common
shares outstanding 14,652 14,528
Dilutive stock options based on the treasury
stock method using the end of the period market
price, if higher than average market price 323 268
------ ------
Weighted average number of common and
common equivalent shares outstanding 14,975 14,796
------ ------
------ ------
Net income $ 3,868 $ 2,809
------ ------
------ ------
Per share amount $ .26 $ .19
------ ------
------ ------
Adjusted to reflect the 2 for 1 common stock split in the form of a stock
dividend distributed September 30, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 12,918
<SECURITIES> 0
<RECEIVABLES> 55,053
<ALLOWANCES> 453
<INVENTORY> 0
<CURRENT-ASSETS> 70,058
<PP&E> 16,198
<DEPRECIATION> 10,331
<TOTAL-ASSETS> 86,733
<CURRENT-LIABILITIES> 24,275
<BONDS> 6,176
0
0
<COMMON> 1,465
<OTHER-SE> 54,817
<TOTAL-LIABILITY-AND-EQUITY> 86,733
<SALES> 98,022
<TOTAL-REVENUES> 98,022
<CGS> 75,653
<TOTAL-COSTS> 75,653
<OTHER-EXPENSES> 16,120
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,503
<INCOME-TAX> 2,635
<INCOME-CONTINUING> 3,868
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,868
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
