<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, 1998
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 April 30, 1998, 22,428,988 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Balance Sheets
March 31, 1998 (Unaudited) and June 30, 1997 1
Condensed Consolidated Statements of Income
Three and nine months ended March 31, 1998
and 1997 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows
Nine months ended March 31, 1998 and 1997 (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
</TABLE>
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
(In thousands) 1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $14,958 $17,888
Accounts receivable, less allowance
for doubtful accounts 87,444 66,954
Other current assets 3,706 2,989
-------- --------
Total current assets 106,108 87,831
Property and equipment, net 7,586 6,121
Other assets 11,955 11,418
-------- --------
$125,649 $105,370
-------- --------
-------- --------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $21,312 $18,131
Dividend payable 1,794 1,336
Salaries and vacations 14,685 11,513
Other, primarily self-insured health care
reserves 2,105 1,647
Income taxes payable 734 195
-------- --------
Total current liabilities 40,630 32,822
Long-term liabilities 6,986 6,444
Shareholders' equity 78,033 66,104
-------- --------
$125,649 $105,370
-------- --------
-------- --------
</TABLE>
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
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(In thousands Three Months Ended Nine Months Ended
except per share amounts) March 31 March 31
---------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Professional services revenues:
Provided directly $116,261 $88,254 $329,276 $247,658
Provided through sub-suppliers 33,750 25,439 97,158 65,904
-------- -------- -------- --------
Total revenues 150,011 113,693 426,434 313,562
Expenses:
Salaries, contracted
services and direct charges 117,261 88,274 332,023 242,281
Selling, administrative and other
operating costs 23,848 18,722 68,842 52,071
-------- -------- -------- --------
Total expenses 141,109 106,996 400,865 294,352
-------- -------- -------- --------
Operating income 8,902 6,697 25,569 19,210
Non-operating income 313 239 997 755
-------- -------- -------- --------
Income before income taxes 9,215 6,936 26,566 19,965
Income taxes 3,687 2,775 10,627 8,031
-------- -------- -------- --------
Net income $ 5,528 $ 4,161 $ 15,939 $ 11,934
-------- -------- -------- --------
-------- -------- -------- --------
PER COMMON SHARE:*
Net income (basic) $ .24 $ .19 $ .71 $ .54
-------- -------- -------- --------
-------- -------- -------- --------
Net income (diluted) $ .24 $ .19 $ .70 $ .53
-------- -------- -------- --------
-------- -------- -------- --------
Dividends paid $ .08 $ .06 $ .21 $ .17
-------- -------- -------- --------
-------- -------- -------- --------
Average common shares
outstanding* 22,409 22,143 22,357 22,045
-------- -------- -------- --------
-------- -------- -------- --------
Average common and common
equivalent shares outstanding* 22,868 22,586 22,841 22,497
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
*Adjusted to reflect the 3 for 2 common stock split in the form of a stock
dividend distributed December 3, 1997.
See notes to condensed consolidated financial statements.
2
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
--------------------
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 4,806 $ 6,861
Cash flows from investing activities:
Property and equipment additions (3,884) (1,929)
Increase in annuities and cash surrender values (300) (320)
Payments for acquisitions -- (5,153)
------- -------
Net cash used in investing activities (4,184) (7,402)
Cash flows from financing activities:
Cash dividends (4,769) (3,748)
Proceeds from exercise of stock options 1,217 985
------- -------
Net cash used in financing activities (3,552) (2,763)
------- -------
Net change in cash and equivalents (2,930) (3,304)
Cash and equivalents at beginning of period 17,888 17,018
------- -------
Cash and equivalents at end of period $14,958 $13,714
------- -------
------- -------
</TABLE>
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 March 31, 1998, the condensed consolidated statements
of income for the three month and nine month periods ended March 31, 1998
and 1997 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, 1998 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
<TABLE>
<CAPTION>
Nine Months Ended
March 31, 1998
-----------------
(In thousands)
<S> <C>
Balance at beginning of period $ 66,104
Cash dividends declared:
August 21, 1997 at $.07 per share (1,640)
December 18, 1997 at $.08 per share (1,791)
February 19, 1998 at $.08 per share (1,796)
Proceeds upon exercise of stock options 1,163
Stock-based compensation 54
Net income 15,939
--------
Balance at end of period $ 78,033
--------
--------
</TABLE>
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 and 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. The
difference between average common shares and average common and common
equivalent shares is the result of outstanding stock options.
4
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended March 31, 1998 and 1997
CHANGES IN FINANCIAL CONDITION
Working capital at March 31, 1998 was $65.5 million, up 19% from the $55.0
million at June 30, 1997. This includes cash and cash equivalents of $15.0
million compared to $17.9 million at June 30, 1997 and accounts receivable of
$87.4 million compared to $67.0 million at June 30, 1997. Ratios of current
assets to current liabilities and total assets to total liabilities have
decreased slightly since June 30, 1997.
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 sub-supplier contracts are not
expected to burden working capital.
On December 18, 1997 the Board of Directors declared the regular quarterly
dividend of $.08 per share payable February 13, 1998 to shareholders of record
on January 31, 1998.
On February 19, 1998 the Board of Directors declared the regular quarterly
dividend of $.08 per share payable May 15, 1998 to shareholders of record on
April 30, 1998.
In January 1998 the Company entered into an agreement to build a facility for
use as its corporate headquarters and its Minneapolis branch operations. The
Company expects construction and related costs will be approximately $17,000,000
and these costs will be financed through a combination of unsecured debt and use
of cash reserves.
The Company believes funds generated from its business and current cash balances
are adequate to meet demands placed upon its resources by its operations,
capital investments and the payment of quarterly dividends.
5
<PAGE>
RESULTS OF OPERATIONS
Revenues provided directly for the nine months ended March 31, 1998 were $329.3
million, an increase of 33.0% over the same period a year ago. Approximately
64% of this increase is the result of an increase in billed hours and 36% from
increases in hourly rates. For the three months ended March 31, 1998 revenues
provided directly were $116.3 million, an increase of 31.7% over the same period
a year ago. Approximately 66% of this increase is the result of an increase in
billed hours and 34% from increases in hourly rates. Revenues provided through
sub-suppliers for the nine month period and quarter ended March 31, 1998 were
$97.2 million and $33.7 million, respectively. This represents increases of
47.4% and 32.7% over the same periods a year ago. These increases in
sub-supplier revenues resulted almost exclusively from increases in billable
hours of service rendered to clients.
Personnel totalled 5,250 at March 31, 1998, compared to 4,400 at March 31, 1997,
an increase of 19.3%. 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 77.9% of revenues for the nine months
ended March 31, 1998 compared to 77.3% for the same period a year ago. These
costs were 78.2% of revenues for the three months ended March 31, 1998 and 77.6%
of revenues for the three months ended March 31, 1997. The increase in this
expense category as a percentage of revenue is mostly a consequence of the
increase in business done through sub-suppliers, whose labor costs are higher
per hour than the labor costs of the Company's 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 16.1% of revenues for
the nine months ended March 31, 1998 compared to 16.6% for the same period a
year ago. These costs were 15.9% of revenues for the three months ended March
31, 1998 and 16.5% of revenues for the three months ended March 31, 1997. 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 nine months ended March 31, 1998 increased 33.6% over the
same period a year ago. As a percentage of revenue, net income has decreased
from 3.8% for the nine months ended March 31, 1997 to 3.7% for the nine months
ended March 31, 1998. Net income, as a percentage of revenue, was 3.7% for the
quarters ended March 31, 1998 and 1997. The Company's net income as a
percentage of revenues provided directly was 4.8% for the nine months ended
March 31, 1998 and 1997. The Company's net income as a percentage of revenues
provided directly for the three months ended March 31, 1998 and 1997 was 4.8%
and 4.7%, respectively.
6
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule.
Restated Financial Data Schedules.
(b) There were no reports on Form 8-K filed for the nine months ended
March 31, 1998.
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 May 13, 1998 By /s/ Gerald M. McGrath
------------- ----------------------
Gerald M. McGrath
Treasurer and Chief Financial Officer
Date May 13, 1998 By /s/ Marti R. Charpentier
-------------- -------------------------
Marti R. Charpentier
Controller and Assistant
Treasurer (Chief Accounting Officer)
8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page No.*
- -------------- ------- ---------
<S> <C> <C>
27 Financial Data Schedule 13
Restated Financial Data Schedules 14-19
</TABLE>
* Page numbers in the sequential numbering system of the manually signed
original report.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 14,958
<SECURITIES> 0
<RECEIVABLES> 88,144
<ALLOWANCES> 700
<INVENTORY> 0
<CURRENT-ASSETS> 106,108
<PP&E> 20,948
<DEPRECIATION> 13,362
<TOTAL-ASSETS> 125,649
<CURRENT-LIABILITIES> 40,630
<BONDS> 6,986
0
0
<COMMON> 2,243
<OTHER-SE> 75,790
<TOTAL-LIABILITY-AND-EQUITY> 125,649
<SALES> 426,434
<TOTAL-REVENUES> 426,434
<CGS> 332,023
<TOTAL-COSTS> 332,023
<OTHER-EXPENSES> 68,536
<LOSS-PROVISION> 306
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,566
<INCOME-TAX> 10,627
<INCOME-CONTINUING> 15,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,939
<EPS-PRIMARY> .71
<EPS-DILUTED> .70
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<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
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<CURRENT-ASSETS> 96,291
<PP&E> 18,662
<DEPRECIATION> 12,195
<TOTAL-ASSETS> 114,305
<CURRENT-LIABILITIES> 37,358
<BONDS> 6,564
0
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<COMMON> 1,490
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<OTHER-EXPENSES> 21,851
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997 JUN-30-1997 JUN-30-1997
<PERIOD-START> JUL-01-1996 JUL-01-1996 JUL-01-1996 JUL-01-1996
<PERIOD-END> SEP-30-1996 DEC-31-1996 MAR-31-1997 JUN-30-1997
<CASH> 12,918 14,511 13,714 17,888
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<ALLOWANCES> 453 400 510 550
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 70,058 70,358 78,716 87,831
<PP&E> 16,198 16,741 17,149 17,677
<DEPRECIATION> 10,331 10,804 11,293 11,556
<TOTAL-ASSETS> 86,733 87,355 95,810 105,370
<CURRENT-LIABILITIES> 24,275 21,988 26,758 32,822
<BONDS> 6,176 6,297 6,398 6,444
0 0 0 0
0 0 0 0
<COMMON> 1,465 1,468 1,482 1,485
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<TOTAL-LIABILITY-AND-EQUITY> 86,733 89,355 95,810 105,370
<SALES> 98,022 199,869 313,562 439,546
<TOTAL-REVENUES> 98,022 199,869 313,562 439,546
<CGS> 75,653 154,007 242,281 340,483
<TOTAL-COSTS> 75,653 154,007 242,281 340,483
<OTHER-EXPENSES> 16,120 33,229 51,823 72,848
<LOSS-PROVISION> 30 120 248 50
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> 6,503 13,029 19,965 27,210
<INCOME-TAX> 2,635 5,256 8,031 10,829
<INCOME-CONTINUING> 3,868 7,773 11,934 16,381
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 3,868 7,773 11,934 16,381
<EPS-PRIMARY> .26 .53 .81 1.11
<EPS-DILUTED> .26 .52 .80 1.09
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 17,018
<SECURITIES> 0
<RECEIVABLES> 49,994
<ALLOWANCES> 500
<INVENTORY> 0
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<PP&E> 15,556
<DEPRECIATION> 9,841
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<BONDS> 5,996
0
0
<COMMON> 733
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<TOTAL-LIABILITY-AND-EQUITY> 81,445
<SALES> 329,544
<TOTAL-REVENUES> 329,544
<CGS> 252,518
<TOTAL-COSTS> 252,518
<OTHER-EXPENSES> 57,314
<LOSS-PROVISION> (50)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,739
<INCOME-TAX> 8,321
<INCOME-CONTINUING> 12,418
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,418
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.68
</TABLE>
