<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 September 30, 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
--- ---
As of October 30, 1997, 14,899,252 shares of the Registrant's Common Stock
were outstanding.
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ANALYSTS INTERNATIONAL CORPORATION
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Balance Sheets
September 30, 1997 (Unaudited) and June 30, 1997 1
Condensed Consolidated Statements of Income
Three months ended September 30, 1997 and 1996 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows
Three months ended September 30, 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
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, June 30,
(In thousands) 1997 1997
------------- --------
(Unaudited)
Current assets:
Cash and cash equivalents $ 21,031 $17,888
Accounts receivable, less allowance
for doubtful accounts 71,773 66,954
Other current assets 3,487 2,989
--------- ---------
Total current assets 96,291 87,831
Property and equipment, net 6,467 6,121
Other assets 11,547 11,418
--------- ---------
$114,305 $105,370
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,075 $18,131
Dividend payable 1,639 1,336
Salaries and vacations 12,087 11,513
Other, primarily self-insured health care reserves 1,942 1,647
Income taxes payable 3,615 195
--------- ---------
Total current liabilities 37,358 32,822
Long-term liabilities 6,564 6,444
Shareholders' equity 70,383 66,104
--------- ---------
$114,305 $105,370
--------- ---------
--------- ---------
Note: The balance sheet at June 30, 1997 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands Three Months Ended
except per share amounts) September 30
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Professional services revenues:
Provided directly $104,671 $77,801
Provided through sub-suppliers 30,487 20,221
---------- ----------
Total revenues 135,158 98,022
Expenses:
Salaries, contracted services and direct charges 104,571 75,653
Selling, administrative and other operating costs 21,951 16,120
---------- ----------
Total expenses 126,522 91,773
---------- ----------
Operating income 8,636 6,249
Other income 331 254
---------- ----------
Income before income taxes 8,967 6,503
Income taxes 3,587 2,635
---------- ----------
Net income $ 5,380 $ 3,868
---------- ----------
---------- ----------
PER COMMON SHARE:
Net income $ .35 $ .26
---------- ----------
---------- ----------
Dividends paid $ .09 $ .075
---------- ----------
---------- ----------
Average common and common equivalent shares outstanding 15,172,000 14,897,000
---------- ----------
---------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
2
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ANALYSTS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
(In thousands) September 30
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net cash provided by operating activities $ 5,111 $ 2,807
Cash flows from investing activities:
Property and equipment additions (1,050) (580)
Increase in annuities and cash surrender values (120) (90)
Payments for acquisitions -- (5,153)
---------- ----------
Net cash used in investing activities (1,170) (5,823)
Cash flows from financing activities:
Cash dividends (1,337) (1,099)
Proceeds from exercise of stock options 539 15
---------- ----------
Net cash used in financing activities (798) (1,084)
---------- ----------
Net change in cash and equivalents 3,143 (4,100)
Cash and equivalents at beginning of period 17,888 17,018
---------- ----------
Cash and equivalents at end of period $21,031 $12,918
---------- ----------
---------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
3
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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, 1997, the condensed consolidated
statements of income for the three month periods ended September 30, 1997
and 1996 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, 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, 1997 annual
report to shareholders.
2. SHAREHOLDERS' EQUITY
Three Months Ended
September 30, 1997
------------------
(In thousands)
Balance at beginning of period $ 66,104
Cash dividends declared:
August 21, 1997 at $.11 per share (1,640)
Proceeds upon exercise of stock options 521
Stock-based compensation 18
Net income 5,380
-----
Balance at end of period $ 70,383
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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 three months ended September 30, 1997, the
basic and diluted amounts would have been $.36 and $.35, respectively.
4
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 and 1996
CHANGES IN FINANCIAL CONDITION
Working capital at September 30, 1997 was $58.9 million, up 7% from the $55.0
million at June 30, 1997. This includes cash and cash equivalents of $21.0
million compared to $17.9 million at June 30, 1997 and accounts receivable of
$71.8 million compared to $67.0 million at June 30, 1997. Ratios of current
assets to current liabilities and total assets to total liabilities were
essentially the same at the end of both periods.
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 are not
expected to burden working capital.
On August 21, 1997 the Board of Directors increased the regular quarterly
dividend to $.11 per share payable November 14, 1997 to shareholders of
record as of October 31, 1997. The previous dividend rate was $.09 per share.
On October 17, 1997 the Board of Directors declared a three-for-two stock
split to be effected in the form of a 50 percent stock dividend to be
distributed December 3, 1997 to shareholders of record on November 19, 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 provided directly for the three months ended September 30, 1997 were
$104.7 million, an increase of 34.5% over the same period a year ago.
Approximately 60% of this increase is the result of an increase in billed
hours and 40% from increases in hourly rates. Revenues provided through
sub-suppliers for the three months ended September 30, 1997 were $30.5
million, an increase of 50.8% over the same period a year ago. This increase
resulted almost exclusively from an increase in billable hours of service
rendered to clients. Prevailing competitive conditions in the industry have
made it difficult for the Company to increase the hourly rates it charges for
services, and there can be no assurance that the Company will be able to
increase its hourly rates.
Personnel totalled 4,900 at September 30, 1997, compared to 4,050 at
September 30, 1996, an increase of 21.0%. 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 77.4% of revenues for the three months
ended September 30, 1997 compared to 77.2% for the same period a year ago.
By comparison, these costs were 77.9% of revenues for the fourth quarter of
fiscal 1997 and 77.4% of revenues for the fourth quarter of fiscal 1996. This
category of expense also includes the fees for the contracted services of
sub-suppliers 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. 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 16.2% of revenues
for the three months ended September 30, 1997 compared to 16.4% 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.
Net income for the three months ended September 30, 1997 increased 39.1% over
the same period a year ago. As a percentage of revenue, net income has also
increased from 3.9% for the three months ended September 30, 1996 to 4.0% for
the three months ended September 30, 1997. The Company's net income as a
percentage of revenues provided directly was 5.1% and 5.0% for the three
months ended September 30, 1997 and 1996, respectively.
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 three months ended
September 30, 1997.
7
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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 there unto duly authorized.
ANALYSTS INTERNATIONAL CORPORATION
----------------------------------
(Registrant)
Date November 12, 1997 By /s/ Gerald M. McGrath
----------------- --------------------------
Gerald M. McGrath
Treasurer and Chief Financial Officer
Date November 12, 1997 By /s/ Marti R. Charpentier
----------------- --------------------------
Marti R. Charpentier
Controller and Assistant
Treasurer (Chief Accounting Officer)
8
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EXHIBIT INDEX
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.
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EXHIBIT NO. 11
ANALYSTS INTERNATIONAL CORPORATION
COMPUTATION OF NET INCOME PER SHARE
Three Months Ended
September 30
(IN THOUSANDS EXCEPT -------------------
PER SHARE AMOUNTS) 1997 1996
- ------------------ ---- ----
PRIMARY:
Weighted average number of common
shares outstanding 14,874 14,652
Dilutive stock options after application
of treasury stock method 298 245
-------- -------
Weighted average number of common and
common equivalent shares outstanding 15,172 14,897
-------- -------
-------- -------
Net income $ 5,380 $ 3,868
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-------- -------
Per share amount $ .35 $ .26
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FULLY DILUTED:
Weighted average number of common
shares outstanding 14,874 14,652
Dilutive stock options based on the treasury
stock method using the end of the period market
price, if higher than average market price 304 323
-------- -------
Weighted average number of common and
common equivalent shares outstanding 15,178 14,975
-------- -------
-------- -------
Net income $ 5,380 $ 3,868
-------- -------
-------- -------
Per share amount $ .35 $ .26
-------- -------
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,031
<SECURITIES> 0
<RECEIVABLES> 72,373
<ALLOWANCES> 600
<INVENTORY> 0
<CURRENT-ASSETS> 96,291
<PP&E> 18,662
<DEPRECIATION> 12,195
<TOTAL-ASSETS> 114,305
<CURRENT-LIABILITIES> 37,358
<BONDS> 6,564
0
0
<COMMON> 1,490
<OTHER-SE> 68,893
<TOTAL-LIABILITY-AND-EQUITY> 114,305
<SALES> 135,158
<TOTAL-REVENUES> 135,158
<CGS> 104,571
<TOTAL-COSTS> 104,571
<OTHER-EXPENSES> 21,851
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,967
<INCOME-TAX> 3,587
<INCOME-CONTINUING> 5,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,380
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
