SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2000
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Commission file no.0-15152
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FIND/SVP, INC.
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(Exact name of Registrant as specified in its charter)
New York 13-2670985
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
625 Avenue of the Americas, New York, NY 10011
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 645-4500
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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 (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 ___
Number of shares of Common Stock outstanding at April 30, 2000: 7,455,193
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FIND/SVP, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets 3
March 31, 2000 (unaudited) and December 31, 1999
Condensed Consolidated Statements of Operations 4
Three Months Ended March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
Three Months Ended March 31, 2000 and 1999 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
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PART I.
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands) March 31, December 31,
2000 1999
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ASSETS (unaudited)
Current assets:
Cash $ 2,426 $ 2,096
Marketable securities 500 500
Accounts receivable, net 2,109 1,941
Note receivable 138 138
Deferred tax assets 114 114
Prepaid expenses and other current assets 375 323
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Total current assets 5,662 5,112
Equipment and leasehold improvements, at cost,
less accumulated depreciation and amortization
of $6,635 in 2000 and $6,399 in 1999 3,902 3,995
Other assets:
Goodwill, net 93 96
Other assets 2,110 2,075
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$11,767 $11,278
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 380 $ 409
Accrued expenses and other 885 1,504
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Total current liabilities 1,265 1,913
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Unearned retainer income 2,948 1,929
Notes payable 2,364 2,963
Other liabilities 700 584
Commitments
Shareholders' equity:
Common stock, $.0001 par value. Authorized
20,000,000 shares; issued and outstanding
7,452,943 shares at March 31, 2000; issued and
outstanding 7,136,169 shares at December 31, 1999 1 1
Capital in excess of par value 5,539 4,904
Accumulated deficit (1,050) (1,016)
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Total shareholders' equity 4,490 3,899
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$11,767 $11,278
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See accompanying notes to condensed consolidated financial statements.
3
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FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended March 31
(in thousands, except share and per share data)
2000 1999
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Revenues $ 6,006 $ 5,486
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Operating expenses:
Direct costs 3,048 2,776
Selling, general and administrative expenses 2,935 2,483
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Operating income 23 227
Interest income 37 33
Interest expense (97) (139)
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(Loss) income before (benefit) provision
for income taxes (37) 121
(Benefit) provision for income taxes (3) 56
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Net (loss) income $ (34) $ 65
========= =========
Earnings per common share:
Basic $ 0.00 $ 0.01
========= =========
Diluted $ 0.00 $ 0.01
========= =========
Weighted average number of common shares:
Basic 7,308,197 7,117,586
========= =========
Diluted 7,308,197 7,203,913
========= =========
See accompanying notes to condensed consolidated financial statements.
4
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FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31
(in thousands)
2000 1999
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Cash flows from operating activities:
Net (loss) income $ (34) $ 65
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 274 289
Provision for losses on accounts receivable 30 7
Changes in assets and liabilities:
Increase in accounts receivable (198) (88)
(Increase) decrease in prepaid expenses (52) 70
Increase in other assets (68) (44)
(Decrease) increase in accounts payable (29) 103
Decrease in accrued expenses and other
current liabilities (619) (627)
Increase in unearned retainer income 1,019 843
Increase (decrease) in other liabilities 116 (190)
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Net cash provided by operating activities 439 428
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Cash flows from investing activities:
Capital expenditures (143) (157)
Repayment of notes receivable -- 16
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Net cash used in investing activities (143) (141)
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Cash flows from financing activities:
Principal payments under notes payable -- (850)
Proceeds from exercise of stock options 34 5
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Net cash provided by (used in)
financing activities 34 (845)
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Net increase (decrease) in cash 330 (558)
Cash at beginning of period 2,096 2,307
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Cash at end of period $ 2,426 $ 1,749
======= =======
See accompanying notes to condensed consolidated financial statements.
5
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FIND/SVP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
A. MANAGEMENT'S STATEMENT
In the opinion of Management, the accompanying condensed consolidated financial
statements contain all normal and recurring adjustments necessary to present
fairly the financial position at March 31, 2000, and the results of operations
for the three month periods ended March 31, 2000 and 1999 and cash flows for the
three month periods ended March 31, 2000 and 1999. Operating results for the
three month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000.
FIND/SVP, Inc. (the "Company") has reclassified certain prior year balances to
conform with the current presentation.
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 that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1999
included in the Company's 1999 Annual Report on Form 10-K.
B. (LOSS) EARNINGS PER SHARE
Basic (loss) earnings per share are computed by dividing net (loss) income by
the weighted average number of common shares outstanding during the year.
Diluted (loss) earnings per share are computed by dividing net (loss) income by
a diluted weighted average number of common shares outstanding during the year.
Such dilution is computed using the treasury stock method for the assumed
conversion of stock options and warrants whose exercise price was less than the
average market price of the common shares during the respective period, and
certain additional dilutive effects of exercised, terminated and cancelled stock
options. For the quarter ended March 31, 2000 there was no such dilutive effect.
Options and warrants to purchase 1,991,377 and 2,046,835 common shares during
the quarters ended March 31, 2000 and 1999, respectively, were antidilutive and
were therefore excluded from the computation of diluted earnings per share.
C. LINE OF CREDIT
The Company has a $1,000,000 line of credit at the prime commercial lending rate
plus 0.5%. The line is renewable annually, and was put in place on December 30,
1999. In April 2000, the Company established letters of credit totaling $148,000
which are secured by the line of credit, thus reducing the amount available to
$852,000. No amounts were borrowed under the line of credit as of March 31,
2000.
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D. INCOME TAXES
The $3,000 income tax benefit for the quarter ended March 31, 2000 represents 9%
of the loss before income tax benefit. The difference between this rate and the
statutory rate primarily relates to expenses that are not deductible for income
tax purposes. The effective tax rate was 46% for the quarter ended March 31,
1999.
E. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities", was issued. SFAS
No. 133 established accounting and reporting standards for derivative
instruments and for hedging activities. The Company will adopt SFAS No. 133 on
January 1, 2001. At the current time the Company does not utilize derivative
instruments, and accordingly it is anticipated that the adoption of SFAS No. 133
will not affect the Company's consolidated financial position and results of
operations.
F. SUPPLEMENTAL CASH FLOWS INFORMATION
During the quarter ended March 31, 2000, the Company had the following non-cash
financing activities:
The Company issued 266,945 common shares upon the exercise of warrants in
exchange for the retirement of $601,000 of the Company's Senior Subordinated
Notes.
The Company recorded the cashless exercise of 47,860 options at prices ranging
from $0.75 to $2.25, in exchange for 28,831 shares of common stock at prices
ranging from $3.3125 to $4.01325. Such shares were held for a period of at least
six months before the respective exchange. The value of these transactions was
$97,000.
During the quarter ended March 31, 2000, options to purchase 334,000 shares of
common stock were granted under the Company's Stock Option Plan, at prices
ranging from $2.21875 to $3.6875.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended March 31, 2000 compared to three months ended March 31, 1999.
GENERAL
FIND/SVP, Inc. provides a broad consulting, advisory and business intelligence
service to executives and other decision-making employees of client companies,
primarily in the United States. The Company operates in one business segment,
providing consulting and business advisory services including: the Quick
Consulting and Research Service ("QCS") which provides retainer clients with
access to the expertise of the Company's staff and information resources; and
the Strategic Consulting and Research Group ("SCRG") which provides more
extensive, in-depth custom market research and competitive intelligence
information, as well as customer satisfaction and loyalty programs. The Company
considers its QCS and SCRG services, which operate as "consulting and business
advisory" activities, to be its core competency.
REVENUES
The Company's revenues increased by $520,000 or 9.5% to $6,006,000 for the
three-month period ended March 31, 2000 from $5,486,000 for the three-month
period ended March 31, 1999.
QCS accounted for 81.1% and 85.6%, and SCRG accounted for 17.9% and 13.4% of the
Company's revenues for the three-month periods ended March 31, 2000 and 1999,
respectively. QCS revenues increased by 3.7% and SCRG revenues increased by
46.0% for the three-month period ended March 31, 2000, as compared to the
comparable period of the prior year.
The increase in QCS was due primarily to an increase in the retainer base (the
recognized monthly retainer revenue), caused by an increase in the number of
retainer clients as well as an increase in the average retainer fee, during the
three-month period ended March 31, 2000 as compared to the comparable period of
the prior year. As of March 31, 2000, the Company had 1,971 retainer clients, an
increase of 1.6% over the number of retainer clients as of March 31, 1999. As of
March 31, 2000, the retainer base (monthly retainer fees billed to clients) was
$1,519,000, an increase of 8.3% over the retainer base as of March 31, 1999.
The increase in SCRG revenues was due primarily to an increase in the number of
projects booked during the first quarter of 2000 as compared to the like period
in 1999. During the first quarter of 2000, many of the practice groups within
SCRG returned to profitability after being adversely affected by staff turnover,
which occurred in the latter part of 1998 and caused reduced revenues for much
of 1999.
DIRECT COSTS
Direct costs increased by 9.8% or $272,000 to $3,048,000 for the three-month
period ended March 31, 2000, from $2,776,000 for the three-month period ended
March 31, 1999. As a percent of revenues, direct costs increased to 50.7% for
the three-month period ended March 31, 2000, from 50.6% for the corresponding
period in 1999. The increase in total direct costs was due primarily to
increased labor costs and an increase in the expenses incurred on behalf of
clients.
8
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by 18.2% or $452,000 to
$2,935,000 for the three-month period ended March 31, 2000, from $2,483,000 for
the three-month period ended March 31, 1999. As a percent of revenues, selling,
general and administrative expenses increased to 48.9% for the three-month
period ended March 31, 2000, from 45.3% for the corresponding period in 1999.
The increase in selling, general and administrative expenses was due primarily
to increased labor costs.
OPERATING INCOME
The Company had operating income of $23,000 for the three months ended March 31,
2000, as compared to operating income of $227,000 for the three months ended
March 31, 1999. The decline in operating income for the three-month period ended
March 31, 2000 is a direct result of the increase in direct costs and selling,
general and administrative expenses discussed above.
INTEREST INCOME AND EXPENSE
During the three months ended March 31, 2000, the Company earned $37,000 in
interest income, which increased from $33,000 in 1999. The increase was a result
of the increased cash balance during the first three months of 2000 as compared
to the same period of 1999, coupled with interest earned on notes receivable.
Interest expense was $97,000 for the three-month period ended March 31, 2000,
which was a decrease from $139,000 for the same period in 1999. The decrease was
a result of the reduction in outstanding debt during the first quarter of 2000
as compared to the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity and capital resources
have been cash flow from operations, borrowings, and prepaid retainer fees
provided by clients. Cash balances were $2,426,000 and $2,096,000 at March 31,
2000 and December 31, 1999, respectively. The Company's working capital position
(current assets, less current liabilities) at March 31, 2000 was $4,397,000, as
compared to $3,199,000 at December 31, 1999.
The Company believes that its cash generated from operations, together with its
existing cash balances, will be sufficient to meet its operating cash needs and
expected capital expenditures for the near term. To supplement possible
short-term cash needs, the Company has a $1,000,000 line of credit at the prime
commercial lending rate plus one-half percent, reduced by outstanding letters of
credit totaling $148,000. The line is renewable annually, and was put in place
on December 30, 1999. No amounts were borrowed under the line of credit as of
March 31, 2000.
Cash provided by operating activities was $439,000 and $428,000 in the
three-month periods ended March 31, 2000 and 1999, respectively.
Cash used in investing activities was $143,000 and $141,000 in the three-month
periods ended March 31, 2000 and 1999, respectively. Capital expenditures for
the migration of the Company's 10-year-old management information system to a
new computer system platform were a significant component of the amounts
invested in both 2000 and 1999. This new system improves the consultants'
ability to communicate with clients, access the internet, and to integrate the
Company's products, as well as to
9
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expand the Company's enterprise network. Total capital expenditures were
$143,000 and $157,000 in the three-month periods ended March 31, 2000 and 1999,
respectively. The Company expects to spend approximately $500,000 for capital
items during the remainder of 2000, the major portions of which will be used to
complete the migration of the information systems to the new platform, and for
leasehold improvements related to mechanical heating and cooling systems at one
of its locations.
Cash provided by (used in) financing activities was $34,000 and ($845,000) in
the three-month periods ended March 31, 2000 and 1999, respectively. In 1999,
the most significant item related to the early repayment of two bank borrowings
aggregating $850,000, which were otherwise due in installments in the years 2000
and 2001. In connection with the repayment of such bank borrowings, the bank
released two $1,000,000 standby letters of credit that had been provided by a
shareholder, SVP, S.A.
In the first quarter of 2000, warrants to acquire 266,945 common shares were
exercised and $600,626 of face value of the Senior Subordinated Note due October
31, 2001 were surrendered as payment.
In accordance with the terms of the Senior Subordinated Notes, the payment of
portions of accrued interest may be deferred. Interest of $221,000 and $134,000
at March 31, 2000 and 1999, respectively, was accrued and deferred under such
terms. Such amounts compound and accrue interest at the 12% rate of such Notes.
The Company is currently negotiating the possible refinancing of a portion of
its long-term notes payable with the intention of reducing future interest
expense.
The Company believes that its current cash balance and cash flow from operations
will be sufficient to cover its expected capital expenditures for the next 12
months and that it will have sufficient liquidity for the next 12 months.
The Company had non-cash financing activities related to the cashless exercise
of stock options. In the quarter ended March 31, 2000, 47,860 options were
exercised at prices ranging from $0.75 to $2.25, in exchange for 28,831 shares
of common stock at prices ranging from $3.3125 to $4.01325. Such shares were
held for a period of at least six months before the respective exchange. The
value of these transactions was $97,000.
During the quarter ended March 31, 2000, options to purchase 334,000 shares of
common stock were granted under the Company's Stock Option Plan, at prices
ranging from $2.21875 to $3.6875.
MARKET FOR COMPANY'S COMMON EQUITY
In the first quarter of 1998, by letter dated January 21, 1999, and by letter
dated November 16, 1999, the Company received notification from the NASDAQ Stock
Market, Inc. ("NASDAQ") that the Company was not in compliance with NASDAQ's
$1.00 minimum bid price requirement; the shares of the Common Stock having
closed below the minimum bid price for 30 consecutive business days. To regain
compliance with this standard the Common Stock was required to have a closing
bid price at or above $1.00 for ten consecutive trading days within the
90-calendar day period following the advent of non-compliance. With respect to
all notifications, the Common Stock subsequently met the required minimum bid
price for ten consecutive trading days, and the Company's Common Stock is
currently in compliance with the NASDAQ minimum bid requirement. Had compliance
not been achieved, NASDAQ could have issued a delisting letter.
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The Company's failure to meet NASDAQ's maintenance criteria in the future may
result in the discontinuance of the inclusion of its securities in NASDAQ. In
such event, trading, if any, in the securities may then continue to be conducted
in the non-NASDAQ over-the-counter market in what are commonly referred to as
the electronic bulletin board and the "pink sheets". As a result, an investor
may find it more difficult to dispose of or to obtain accurate quotations as to
the market value of the securities. In addition, the Company would be subject to
a Rule promulgated by the Securities and Exchange Commission that, if the
Company fails to meet criteria set forth in such Rule, imposes various practice
requirements on broker-dealers who sell securities governed by the Rule to
persons other than established customers and accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transactions prior to sale. Consequently, the Rule may have an
adverse effect on the ability of brokers-dealers to sell the securities, which
may affect the ability of shareholders to sell the securities in the secondary
market.
INFLATION
The Company has in the past been able to increase the price of its products and
services sufficiently to offset the effects of inflation on wages and other
expenses, and anticipates that it will be able to do so in the future.
FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
This Report on Form 10-Q (and any other reports issued by the Company from time
to time) contains certain forward-looking statements made in reliance upon the
safe harbor provisions of the Private Securities Litigation Act of 1995. Such
forward-looking statements, including statements regarding the Company's
dependence on regulatory approvals, its future cash flows, sales, gross margins
and operating costs, the effect of conditions in the industry and the economy in
general, and legal proceedings, are based on current expectations that involve
numerous risks and uncertainties. Actual results could differ materially from
those anticipated in such forward-looking statements as a result of various
known and unknown factors, including, without limitation, future economic,
competitive, regulatory, and market conditions, future business decisions, and
those factors discussed under Management's Discussion and Analysis of Financial
Condition and Results of Operations. Words such as "believes", "anticipates",
"expects", "intends", "may", and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying such
statements. The Company undertakes no obligation to revise any of these
forward-looking statements. Subsequent written and oral forward looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by cautionary statements in this paragraph
and elsewhere in this Form 10-Q, and in other reports filed by the Company with
the Securities and Exchange Commission.
11
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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's assessment of its sensitivity
to market risk as of March 31, 2000, as compared to the information included in
Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk",
of the Company's Form 10-K for the year ended December 31, 1999, as filed with
the Securities and Exchange Commission on March 30, 2000.
12
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PART II.
OTHER INFORMATION
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
27. Financial Data Schedule
B. REPORTS ON FORM 8-K
None.
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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 thereunto duly authorized.
FIND/SVP Inc.
(REGISTRANT)
Date: May 12, 2000 /s/ Andrew P. Garvin
- ------------------- -------------------------------------
Andrew P. Garvin
Chief Executive Officer and President
Date: May 12, 2000 /s/ Fred S. Golden
- ------------------- -------------------------------------
Fred S. Golden
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
14
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 2,426 1,749
<SECURITIES> 500 0
<RECEIVABLES> 2,364 2,543
<ALLOWANCES> (117) (90)
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,662 4,920
<PP&E> 10,537 9,879
<DEPRECIATION> (6,635) (5,701)
<TOTAL-ASSETS> 11,767 11,055
<CURRENT-LIABILITIES> 1,265 1,890
<BONDS> 0 0
0 0
0 0
<COMMON> 5,540 4,892
<OTHER-SE> (1,050) (1,834)
<TOTAL-LIABILITY-AND-EQUITY> 11,767 11,055
<SALES> 0 0
<TOTAL-REVENUES> 6,006 5,486
<CGS> 0 0
<TOTAL-COSTS> 3,048 2,776
<OTHER-EXPENSES> 2,935 2,483
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (97) (139)
<INCOME-PRETAX> (37) 121
<INCOME-TAX> (3) 56
<INCOME-CONTINUING> (34) 65
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (34) 65
<EPS-BASIC> 0.00 0.01
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