<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to_________
Commission File No. 1-7994
MACKENZIE INVESTMENT MANAGEMENT INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 59-2522153
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
700 South Federal Highway, Suite 300
Boca Raton, FL 33432
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 393-8900
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Outstanding: 18,594,500 shares, common stock, par value $.01 per share at
January 28, 2000.
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MACKENZIE INVESTMENT MANAGEMENT INC.
Index to Form 10-Q
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I
FINANCIAL INFORMATION
Item 1. CONDENSED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations and
Retained Earnings 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5-10
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 10
Part II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 10
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 10
Item 3. DEFAULTS UPON SENIOR SECURITIES 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITIES HOLDERS 10
Item 5. OTHER INFORMATION 11
Item 6. EXHIBITS AND REPORT ON FORM 8-K 11
</TABLE>
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PART 1. - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
MACKENZIE INVESTMENT MANAGEMENT INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
Unaudited
December 31, March 31,
1999 1999
----------- -----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $40,242,966 $51,032,223
Receivables:
Funds for fees and expense advances 6,199,262 5,372,633
Other 1,014,413 854,343
Property and equipment, net of accumulated
depreciation of $2,777,146 as of December 31, 1999
and $2,262,386 as of March 31, 1999 1,185,094 1,306,696
Management contracts, net of accumulated
amortization of $7,663,252 as of December 31, 1999
and $6,831,667 as of March 31, 1999 5,626,425 5,643,284
Deferred selling commissions 3,269,483 1,761,002
Other assets 5,535,299 2,199,076
----------- -----------
Total assets $63,072,942 $68,169,257
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Payable to Funds for purchases of Funds' shares
and expense reimbursements $ 277,542 $ 158,365
Sub-advisory fees payable 3,360,941 3,447,159
Accounts payable 815,815 876,578
Accrued expenses and other liabilities 4,040,192 2,138,424
Income taxes payable 184,270 9,241,917
Deferred tax liability 954,391 2,976
----------- -----------
Total liabilities 9,633,151 15,865,419
----------- -----------
Commitments
Stockholders' equity:
Capital stock, $.01 par value, 100,000,000 shares authorized;
18,601,600 and 19,210,200 shares issued and outstanding
as of December 31, 1999 and March 31, 1999, respectively 186,016 192,102
Additional paid-in capital 37,996,005 40,403,488
Retained earnings 15,257,770 11,708,248
----------- -----------
Total stockholders' equity 53,439,791 52,303,838
----------- -----------
Total liabilities and stockholders' equity $63,072,942 $68,169,257
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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MACKENZIE INVESTMENT MANAGEMENT INC.
Condensed Consolidated Statements of Operations and Retained Earnings
Unaudited
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Management fees $ 8,158,278 $ 7,985,643 $24,200,052 $25,872,209
Sub-advisory fees from Canadian Funds 2,395,656 1,443,958 6,214,855 4,413,906
12b-1 Service and Distribution fees 2,187,487 3,586,731 6,540,246 11,628,069
Transfer agent fees 778,758 792,266 2,243,176 2,306,362
Administrative services fees 813,026 803,909 2,412,185 2,620,643
Fund accounting fees 214,121 176,642 597,203 529,064
Underwriting fees 82,002 24,380 148,024 108,751
Redemption fees 101,299 899,299 220,025 2,376,416
Interest, dividends and other 1,426,492 506,477 3,115,578 922,974
----------- ----------- ----------- -----------
16,157,119 16,219,305 45,691,344 50,778,394
----------- ----------- ----------- -----------
Expenses:
Sales literature, advertising and promotion 591,714 791,680 3,138,141 2,297,667
12b-1 Service fees 2,271,388 2,169,489 6,701,691 6,921,268
Employee compensation and benefits 3,070,596 2,228,266 9,642,899 7,753,333
Sub-advisory fees 3,361,260 3,515,533 10,293,990 11,381,285
Amortization of management contracts 290,637 270,474 831,585 811,421
Amortization of deferred selling commissions 253,414 1,651,203 701,277 5,024,566
Depreciation 178,995 146,230 514,760 400,142
General and administrative 1,762,166 1,321,546 4,750,279 3,376,510
Interest -- 120,260 -- 368,433
Occupancy and equipment rental 295,255 236,436 829,232 676,118
Reimbursement to Funds for expenses 831,875 463,020 1,864,409 1,220,175
----------- ----------- ----------- -----------
12,907,300 12,914,137 39,268,263 40,230,918
----------- ----------- ----------- -----------
Income before income taxes 3,249,819 3,305,168 6,423,081 10,547,476
Provision for income taxes 1,374,772 1,345,793 2,873,559 3,864,170
----------- ----------- ----------- -----------
Net income 1,875,047 1,959,375 3,549,522 6,683,306
Retained earnings, beginning of period 13,382,723 7,883,523 11,708,248 3,159,592
----------- ----------- ----------- -----------
Retained earnings, end of period $15,257,770 $ 9,842,898 $15,257,770 $ 9,842,898
=========== =========== =========== ===========
Basic earnings per share $ 0.10 $ 0.10 $ 0.19 $ 0.35
=========== =========== =========== ===========
Weighted average number of common shares
outstanding used in basic calculation 18,718,017 19,208,274 18,843,484 19,113,866
=========== =========== =========== ===========
Diluted earnings per share $ 0.10 $ 0.10 $ 0.19 $ 0.35
=========== =========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding
used in diluted calculation 18,745,098 19,248,471 18,874,829 19,282,252
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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MACKENZIE INVESTMENT MANAGEMENT INC.
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Unaudited Nine months ended
December 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,549,522 $ 6,683,306
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation 514,760 400,142
Amortization of management contracts 831,585 811,421
Amortization of deferred selling commissions 701,277 5,024,566
Provision for deferred income taxes 951,415 3,594,170
Payment of deferred selling commissions (2,209,759) (3,153,125)
Change in assets and liabilities:
Receivables (986,699) 137,844
Management contracts (814,725) --
Other assets (3,336,223) (971,682)
Payable to Funds for purchases of Funds' shares
and expense reimbursements 119,177 135,292
Sub-advisory fees payable (86,218) (245,706)
Accounts payable, accrued expenses and
other liabilities 1,841,005 266,706
Income taxes payable (9,057,647) --
------------ ------------
Net cash (used in) provided by operating activities (7,982,530) 12,682,934
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (393,158) (543,129)
------------ ------------
Net cash used in investing activities (393,158) (543,129)
------------ ------------
Cash flows from financing activities:
Purchase and retirement of common stock (2,413,569) (108,537)
Proceeds from the exercise of stock options -- 412,025
------------ ------------
Net cash (used in) provided by financing activities (2,413,569) 303,488
------------ ------------
Net (decrease) increase in cash and cash equivalents (10,789,257) 12,443,293
Cash and cash equivalents, beginning of period 51,032,223 20,959,781
------------ ------------
Cash and cash equivalents, end of period 40,242,966 33,403,074
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE> 6
MACKENZIE INVESTMENT MANAGEMENT INC.
Notes to Condensed Consolidated Financial Statements
December 31, 1999
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited interim financial statements of Mackenzie Investment
Management Inc. ("MIMI") and its consolidated subsidiaries (the "Company")
included herein have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles. In the opinion of management, these financial statements
include all appropriate adjustments, consisting of normal recurring
adjustments, necessary to a fair presentation of the results of operations
for the periods shown. Certain prior year amounts have been reclassified to
conform to current year presentation. The results of operations for the
three months and nine months ended December 31, 1999 are not necessarily
indicative of the results of operations to be expected for the year ended
March 31, 2000. These interim financial statements should be read in
conjunction with the Company's audited financial statements for the fiscal
year ended March 31, 1999.
2. NORMAL COURSE ISSUER BID
In June 1998, the Company entered into a normal course issuer bid, which
was approved by the Toronto Stock Exchange ("TSE"), to purchase up to
945,000 of its common shares. The bid commenced on June 10, 1998 and
terminated on June 9, 1999. During this bid period, the Company purchased
400,800 of its common shares at a total cost of $1,701,923.
In July 1999, the Company filed another notice with the TSE to commence a
normal course issuer bid to purchase up to an additional 941,610 common
shares of its stock representing 5% of the issued and outstanding common
shares at the date of the notice. The bid was approved by the TSE effective
on July 16, 1999 and will terminate on the earlier of the date on which the
maximum number of common shares have been purchased, the date the Company
provides notice of termination, or July 15, 2000. For the period July 16,
1999 through December 31, 1999, the Company has purchased an additional
230,600 of its common shares at a total cost of $820,183.
All shares acquired under the normal course issuer bid are acquired at
market price at the time of acquisition and are immediately retired.
The Company believes that its common shares are undervalued at current
market prices based on its current earnings and that the repurchase of
common shares is an appropriate use of corporate funds and will benefit
shareholders.
3. INTRODUCTION OF A NEW PRODUCT
On July 1, 1999, the Company introduced a new product line, International
Solutions, an asset allocation program, which consists of five separate
investment portfolios. The portfolios invest in Ivy Funds, for which the
Company provides investment management and other related services, as well
as other unrelated mutual funds.
4
<PAGE> 7
4. ACQUISITION OF THE ASSETS OF HUDSON CAPITAL APPRECIATION FUND
On September 29, 1999, the Company acquired the assets of Hudson Capital
Appreciation Fund (the "Hudson Fund"). The assets of the Hudson Fund, which
were approximately $20,056,000, were merged into the Ivy U.S. Emerging
Growth Fund.
5. LINE OF CREDIT
On October 13, 1999, the Corporation entered into a $10 million line of
credit agreement with the First Union National Bank. The line of credit has
a term of 364 days and is available for general working capital and
short-term capital expenditure needs. No amounts were drawn on the line of
credit as of December 31, 1999.
6. SUBSEQUENT EVENT
During January 2000 under its normal course issuer bid, the Company
purchased an additional 7,100 shares of its common shares at a total cost
of $23,459. The shares were acquired at market price at the time of
acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements in the Quarterly Report on Form 10-Q under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and elsewhere in this report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions; the loss of, or the
failure to replace, any significant sub-advisory relationships; changes in
the relative investment performance; and investor sentiment for
international investing. The Company wishes to caution readers not to place
undue reliance on such forward-looking statements and remind readers that
these forward-looking statements speak only as of the date of this
Quarterly Report. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
GENERAL
MIMI is a public company listed on the TSE. Its majority shareholder,
Mackenzie Financial Corporation ("MFC"), is a Toronto-based investment
counsel and mutual fund management company. As of December 31, 1999, MFC
holds 85.9% of the outstanding common shares of MIMI. MIMI is an investment
adviser and has three wholly owned subsidiaries, as follows:
Ivy Management, Inc. ("IMI"), an investment adviser;
Ivy Mackenzie Distributors, Inc. ("IMDI"), a broker/dealer; and
5
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Ivy Mackenzie Services Corp. ("IMSC"), a transfer agent.
The Company's principal business activities are carried on solely in the
United States and include:
o Managing public mutual funds offered in the U.S. (the "Funds") by Ivy
Fund and Mackenzie Solutions, which are U.S. open-end series
investment companies registered under the Investment Company Act of
1940, as amended;
o Providing investment advisory services to the Funds and sub-advisory
services to eleven Universal Funds sold only in Canada and managed by
MFC (the "Canadian Funds");
o Underwriting, selling and otherwise distributing redeemable shares of
the Funds in the U.S. through various distribution channels; and
o Providing transfer agent, administrative and fund accounting services
to the Funds.
The Company derives its revenues principally from ongoing management fees
and sub-advisory fees calculated as a percentage of average daily net
assets under management, and from fees related to services performed for
the Funds under contracts for administrative, transfer agent and fund
accounting services. The level of assets under management is affected by
gross sales, redemptions and changes in market values of the mutual fund's
portfolio of investments. As the level of assets under management
fluctuates so does management fee revenue. While an increase in assets
under management will most likely increase transfer agent fees, these fees
are more directly related to the number of shareholder accounts in the
Funds.
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 1998
Net assets under management, exclusive of assets of the Canadian Funds, for
which MIMI provides sub-advisory services to MFC, increased 4% to $3,630
million at December 31, 1999 from $3,479 million at December 31, 1998. Of
the $151 million increase, $198 million was attributable to market
appreciation and introduction of new products, which was offset by a $47
million decrease attributable to net redemptions (sales less redemptions).
However, average assets under management decreased 7% to $3,352 million
during the nine months ended December 31, 1999 from $3,595 million during
the nine months ended December 31, 1998.
Net sales for the nine month period ended December 31, 1999 decreased by
$47 million compared to the nine month period ended December 31, 1998. The
decrease in net sales is primarily caused by (i) the Ivy International Fund
("IIF") being closed to new shareholders; and (ii) in management's opinion,
investors' apprehension of the world financial markets.
REVENUES
Total revenues decreased 10% in the first nine months of fiscal year 2000
from the first nine months of fiscal year 1999 due primarily to the sale of
the Class B deferred selling commission asset (SEE LIQUIDITY AND CAPITAL
RESOURCES) and the decrease in the average net assets under management.
Management fees, transfer agent fees, administrative services fees and fund
accounting fees decreased 6% for the nine months ended December 31, 1999
from the comparable period last year as a result of the decrease in average
net assets under management.
Sub-advisory fees from the Canadian Funds increased 41% for the nine months
ended December 31, 1999 as compared to the nine months ended December 31,
1998. This increase is attributable to a
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<PAGE> 9
51% increase in the Canadian Funds' average net assets to $1,905 million
for the nine month period ended December 31, 1999 from $1,259 million for
the nine month period ended December 31, 1998. Eleven Canadian Funds are
currently being sub-advised as compared to nine Canadian Funds at December
31, 1998.
12b-1 Service and Distribution fees received from the Funds decreased by
$5.1 million to $6.5 million for the nine months ended December 31, 1999
from $11.6 million for the comparable period last year, primarily due to
the sale of the Class B deferred selling commission asset and a decrease in
average net assets under management. As a result of the sale, 12b-1
Distribution fees on the mutual fund shares represented by the deferred
selling commission asset sold are paid to a third party. The sale resulted
in a decrease in the asset base on which the Company collects 12b-1
Distribution fees. (SEE LIQUIDITY AND CAPITAL RESOURCES). The sale also
resulted in a 91% reduction of contingent deferred sales charges
(redemption fees).
Interest, dividends and other revenue increased 238% for the nine months
ended December 31, 1999 from the comparable period last year. This increase
is due to (i) an increase in average cash balances primarily due to cash
received from the sale of the Class B deferred selling commission asset
(SEE LIQUIDITY AND CAPITAL RESOURCES) and (ii) dividends received on
investments held by the Company.
EXPENSES
Total operating expenses decreased by 2% during the nine months ended
December 31, 1999 as compared to the nine months ended December 31, 1998
due to (i) the reduction in the amortization of deferred selling
commissions as a result of the sale of the Class B deferred selling
commission asset (SEE LIQUIDITY AND CAPITAL RESOURCES) and (ii) reduced
sub-advisory fees expense due to a decrease in the average net assets of
IIF, for which a third party provides investment advisory services.
Sales literature, advertising and promotion increased 37% for the nine
months ended December 31, 1999 over the comparable period last year because
of sales force and related marketing expenditure increases for the
promotion of new and existing products.
12b-1 Service fees paid to broker/dealers decreased 3% due to the decrease
in average assets under management.
Employee compensation and benefits increased 24% for the nine months ended
December 31, 1999 from the comparable period last year. This increase is
due to (i) a severance payment made to the former President and Chief
Executive Officer who resigned in July 1999 and (ii) an increase in
staffing levels at December 31, 1999 as compared to December 31, 1998.
General and administrative expenses increased 41% for the nine months ended
December 31, 1999 from the comparable period last year, primarily due to
(i) the expensing of certain fund organization costs resulting from the
adoption of Statement of Position No. 98-5, Reporting on the Cost of
Start-Up Activities, and (ii) the outsourcing of certain technology related
services to an unrelated third party.
There were no charges to interest expense for the nine months ended
December 31, 1999 as compared to $368,000 for the comparable period last
year as the bank line of credit was repaid when the deferred selling
commission asset was sold in fiscal year 1999. (SEE LIQUIDITY AND CAPITAL
RESOURCES).
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IMI voluntarily limits total fund expenses for certain Funds and bears
expenses in excess of such limits. The increase of $644,000 for the nine
months ended December 31, 1999 from the comparable period last year is
attributable to (i) a decrease in the average net assets of many of the
Funds that IMI reimburses and (ii) the introduction of a new product line
in July 1999, International Solutions, which consists of five separate
investment portfolios for which IMI voluntarily limits expenses.
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1998
Average net assets for the quarter increased 2% to $3,379 million during
the quarter ended December 31, 1999 from $3,322 million during the quarter
ended December 31, 1998.
Sales for the three month period ended December 31, 1999 increased by $46
million compared to the three month period ended December 31, 1998, while
redemptions remained comparable at $242 million for the corresponding
periods ended December 31, 1999 and 1998. It appears that investor
sentiment towards international investing may be changing.
REVENUES
Total revenues decreased by less than 1% for the quarter ended December 31,
1999 from the comparable quarter last year. The decrease is primarily due
to the sale of the Class B deferred selling commission asset (SEE LIQUIDITY
AND CAPITAL RECOURSES).
Management fees, transfer agent fees, administrative services fees and fund
accounting fees increased 2% for the three months ended December 31, 1999
from the comparable period last year as a result of the increase in average
net assets under management.
12b-1 Service and Distribution fees and redemption fees have decreased 49%
for the quarter ended December 31, 1999 from the comparable quarter last
year as a result of the sale of the Class B deferred selling commission
asset. (SEE LIQUIDITY AND CAPITAL RECOURSES).
Sub-advisory fees from the Canadian Funds increased 66% for the three
months ended December 31, 1999 as compared to the three months ended
December 31, 1998. This increase is attributable to a 87% increase in the
Canadian Funds' average net assets to $2,288 million for the three month
period ended December 31, 1999 from $1,224 million for the three month
period ended December 31, 1998.
Interest, dividends and other revenue increased 182% for the three months
ended December 31, 1999 from the comparable period last year. This increase
is due to (i) an increase in average cash balances primarily due to cash
received from the sale of the Class B deferred selling commission asset
(SEE LIQUIDITY AND CAPITAL RESOURCES) and (ii) dividends received on
investments held by the Company.
EXPENSES
Total operating expenses for the three months ended December 31, 1999 were
comparable to the corresponding period last year. Increases in expenses
related to the growth in our business (general and administrative expenses,
employee compensation and benefits and reimbursement to the Funds for
expenses) were offset primarily by a decrease in the amortization of
deferred selling commissions.
Sales literature, advertising and promotion decreased 25% for the three
months ended December 31, 1999 from the comparable period last year due to
management's re-evaluation of certain marketing programs.
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Employee compensation and benefits increased 38% for the three months ended
December 31, 1999 from the comparable period last year. This increase is
due to an increase in staffing levels at December 31, 1999 as compared to
December 31, 1998.
Sub-advisory fees decreased 4% for the three months ended December 31, 1999
from the comparable period last year, due to a decrease in average net
assets of certain sub-advised funds.
General and administrative expenses increased 33% for the three months
ended December 31, 1999 from the comparable period last year as a result of
the expensing of certain fund organization costs resulting from the
adoption of Statement of Position No. 98-5, Reporting on the Cost of
Start-Up Activities and the outsourcing of certain technology related
services to an unrelated third party.
IMI voluntarily limits total fund expenses for certain Funds and bears
expenses in excess of such limits. The increase of 80% for the three months
ended December 31, 1999 from the comparable period last year resulted
primarily from introduction of five new funds in July 1999 for which IMI
voluntarily limits expenses.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital resources are primarily derived from the operating
cash flows received by the Company from managing and providing investment
advisory services to the mutual funds offered in the U.S. and from
providing sub-advisory services to the Canadian Funds. The Company manages
its resources to ensure the availability of sufficient cash flows to meet
all of its financial commitments.
In March 1999, the Class B deferred selling commission asset was sold to an
unrelated third party resulting in net proceeds of approximately $21
million. The cash received is being used for general corporate purposes.
The Company estimates that cash flows in fiscal year 2000 will decrease by
approximately $8 million due to the estimated decrease in 12b-1
Distribution fees and redemption fees resulting from the transaction. In
March 1999, the Company repaid BankBoston, N.A. all amounts outstanding
under its credit facility, which was used to fund the commissions paid to
brokers.
The Company's cash and cash equivalents decreased by $10.8 million at
December 31, 1999 from the balance at March 31, 1999. The decrease resulted
in cash used in operating activities of $8.0 million (primarily federal and
state income taxes), purchases of property and equipment of $393,000,
principally consisting of computer equipment and software enhancements, and
the purchase and retirement of the Company's common stock for $2.4 million.
The payment of deferred selling commissions to broker/dealers decreased to
$2.2 million for the nine months ended December 31, 1999 as compared to
$3.2 million for the nine months ended December 31, 1998. Commissions
payments made during the nine-month periods ended December 31, 1999 and
1998 were funded internally from operations.
On October 13, 1999, the Company entered into a $10 million line of credit
agreement with the First Union National Bank. The line of credit has a term
of 364 days and is available for general working capital and short-term
capital expenditure needs. There are no immediate plans to draw on the line
of credit as the Company maintains sufficient cash balances to meet its
financial commitments.
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YEAR 2000 PROJECT
In 1996, the Company began the process of identifying, evaluating and
implementing changes to its critical computer programs and equipment to
address the year 2000 issue. The project plan included discovery,
assessment, remediation, system testing, contingency planning and internal
certification.
The Company successfully completed its year 2000 rollover without any
mission-critical information technology or non-information technology
system disruptions. The Company is not aware of any year 2000 related
problems with third-party vendors of mission-critical information
technology systems. However, it will continue to maintain contingency plans
with respect to its third-party vendor relationships.
Although the year 2000 event has occurred, there can be no assurance that
there will be no problems related to the year 2000 for a period of time
after January 1, 2000. If year 2000 issues are not adequately addressed,
the Company could face, among other things, business disruptions,
operational problems, financial losses, legal liability and similar risks,
and the Company's business, results of operations and financial position
could be materially adversely affected.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are currently no legal proceedings pending to which the Company is a
party or of which any of its property is the subject. Further, there are no
material legal proceedings to which any director, officer, or affiliate of
the Company or any associate thereof is a party which is adverse to the
Company. There are no material administrative or judicial proceedings
pending or known to be contemplated by any governmental authorities.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
10
<PAGE> 13
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
EXHIBITS DESCRIPTION
- -------- -----------
27.1 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Company has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
- ---- -------- ----
<S> <C> <C>
/s/ Keith J. Carlson
- -------------------------------
Keith J. Carlson President and Chief Executive Officer January 28, 2000
/s/ Beverly Yanowitch
- -------------------------------
Beverly Yanowitch Vice President and Chief Financial Officer January 28, 2000
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 40,243
<SECURITIES> 0
<RECEIVABLES> 7,214
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,457
<PP&E> 3,962
<DEPRECIATION> (2,777)
<TOTAL-ASSETS> 63,073
<CURRENT-LIABILITIES> 8,969
<BONDS> 0
0
0
<COMMON> 186
<OTHER-SE> 53,254
<TOTAL-LIABILITY-AND-EQUITY> 63,073
<SALES> 0
<TOTAL-REVENUES> 45,691
<CGS> 0
<TOTAL-COSTS> 39,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,423
<INCOME-TAX> 2,873
<INCOME-CONTINUING> 3,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,550
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
</TABLE>
