<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-4090
ANALYSTS INTERNATIONAL CORPORATION
Minnesota 41-0905408
7615 Metro Boulevard
Minneapolis, MN 55439
(612) 835-5900
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 April 25, 1997, 14,818,293 shares of the Registrant's Common Stock were
outstanding.
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ANALYSTS INTERNATIONAL CORPORATION
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INDEX
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Page
Number
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PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Balance Sheets
March 31, 1997 (Unaudited) and June 30, 1996 1
Condensed Consolidated Statements of Income
Three and nine months ended March 31, 1997
and 1996 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows
Nine months ended March 31, 1997 and 1996 (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
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ANALYSTS INTERNATIONAL CORPORATION
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CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
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<TABLE>
<CAPTION>
March 31, June 30,
(In thousands) 1997 1996
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(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $13,714 $17,018
Accounts receivable, less allowance
for doubtful accounts 62,089 49,494
Other current assets 2,913 2,567
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Total current assets 78,716 69,079
Property and equipment, net 5,856 5,715
Other assets 11,238 6,651
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$95,810 $81,445
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</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
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<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities:
Accounts payable $14,447 $11,049
Dividend payable 1,334 1,099
Salaries and vacations 9,274 7,524
Other, primarily self-insured health care reserves 1,228 1,677
Income taxes payable 475 382
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Total current liabilities 26,758 21,731
Long-term liabilities 6,398 5,996
Shareholders' equity (Note 2) 62,654 53,718
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$95,810 $81,445
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</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
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ANALYSTS INTERNATIONAL CORPORATION
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands Three Months Ended Nine Months Ended
except per share amounts) March 31 March 31
--------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $113,693 $ 85,976 $313,562 $237,833
Expenses:
Salaries, contracted
services and direct charges 88,274 65,984 242,281 181,494
Selling, administrative and other
operating costs 18,722 14,709 52,071 42,168
------ ------ ------ ------
Total expenses 106,996 80,693 294,352 223,662
------- ------ ------- -------
Operating income 6,697 5,283 19,210 14,171
Other income 239 281 755 801
------ ------ ------ ------
Income before income taxes 6,936 5,564 19,965 14,972
Income taxes 2,775 2,226 8,031 5,943
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Net income $ 4,161 $ 3,338 $ 11,934 $ 9,029
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PER COMMON SHARE:*
Net income $ .28 $ .23 $ .80 $ .61
------ ------ ------ ------
------ ------ ------ ------
Dividends paid $ .09 $ .075 $ .255 $ .215
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Average common and common
equivalent shares outstanding* 15,057,000 14,820,000 14,998,000 14,788,000
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</TABLE>
*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
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ANALYSTS INTERNATIONAL CORPORATION
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31
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(In thousands) 1997 1996
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Net cash provided by operating activities $ 6,861 $11,600
Cash flows from investing activities:
Property and equipment additions (1,929) (2,062)
Increase in annuities and cash surrender values (320) (286)
Payments for acquisitions (5,153) -
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Net cash used in investing activities (7,402) (2,348)
Cash flows from financing activities:
Cash dividends (3,748) (3,129)
Proceeds from exercise of stock options 985 236
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Net cash used in financing activities (2,763) (2,893)
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Net change in cash and equivalents (3,304) 6,359
Cash and equivalents at beginning of period 17,018 12,615
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Cash and equivalents at end of period $13,714 $18,974
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See notes to condensed consolidated financial statements.
3
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ANALYSTS INTERNATIONAL CORPORATION
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Consolidated Financial Statements - The condensed consolidated
balance sheet as of March 31, 1997, the condensed consolidated statements
of income for the three month and nine month periods ended March 31, 1997
and 1996 and the condensed consolidated statements of cash flows for the
nine 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 March 31, 1997 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
Nine Months Ended
March 31, 1997
-----------------
(In thousands)
Balance at beginning of period $ 53,718
Cash dividends declared:
August 15, 1996 at $.09 per share (1,319)
December 19, 1996 at $.09 per share (1,324)
February 15, 1997 at $.09 per share (1,340)
Proceeds upon exercise of stock options 985
Net income 11,934
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Balance at end of period $ 62,654
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3. NET INCOME PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share". This statement specifies the computation, presentation and
disclosure requirements for earnings per share (EPS). This Statement is
effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. This statement replaces the
presentation of primary EPS with a presentation of basic EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding
for the period. If the Company had applied SFAS No. 128 to the computation
of earnings per share in the nine months ended March 31, 1997, the basic and
diluted amounts would have been $.81 and $.79, respectively.
4
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended March 31, 1997 and 1996
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 reduction in
the Company's cash from $17.0 million to $13.7 million is 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 February 20, 1997 the Board of Directors declared the regular quarterly
dividend of $.09 per share payable May 15, 1997 to shareholders of record on
April 30, 1997.
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
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RESULTS OF OPERATIONS
Revenues for the nine months ended March 31, 1997 and for the quarter then ended
were $314 million and $114 million, respectively. This represents increases of
31.8% and 32.2% over the same periods a year ago. These revenue increases
resulted primarily from increases in billable hours of service rendered to
clients and increases in pass-through billings on the Company's outsourcing
contracts. For the nine month period and quarter ended March 31, 1997, these
pass-through billings approximated $65.9 million and $25.4 million,
respectively, compared with $42.1 million and $15.4 million for the same periods
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 4,400 at March 31, 1997, compared to 3,670 at March 31, 1996,
an increase of 19.9%. 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 77.3% of revenues for the nine months ended
March 31, 1997 compared to 76.3% for the same period a year ago. These costs as
a percentage of revenues for the quarters ended March 31, 1997 and 1996 were
77.6% and 76.7%, respectively. By comparison, these costs were 76.9% of
revenues for the second quarter of fiscal 1997 and 77.2% of revenues for the
first quarter of fiscal 1997. 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. This category of expense also
includes the fees for the contracted services of subcontractors who are
necessary to support the Company with its major outsourcing contracts and these
fees typically are higher per hour than the labor costs for its own employees.
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 16.6% of revenues for
the nine months ended March 31, 1997 compared to 17.7% for the same period a
year ago. For the quarter ended March 31, 1997 these costs were 16.5% of
revenue compared to 17.1% for the same quarter last year. 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
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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 nine months ended
March 31, 1997.
7
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SIGNATURES
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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
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(Registrant)
Date May 12, 1997 By /s/ Gerald M. McGrath
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Gerald M. McGrath
Treasurer and Chief Financial Officer
Date May 12, 1997 By /s/ Marti R. Charpentier
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Marti R. Charpentier
Controller and Assistant
Treasurer (Chief Accounting Officer)
8
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EXHIBIT INDEX
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EXHIBIT NUMBER EXHIBIT PAGE NO.*
- -------------- ------- ---------
11 Computation of Net Income Per Share 13
27 Financial Data Schedule 15
* 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
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(IN THOUSANDS EXCEPT March 31 March 31
------------------------ ------------------------
PER SHARE AMOUNTS) 1997 1996 1997 1996
---- ---- ---- ----
Primary:
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 14,762 14,584 14,697 14,552
Dilutive stock options after application
of treasury stock method 295 236 301 236
----- ----- ----- -----
Weighted average number of common and
common equivalent shares outstanding 15,057 14,820 14,998 14,788
------ ------ ------ ------
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Net income $ 4,161 $ 3,338 $11,934 $ 9,029
------ ------ ------ ------
------ ------ ------ ------
Per share amount $ .28 $ .23 $ .80 $ .61
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------ ------ ------ ------
Fully diluted:
Weighted average number of common
shares outstanding 14,762 14,584 14,697 14,552
Dilutive stock options based on the treasury
stock method using the end of the period market
price, if higher than average market price 295 252 337 252
------ ------ ------ ------
Weighted average number of common and
common equivalent shares outstanding 15,057 14,836 15,034 14,804
------ ------ ------ ------
------ ------ ------ ------
Net income $ 4,161 $ 3,338 $11,934 $ 9,029
------ ------ ------ ------
------ ------ ------ ------
Per share amount $ .28 $ .23 $ .79 $ .61
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 13,714
<SECURITIES> 0
<RECEIVABLES> 62,599
<ALLOWANCES> 510
<INVENTORY> 0
<CURRENT-ASSETS> 78,716
<PP&E> 17,149
<DEPRECIATION> 11,293
<TOTAL-ASSETS> 95,810
<CURRENT-LIABILITIES> 26,758
<BONDS> 6,398
0
0
<COMMON> 1,482
<OTHER-SE> 61,172
<TOTAL-LIABILITY-AND-EQUITY> 95,810
<SALES> 313,562
<TOTAL-REVENUES> 313,562
<CGS> 242,281
<TOTAL-COSTS> 242,281
<OTHER-EXPENSES> 51,823
<LOSS-PROVISION> 248
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,965
<INCOME-TAX> 8,031
<INCOME-CONTINUING> 11,934
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,934
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
