<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 2000
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 NUMBER 0-21040
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1320610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8 CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
(Address of principal executive offices) (Zip Code)
(617) 374-9800
(Registrant's telephone number, including area code)
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 ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of April 30, 2000, there were 62,398,168 shares of common stock
outstanding.
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION:
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 18
PART II - OTHER INFORMATION:
ITEM 1: LEGAL PROCEEDINGS 18
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURES 20
EXHIBIT INDEX 21
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
------- --------------------
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
-------- --------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 57,950 $ 62,288
Investments held to maturity 28,785 28,659
Accounts receivable, less allowance of $10,414 and $10,287
at March 31, 2000 and December 31, 1999, respectively 132,066 126,842
Unbilled revenue on contracts 16,353 13,181
Deferred income taxes 247 247
Prepaid expenses and other current assets 47,775 38,465
-------- --------
Total current assets 283,176 269,682
Property and equipment, net 51,573 53,127
Deferred income taxes 6,144 3,619
Other assets 35,285 41,246
-------- --------
Total assets $376,178 $367,674
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,189 $ 13,845
Accrued expenses 64,033 54,971
Deferred revenue 11,306 9,594
Income taxes payable 11,781 12,054
Obligations under capital leases, current 46 71
-------- --------
Total current liabilities 97,355 90,535
Obligations under capital lease 59 103
Other long term liabilities 2,000 -
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share, 2,000,000 shares
authorized and none issued and outstanding
at March 31, 2000 and December 31,1999, respectively - -
Common stock, $.01 par value, authorized 250,000,000
shares; issued and outstanding 62,695,705 and 62,065,028 shares
at March 31, 2000 and December 31, 1999, respectively 627 621
Additional paid-in capital 168,347 159,738
Retained earnings 125,396 129,670
Accumulated other comprehensive loss (14,444) (9,331)
Deferred compensation (3,162) (3,662)
-------- --------
Total stockholders' equity 276,764 277,036
-------- --------
Total liabilities and stockholders' equity $376,178 $367,674
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Net revenues $147,592 $151,373
Costs and expenses:
Project personnel 78,007 71,568
General and administration 24,071 16,442
Sales and marketing 19,042 14,265
Other costs 47,167 37,960
-------- --------
Total operating expenses 168,287 140,235
-------- --------
Income/(loss) from operations (20,695) 11,138
Other income/(expense):
Interest income, net 706 561
Gain on equity investment 5,113 407
Gain on sale of assets 7,661 -
Foreign exchange gain/(loss) 90 (75)
-------- --------
Total other income 13,570 893
-------- --------
Income/(loss) before income taxes (7,125) 12,031
Provision/(benefit) for
income taxes (2,850) 4,572
-------- --------
Net income/(loss) $ (4,275) $ 7,459
======== ========
Basic net income/(loss) per share $(.07) $.13
======== ========
Diluted net income/(loss) per share $(.07) $.12
======== ========
Weighted average number of
common shares outstanding 62,270 59,301
======== ========
Weighted average number of
common and common
equivalent shares outstanding 62,270 64,059
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ (4,275) $ 7,459
Amounts that reconcile net income/(loss) to net cash
used in operating activities:
Depreciation and amortization 4,238 3,943
Stock based compensation 500 -
Tax benefit from exercise of stock options - 1,467
Gain on equity investment in Cambridge Technology Capital Fund (5,113) (282)
Gain on sale of assets (7,661) -
Change in deferred income taxes (2,524) -
Changes in assets and liabilities:
(Increase)/decrease in accounts receivable (6,248) 3,317
Increase in unbilled revenue on contracts (3,401) (10,263)
Increase in prepaid expenses and other current assets (4,911) (3,845)
Decrease/(increase) in other assets 1,182 (216)
Decrease in accounts payable (3,566) (1,339)
Increase/(decrease) in accrued expenses 9,536 (5,097)
Increase in deferred revenue 1,724 1,080
Decrease in income taxes payable (314) (7,344)
Increase in other long-term liabilities 2,000 -
-------- --------
Net cash used in operating activities (18,833) (11,120)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (2,790) (4,210)
Purchase of investments held to maturity (1,944) (4,579)
Maturity of investments held to maturity 1,818 2,137
Proceeds from Cambridge Technology Capital
Fund cash distribution 5,928 -
Investment in Cambridge Technology Capital Fund - (840)
Proceeds from sale of assets 3,001 -
-------- --------
Net cash provided by/(used in) investing activities 6,013 (7,492)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt and capital leases (37) (54)
Proceeds from employee stock purchase plan 2,826 4,768
Proceeds from exercise of stock options 5,789 7,307
-------- --------
Net cash provided by financing activities 8,578 12,021
-------- --------
Effect of foreign exchange rate changes on cash (96) 236
Net decrease in cash and cash equivalents (4,338) (6,355)
Cash and cash equivalents at beginning of period 62,288 80,051
-------- --------
Cash and cash equivalents at end of period $ 57,950 $ 73,696
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. BASIS OF REPORTING
------------------
The accompanying consolidated financial statements of Cambridge Technology
Partners (Massachusetts), Inc., a Delaware corporation (the "Company"), include
the accounts of the Company and all of its wholly owned subsidiaries. All
intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the consolidated financial statements reflect all
normal and recurring adjustments, which are necessary for a fair presentation of
the Company's financial position, results of operations, and cash flows as of
the dates and for the periods presented. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Consequently, these statements do not
include all the disclosures normally required by generally accepted accounting
principles for annual financial statements or those normally made in the
Company's Annual Report on Form 10-K. Accordingly, reference should be made to
the Company's Annual Report on Form 10-K for the year ended December 31, 1999
for additional disclosures, including a summary of the Company's accounting
policies. The consolidated results of operations for the three months ended
March 31, 2000 are not necessarily indicative of results for the full year.
B. NET INCOME PER SHARE
--------------------
The following table presents the calculation of earnings per share for the three
months ended March 31, 2000 and 1999 (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- --------------
<S> <C> <C>
Net income/(loss) $(4,275) $ 7,459
=============== ==============
Basic:
Weighted average number of common shares outstanding 62,270 59,301
=============== ==============
Net income/(loss) per share $ (.07) $ .13
=============== ==============
Diluted:
Weighted average number of common shares outstanding 62,270 59,301
Dilutive effects of stock options - 4,758
--------------- --------------
Weighted average number of common and common
equivalent shares outstanding 62,270 64,059
=============== ==============
Net income/(loss) per share $ (.07) $ .12
=============== ==============
</TABLE>
For the three month period ended March 31, 2000 basic and diluted EPS were
calculated based solely on weighted average number of common shares outstanding.
For the three month period ended March 31, 2000 and 1999, outstanding options to
purchase 6,523,787 and 772,024 shares respectively, were excluded from the
computation of diluted EPS because the effects of these option shares were anti-
dilutive.
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C. FOREIGN EXCHANGE CONTRACTS
--------------------------
The Company maintains foreign exchange contracts in an attempt to mitigate the
risk of changes in foreign exchange rates associated with intercompany balances.
The contracts generally have maturities of one month. The impact of exchange
rate movements on contracts is recorded in other income in the period in which
the exchange rates change, generally consistent with the term of the contract.
As of March 31, 2000, the Company held foreign exchange forward contracts of
approximately $8.4 million and there were no related deferred gains or losses.
As of March 31, 2000, the forward contracts consisted of 460.0 million Japanese
yen, 2.8 million Swiss francs, 1.0 million British pounds, and 4.5 million
French francs. The Company does not hold foreign exchange contracts for trading
purposes.
D. COMPREHENSIVE INCOME
--------------------
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" requires the presentation of comprehensive income and its components.
Comprehensive income presents a measure of all changes in equity that result
from recognized transactions and other economic events during the period other
than transactions with stockholders. The following table presents the
calculation of comprehensive income and its components for the three months
ended March 31, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Comprehensive income/(loss):
Net income/(loss) $ (4,275) $ 7,459
Other comprehensive income/(loss):
Unrealized gain/(loss) on marketable equity securities,
net of taxes of ($2,525) and $165 for the three month
periods ended March 31, 2000 and 1999, respectively (3,788) 267
Foreign currency translation adjustment (1,325) (3,197)
----------------- -----------------
Other comprehensive loss (5,113) (2,930)
----------------- -----------------
Comprehensive income/(loss) $ (9,388) $ 4,529
================= =================
</TABLE>
E. NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, recorded as a
gain or loss, depends on the intended use of the derivative and its resulting
designation. The statement initially was to be effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. In July 1999, the Financial
Accounting Standards Board issued SFAS 137, "Accounting for Derivative
Instruments and Hedging Activites-deferral of the Effective Date of FASB
Statement No. 133, an amendment of FASB Statement No.
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133." SFAS 137 defers the implementation of SFAS 133 by one year. SFAS 133, as
amended by SFAS 137, is effective for the Company's fiscal quarters beginning
after January 1, 2001. The Company is currently evaluating if the adoption of
SFAS 137 will have a material effect on its financial position or results of
operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation - an interpretation of APB Opinion No. 25." FIN 44
is effective July 1, 2000, but certain conclusions in this Interpretation cover
specific events that occur after either December 15, 1998, or January 12, 2000.
To the extent that this Interpretation covers events occurring during the period
after December 15, 1998, or January 12, 2000, but before the effective date of
July 1, 2000, the effects of applying this Interpretation are required to be
recognized on a prospective basis from July 1, 2000. The Company is currently
evaluating the impact, if any, this interpretation will have on its financial
position and results of operations.
F. COMMITMENTS AND CONTINGENCIES
-----------------------------
On November 18, 1998, certain of the former stockholders of Excell Data
Corporation ("Excell") filed a lawsuit against the Company in the United States
District Court for the District of Massachusetts ("District Court"). The
complaint alleged breach of contract, violation of federal securities laws,
common law fraud, and negligent misrepresentation in connection with the Excell
acquisition and sought unspecified damages. In February 1999, the Company filed
a counterclaim against the former stockholders of Excell which alleges breach of
contract. On March 2, 2000, the District Court granted the Company's motion for
summary judgement, dismissing the complaints of the former shareholders of
Excell in their entirety.
In March and April 1999, certain stockholders of the Company filed ten separate
class action lawsuits against the Company and certain of the Company's officers
in the United States District Court for the District of Massachusetts. These
suits have since been consolidated by the court. The suits allege
misrepresentations and omissions regarding the Company's future growth prospects
and progress of the Company's reorganization in violation of federal securities
laws. The suits seek unspecified damages. The Company believes that the
plaintiffs' claims are without merit and intends to vigorously defend the
lawsuits. The Company has moved to dismiss the plaintiffs' consolidated
complaint. That motion is currently pending.
The Company is involved in litigation and various other legal matters, which
have arisen in the ordinary course of business. The Company does not believe
that the ultimate resolution of any such existing matter will have a material
adverse effect on its financial condition, results of operations, or cash flows.
G. CAMBRIDGE TECHNOLOGY CAPITAL FUND I L.P. (the "FUND")
------------------------------------------------------
The Fund was formed in October 1997 as a limited partnership with committed
capital of approximately $25.3 million. The Fund's goal is capital appreciation
and is intended to invest in expansion-stage, private companies providing
products and services within the technology industry. The Company's ownership
interest in the Fund, of approximately 24%, is accounted for using the equity
method of accounting. The Company's total capital commitment to the Fund is
approximately $6.0 million, of which $4.9 million has been contributed through
March 31, 2000. The carrying value of the Company's investment in the Fund was
approximately $18.2 million and $33.2 million at March 31, 2000 and December 31,
1999 respectively, and is included in other assets in the consolidated balance
sheet. The decrease in the carrying value of the Company's investment in the
Fund in 2000 is primarily a result of realized gains on the distribution of
assets in the Fund's investment portfolio. For the quarter ended March 31,
2000, the Company received approximately $5.9 million of cash distributions and
$14.2 million of distributions in-kind in the form of
8
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marketable equity securities. The gain on the Company's equity investment in the
Fund totaled $5.1 million and $0.4 million for the three months ended March 31,
2000 and 1999, respectively. The amount of gain allocated each period is based
on the allocation of the Fund's income as determined by the Fund's partnership
agreement. The allocation methodology may vary at times and may not be solely
based on contribution percentage.
Summarized financial information of the Fund is presented as follows (in
thousands):
<TABLE>
<CAPTION> Three Months Ended
March 31,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net realized gains $ 69,967 $ 3,364
Net decrease in unrealized
appreciation of investments (51,989) (1,301)
Net loss from operations (156) (196)
------------ -----------
Net increase in partners' capital $ 17,822 $ 1,867
============ ===========
</TABLE>
The net decrease in unrealized appreciation of investments for the three months
ended March 31, 2000 and 1999 included $50.0 million and $2.1 million,
respectively, of reversals of unrealized gains from prior periods in order to
record realized gains for securities sold or distributed during the current
period.
H. OPERATING SEGMENT INFORMATION
-----------------------------
The Company is managed in two operating segments: North America and
International. The North American operating segment consists of e-business,
systems integration, and consulting services in the United States and Canada,
while the International operating segment consists of e-business, systems
integration, and consulting services outside of North America.
The Company evaluates each segment's performance based on revenues and income
from operations. For segment reporting purposes, total corporate revenues,
income from operations, and assets have been included in North America. The
investment in the Fund of $18.2 million and $2.9 million is included in total
assets for North America at March 31, 2000 and 1999, respectively.
9
<PAGE>
Information about the Company's operating segments is presented as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
2000 1999
--------------- -----------------
<S> <C> <C>
Revenues:
North America $ 91,240 $ 97,287
International 56,352 54,086
--------------- -----------------
Consolidated $147,592 $151,373
=============== =================
Income/(loss) from operations:
North America $ (23,060) $ 3,730
International 2,365 7,408
--------------- -----------------
Consolidated income/(loss)
from operations (20,695) 11,138
Other income 13,570 893
--------------- -----------------
Consolidated income/(loss)
before incomes taxes $ (7,125) $ 12,031
=============== =================
Total assets:
North America $278,330 $272,246
International 97,848 84,585
--------------- -----------------
Consolidated $ 376,178 $ 356,831
=============== =================
</TABLE>
I. GAIN ON SALE OF ASSETS
----------------------
On February 10, 2000, the Company announced that it had sold its Cambridge
Information Network ("CIN") to EarthWeb Inc. ("EarthWeb") for $8.0 million in a
combination of cash and EarthWeb common stock, as determined by EarthWeb. During
the first quarter of 2000, the Company recorded a gain on the sale of assets,
net of transaction costs related to this transaction, of approximately $7.7
million. Approximately $3.0 million in cash proceeds were received on February
10, 2000. Under the terms of the agreement, approximately $1.0 million in cash
or an equivalent amount of shares of EarthWeb's stock were to be received on
March 31, 2000 and June 30, 2000, respectively, and the balance of approximately
$3.0 million in cash or an equivalent amount of shares of EarthWeb's stock will
be received on September 30, 2000. The March 31, 2000 payment was deficient due
to the timing of the delivery of EarthWeb's stock to the Company and a decrease
in the value of such stock between March 31, 2000 and the actual delivery date.
The Company is seeking a resolution to the deficiency. In conjunction with the
sale of CIN to EarthWeb, the Company entered into a services agreement with
EarthWeb to purchase a combination of web site sponsorships and service from
EarthWeb's sites for $1.0 million per year for three years.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
OVERVIEW
Cambridge Technology Partners (Massachusetts), Inc. ("Cambridge" or the
"Company") performs technology and consulting services to help its clients
develop and accelerate their transition to Internet-based e-business solutions
and processes - the information technology that defines the "New Economy."
Founded in 1991, the Company combines electronic business and digital (Internet)
strategy consulting and cross-enterprise, software integration services to
"Global 1000" organizations worldwide, delivering rapid end-to-end business
solutions, usually on a fixed-time, fixed-price basis. Cambridge's services
include digital business strategies, e-commerce technical solutions consulting,
Internet user experience design, advanced software application integration,
custom software solutions, network solutions, enterprise resource solutions,
change management consulting, and integrated management consulting across
various industrial sectors and the entire scope of the value chain of the
Company's clients.
Electronic commerce business solutions delivered to clients have become and will
likely continue to become more integrated with clients' value chains and legacy
systems. This market trend represents a growth opportunity for Cambridge.
Starting in 2000, Cambridge groups its services into three lines of business,
"e-Solutions," "Traditional" and "Change Management Consulting."
The Company provides the majority of its services on a fixed-time, fixed-price
model, with client involvement at all stages of the process. For software
development services, the Company and its clients generally agree on a
contractually fixed price for each phase of a project. In performing its
services, the Company brings together key client users, executives, and IT
professionals in interactive sessions to achieve consensus on the business case,
strategic objectives, and functionality of a business solution. In many cases,
the Company employs a rapid deployment methodology that features an iterative
approach. The Company believes that these techniques permit the delivery of
results in rapid time frames - typically within three to twelve months.
Revenues for the first quarter of 2000 decreased 3% to $147.6 million compared
to $151.4 million for the same period in 1999. Net loss for the quarter ended
March 31, 2000 was $4.3 million, or $.07 per share (basic and diluted). Included
in net loss for the first quarter of 2000 is a $5.1 million, or a $.05 per share
(basic and diluted), gain on equity investment related to the Company's
investment in the Cambridge Technology Capital Fund I L.P. (the "Fund"), and a
$7.7 million, or a $.07 per share (basic and diluted) gain on sale of assets
related to the Company's sale of its Cambridge Information Network (CIN). This
compares to net income of $7.5 million, or $.12 per share (diluted), for the
first quarter of 1999.
For the first quarter of 2000, e-Solutions revenues, consisting of e-Business
and e-Integrations revenues, increased 59% to $77.0 million compared to $48.3
million for the same period in 1999. Sequentially, e-Solutions revenues
increased 11% compared to $69.3 million for the quarter ended December 31, 1999.
Growth in e-Solutions revenues for the first quarter of 2000 is primarily
attributable to increased demand for the Company's e-Business and e-Integration
services worldwide. Revenues for Traditional services, comprised of services
from custom client/server applications and implementations of software such as
call centers and enterprise resource planning (ERP) applications, decreased 48%
to $38.8 million for the first quarter of 2000 compared to $73.9 million for the
same period in 1999. The decrease in revenues from Traditional services was
primarily due to clients investing in such projects in prior periods in
conjunction
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with Year 2000 prevention plans and the transition of the Company's staff to
providing e-Solutions services. Change Management Consulting revenues for the
first quarter of 2000 increased 9% to $31.8 million from $29.1 million due
primarily to increased demand in North America within the energy and chemical
sectors and the development of the financial sector in Europe.
North American revenues decreased 6% to $91.2 million for the quarter ended
March 31, 2000 compared to $97.3 million for the same period in 1999, while
International revenues decreased 4% to $56.4 million in the first quarter of
2000 compared to $54.1 million in the first quarter of 1999. North American
revenues for 2000 represented 62% of total revenues while International revenues
represented 38% of total revenues for the same period. North American revenues
for 1999 represented 64% of total revenues while International revenues
represented 36% of total revenues for the same period. The decrease in North
American and International revenues for the quarter ended March 31, 2000
compared to the same period in 1999 was due primarily to a decrease in revenues
from Traditional services. Traditional services remain a part of the Company's
service offerings in support of e-Solutions.
Annualized employee turnover was approximately 40%, excluding forced turnover,
for the first quarter of 2000 compared to approximately 31%, excluding forced
turnover, for 1999. The Company, along with the rest of the technology industry,
continues to be challenged by employee turnover as companies compete for
employees with the skill sets required to fulfill client demand. Company
headcount totaled 3,942 at March 31, 2000 compared to 4,207 at December 31,
1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1999
Total revenues for the first quarter of 2000 decreased 3% to $147.6 million
compared to $151.4 million for the same period in 1999. North American revenues
decreased 6% to $91.2 million for the quarter ended March 31, 2000 compared to
$97.3 million for the same period in 1999. International revenues decreased 4%
to $56.4 million in the first quarter of 2000 compared to $54.1 million in the
first quarter of 1999. The decrease in worldwide total revenues for the first
quarter of 2000 compared to the first quarter of 1999 was principally due to a
48% decrease in the revenues from Traditional services to $38.8 million from
$73.9 million. This decrease was partially offset by an increase in the
revenues from e-Solutions of 59% to $77.0 million for the first quarter of 2000
from $48.3 million for the same period in 1999 and an increase of 9% in revenues
from Change Management Consulting to $31.8 million for the quarter ended March
31, 2000 from $29.1 million for the same period in 1999. The decrease in
revenues from Traditional services was primarily due to clients investing in
such projects in prior periods in conjunction with Year 2000 prevention plans
and the transition of the Company's staff to providing e-Solutions services.
Traditional services remain a part of the Company's service offerings in support
of e-Solutions. Growth in e-Solutions revenues for the first quarter of 2000 is
primarily attributable to increased demand for the Company's e-Business and e-
Integration services worldwide. The increase in Change Management Consulting
revenues was primarily due to increased demand in North America within the
energy and chemical sectors and the development of the financial sector in
Europe.
Project personnel costs consist principally of payroll and payroll-related
expenses for personnel dedicated to client assignments and are directly related
to the level of client services being delivered. Project personnel costs were
$78.0 million, or 53% of revenues, for the first quarter of 2000 compared to
$71.6 million or 47%
12
<PAGE>
of revenues, for the first quarter of 1999. The dollar and percentage increase
resulted primarily from an increase in payroll and payroll-related expenses
associated with increased wages to transition the Company's salary scale to the
top end of the market place and bonus costs associated with the Company's
incentive bonus program. The increase in project personnel costs was partially
offset by a 13% decrease in worldwide project personnel headcount to 2,992 full-
time employees at March 31, 2000 from 3,428 full-time employees at March 31,
1999. Competition for personnel with IT skills is intense and the Company
expects salaries and wages to continue to increase. The Company periodically
reviews and updates its billing rates in an attempt to cover the expected
increase in project personnel costs.
General and administration expenses were $24.1 million, or 16% of revenues, for
the first quarter of 2000 compared to $16.4 million or, 11% of revenues, for the
first quarter of 1999. The dollar and percentage increase resulted primarily
from an incentive bonus program, an increase in payroll and payroll-related
expenses associated with increased wages and recruiting of additional personnel,
including senior executives, to support the Company's business. Worldwide
general and administrative personnel headcount increased 16% to 710 full-time
employees at March 31, 2000 from 612 full-time employees at March 31, 1999.
Sales and marketing expenses were $19.0 million, or 13% of revenues, for the
first quarter of 2000 compared to $14.3 million, or 9% of revenues, for the
first quarter of 1999. The dollar and percentage increase resulted primarily
from costs associated with enhancing the Company's brand recognition through
advertising and the sponsorship of major forums and an increase in payroll and
payroll-related expenses associated with increased wages. This increase was
partially offset by a decrease in worldwide sales and marketing personnel
headcount of 20% to 240 employees at March 31, 2000 from 301 employees at March
31, 1999. The Company continued its investment in marketing initiatives and
educational and training programs through those conducted by its Management Lab.
The Management Lab enables clients to participate in both physical and virtual
interactive forums to discuss issues associated with adopting IT, as well as key
business, technology, and career management issues.
Other costs consist of non-billable expenses directly incurred for client
projects and other associated business costs, including facilities costs and
related expenses, non-billable staff travel, non-billable project personnel
costs, and training costs. Other costs were $47.2 million, or 32% of revenues,
for the first quarter of 2000 compared to $38.0 million, or 25% of revenues, for
the first quarter of 1999. The dollar and percentage increase from 1999
resulted principally from increased facilities and telecommunications costs. The
increase was also caused by a decrease in staff utilization due to employee
turnover and additional training required to transition project personnel to
providers of e-Business solutions. The Company continues to assess its hiring
plans based upon a review of the skill sets required to reflect the change in
market dynamics.
Included in other income for the first quarter of 2000 is a gain on equity
investment of $5.1 million related to the Company's investment in the Fund
compared to a gain of $0.4 million for the first quarter of 1999. Also included
in other income for the first quarter of 2000 is a gain on the sale of CIN of
$7.7 million. CIN is an internet community for IT executives to share
experiences, solve problems, and exchange benchmarking data and other
information. In addition, other income includes interest income, net of interest
expense, of $0.7 million for the first quarter of 2000 compared to $0.6 million
for the same period in 1999.
The Company maintains monthly foreign exchange forward contracts in an attempt
to hedge against the risk of changes in foreign exchange rates associated with
intercompany balances. This risk coverage is dependent upon forecasted
intercompany activities at the beginning of each month. The exchange rate gains
and losses are directly related to the accuracy of such forecasted amounts. As
of March 31, 2000, the Company held foreign exchange contracts of approximately
$8.4 million. As the Company grows its international business,
13
<PAGE>
it becomes increasingly subject to the risks associated with international
operations, including fluctuations in foreign currency exchange rates. The
Company continues to monitor the impact of foreign currency exchange rates on
revenues.
The Company's effective income tax rate for the first quarter of 2000 was 40%
compared to 38% for the same period a year ago. The increase in the effective
tax rate for the first quarter of 2000 was primarily due to an increase in
certain expenses which are not deductible for tax purposes. The Company's
effective tax rate may vary from period to period based on the Company's future
expansion into areas of varying country, state, and local statutory income tax
rates, its geographic mix of revenue and income, and the effects of varying
compensation arrangements.
Net loss for the quarter ended March 31, 2000 was $4.3 million, or $.07 per
share (basic and diluted). Included in net loss for the first quarter of 2000 is
a $5.1 million, or a $.05 per share (basic and diluted) gain on equity
investment related to the Company's investment in the Fund and a $7.7 million,
or a $.07 per share (basic and diluted) gain on sale of assets. This compares to
net income of $7.5 million, or $.12 per share (diluted), for the first quarter
of 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company continued to operate essentially debt-free and working capital
increased to $185.8 million at March 31, 2000, from $179.1 million at December
31, 1999. This increase was primarily due to increases in accounts receivable,
unbilled revenue on contracts, prepaid expenses and other current assets, and a
decrease in accounts payable, partially offset by a decrease in cash and cash
equivalents and an increase in accrued expenses. The increase in unbilled
revenue on contracts was caused by timing differences, including timing
differences between contractual billing terms and percentage of completion
revenue recognition requirements. The Company's days sales outstanding in
accounts receivable was 81 days for the first quarter of 2000 compared to 79
days for the quarter ended December 31, 1999, and 77 days for the quarter ended
March 31, 1999. This increase from 1999 to 2000 was due to an increase in
accounts receivable while revenue remained essentially the same. The increase
in accounts receivable is primarily due to longer collection periods resulting
from employee turnover which has resulted in the discontinuity of project teams.
The Company actively assesses and monitors the collectability of its accounts
receivable and has included days sales outstanding as a measurement criteria to
calculate certain employees incentive bonuses for 2000.
Net cash used in operating activities was $18.8 million in the first three
months of 2000, compared to net cash used in operating activities of $11.1
million for the same period in 1999. The increase in net cash used in operating
activities in 2000 compared to 1999 was primarily caused by a net loss in 2000
compared to net income in 1999, and an increase in accounts receivable,
partially offset by an increase in accrued expenses and an increase in other
long-term liabilities. In addition, the net loss for 2000 includes non-cash
gains from the Fund and the sale of CIN.
Capital expenditures of $3.0 million for the first three months of 2000 were
used principally for computer equipment to support the Company's operations,
employee workstations, telecommunications equipment, and leasehold improvements.
Capital expenditures for the full year of 2000 are expected to approximate $26
million, principally for leasehold improvements, personal computers, employee
workstations, telecommunications equipment, and other equipment to support both
current and anticipated levels of customer activities worldwide. The actual
amount of capital expenditures may vary from management's estimates as capital
needs arise and actual expenditures are made.
The Company evaluates, on an ongoing basis, potential acquisitions of companies
or
14
<PAGE>
technologies that may complement or enhance the Company's global growth
initiatives. The Company cannot be certain that it will be able to identify
suitable acquisition opportunities at an acceptable cost, if at all. Liquidity
may also be effected by acquisitions of companies or technology.
In December 1999, the Company announced a new investment strategy that will help
create and build New Economy companies (NEWCOs) using the knowledge and skills
of its consultants, funding from internal sources, and capital from the Fund and
other venture capital firms. During 2000, the Company expects to invest
approximately $25 million in NEWCOs subject to market conditions.
The Company maintains a $50.0 million unsecured senior revolving credit facility
(the "Facility") through a syndication arrangement committed equally by The
Chase Manhattan Bank ("Chase") and Fleet National Bank. The Facility, which
expires on September 10, 2001, is administered by Chase and carries a commitment
fee, payable quarterly in arrears, calculated based on the unused portion of the
Facility and a price grid as set forth in the credit agreement. The Facility
permits the Company to elect any one of three possible interest rate formulas as
defined in the credit agreement. Interest is payable in arrears based on an
interest period determined by the interest rate elected by the Company. The
Facility requires, among other things, the Company to maintain certain financial
ratios, including debt service coverage, debt to capital, and net worth. For
the quarter ended March 31, 2000 the Company was in compliance with the debt to
capital and net worth ratio requirements but was not in compliance with the debt
service coverage ratio. The Company is in the process of renegotiating the
terms of the Facility. As of March 31, 2000 and December 31, 1999, the Company
had no balance outstanding under the Facility.
The Fund was formed in October 1997 as a limited partnership with committed
capital of approximately $25.3 million. The Fund's goal is capital appreciation
and is intended to invest in expansion-stage, private companies providing
products and services within the technology industry. A wholly owned subsidiary
of the Company acts as the general partner of the Fund's general partner, and
the Company's investment is accounted for using the equity method of accounting.
The Company's capital commitment to the Fund is approximately $6.0 million. At
March 31, 2000, the Company's cumulative capital contribution to the Fund
amounted to approximately $4.9 million. The Company's investment in the Fund
resulted in a net gain of approximately $5.1 million for the three months ended
March 31, 2000.
The Company expects that cash flows from operations will provide the principal
source of future liquidity for the Company. However, the Company's strategy to
transition its business to Internet oriented solutions could place a strain on
the Company's financial resources. The Company anticipates that existing cash
and investment balances combined with cash generated from operations will be
sufficient to meet the Company's working capital requirements for at least the
next 12 months and to fund the transition of the Company's business. Operating
results and liquidity may be adversely affected if market demand and revenues do
not increase as anticipated. As the Company expands its international
operations, a number of factors, including market acceptance of the Company's
services, significant fluctuations in currency exchange rates, and changes in
general economic, political, or regulatory conditions could also adversely
affect future results and liquidity.
THE YEAR 2000 ISSUE
The Year 2000 issue results from computer programs written using two digits
rather than four to define the applicable year. Any computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing
15
<PAGE>
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
In addition to the Company's internal systems, the Company relies on third party
relationships in the conduct of its business. For example, third party vendors
handle the payroll function for the Company, and the Company also relies on the
services of landlords of its facilities, telecommunication companies, banks,
utilities, and commercial airlines, among others. In addition, the failure on
the part of the accounting systems of the Company's clients due to the Year 2000
issue could result in a delay in the payment of invoices issued by the Company
for services and expenses.
The Company has recommended, implemented and customized various third-party
software packages for its clients, certain of which may not be Year 2000
compliant. Because the Company has designed, developed and implemented software
and systems for a large number of clients since 1991, there can be no way of
assuring that all such software programs and systems are Year 2000 compliant.
There also can be no assurance that the contractual protections, if any,
obtained by the Company will operate to protect the Company from, or limit the
amount of, any liability arising from claims asserted against the Company.
To date, the Company's software and services have not revealed any significant
Year 2000 problems. As of May 12, 2000, the Company has not experienced any
significant issues as a result of Year 2000 problems and does not anticipate
incurring material incremental costs in future periods due to such issues.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, recorded as a
gain or loss, depends on the intended use of the derivative and its resulting
designation. The statement initially was to be effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. In July 1999, the Financial
Accounting Standards Board issued SFAS 137, "Accounting for Derivative
Instruments and Hedging Activites-deferral of the Effective Date of FASB
Statement No. 133, an amendment of FASB Statement No. 133." SFAS 137 defers the
implementation of SFAS 133 by one year. SFAS 133, as amended by SFAS 137, is
effective for the Company's fiscal quarters beginning after January 1, 2001. The
Company is evaluating if the adoption of SFAS 137 will have a material effect on
its financial position or results of operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation - an interpretation of APB Opinion No. 25." FIN 44
is effective July 1, 2000, but certain conclusions in this Interpretation cover
specific events that occur after either December 15, 1998, or January 12, 2000.
To the extent that this Interpretation covers events occurring during the period
after December 15, 1998, or January 12, 2000, but before the effective date of
July 1, 2000, the effects of applying this Interpretation are required to be
recognized on a prospective basis from July 1, 2000. The Company is currently
evaluating the impact, if any, this interpretation will have on its financial
position and results of operations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes forward-looking statements (statements that are not
historical facts), including, without limitation: statements about future net
revenues and profits; capital expenditures; liquidity sources and needs; working
capital needs; e-Business initiatives undertaken in response to customer demand
and anticipated market growth opportunities; the transition of personnel to e-
Solutions from traditional services; estimated costs for additional retention
programs; the Company's hiring efforts; increases in personnel and wages for the
Company's personnel; the impact of varying compensation arrangements; geographic
expansion and opening additional offices; and litigation involving the Company.
These forward-looking statements are subject to several risks and uncertainties.
While it is impossible to
16
<PAGE>
identify each factor and event that could affect the Company's results, there
are a number of important factors that could cause the Company's actual results
to differ materially from those indicated by the forward-looking statements and
that could have an impact on the Company's operating results. These factors
include, without limitation:
. risks associated with the Company's transition to an e-Business company,
including the orientation of new management teams within the new structure
and the need to develop reliable forecasting tools for each e-Business
service offering;
. the success of the Company's human resources repositioning and retention
programs;
. employee hiring, retention, billability and utilization;
. the number and significance of client engagements commenced and completed
during a period;
. the number of working days in a period;
. the Company's ability to manage its growth;
. the Company's ability to manage the cost of its engagements and operating
costs;
. changes in demand for the Company's services and third party products or
solutions for which the Company performs integration services;
. future initiatives in an attempt to adapt to changing market dynamics;
. estimated costs for additional retention programs;
. changes in market conditions that could impact the value of securities
owned by the Company or the Company's investment in the Cambridge
Technology Capital Fund I;
. turnover in senior management;
. competition;
. risks associated with international operations;
. the acceptance and profitability of the Company's services in new
locations;
. the integration of acquired businesses;
. unanticipated negative outcomes of litigation involving the Company; and
. misappropriation of, or lack or loss of protection of, the Company's
intellectual property.
. risks associated with NEWCO investments.
The timing of revenues is difficult to forecast because the Company's sales
cycle is relatively long in the case of new clients and may depend on factors
such as the size and scope of client assignments and general economic
conditions. Because a high percentage of the Company's expenses are relatively
fixed, a variation in the timing of the initiation or the completion of client
assignments, particularly at or near the end of any quarter, can cause
significant variations in operating results from period to period.
17
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
The Company is exposed to market risk from changes in interest rates and foreign
currency exchange rates due to investments in instruments made for non-trading
purposes. The interest rate risk relates primarily to the Company's portfolio of
short-term, investment grade municipal securities. The Company is also subject
to risk relating to fluctuating interest rates to the extent that it incurs any
borrowings under its credit facility. The foreign exchange rate risk relates to
the Company's investment in foreign exchange contracts which are entered into in
an attempt to mitigate the risk of changes in foreign exchange rates associated
with intercompany balances. The Company believes that interest rate risk and
foreign currency exchange rate risk are both immaterial to the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
On November 18, 1998, certain of the former stockholders of Excell Data
Corporation ("Excell") filed a lawsuit against the Company in the United States
District Court for the District of Massachusetts ("District Court"). The
complaint alleged breach of contract, violation of federal securities laws,
common law fraud, and negligent misrepresentation in connection with the Excell
acquisition and sought unspecified damages. In February 1999, the Company filed
a counterclaim against the former stockholders of Excell which alleges breach of
contract. On March 2, 2000, the District Court granted the Company's motion for
summary judgement, dismissing the complaints of the former shareholders of
Excell in their entirety.
In March and April 1999, certain stockholders of the Company filed ten separate
class action lawsuits against the Company and certain of the Company's officers
in the United States District Court for the District of Massachusetts. These
suits have since been consolidated by the court. The suits allege
misrepresentations and omissions regarding the Company's future growth prospects
and progress of the Company's reorganization in violation of federal securities
laws. The suits seek unspecified damages. The Company believes that the
plaintiffs' claims are without merit and intends to vigorously defend the
lawsuits. The Company has moved to dismiss the plantiffs' consolidated
complaint. That motion is currently pending.
The Company is involved in litigation and various other legal matters, which
have arisen in the ordinary course of business. The Company does not believe
that the ultimate resolution of any existing matter will have a material adverse
effect on its financial condition, results of operations, or cash flows.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K UPDATE REQUIRED
- ------- --------------------------------
(a) Exhibits:
3(i)(1) Amended and Restated Certificate of Incorporation of the
Company, as amended.
3(ii)(2) Amended and Restated By-laws of the Company.
4.1(3) Rights Agreement dated June 23, 1997 by and between the Company
and ChaseMellon Shareholder Services, LLC ( the
"Rights Agreement").
4.2(4) Amendment No. 1 to the Rights Agreement dated September 30, 1998
by and between the Company and ChaseMellon Shareholder Services,
LLC.
11 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
- -------------------------------------------------------------------------------
(1) Incorporated herein by reference to Exhibit 3.1 to the Company's
Report on Form 10-Q for the period ended June 30, 1998.
(2) Incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 33-56338).
(3) Incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A/A filed on September 30, 1998.
(4) Incorporated herein by reference to Exhibit 4.2 to the Company's
Registration Statement on Form 8-A/A filed on September 30, 1998.
(b) Reports on Form 8-K:
The Company did not file any current reports on Form 8-K during the three
months ended March 31, 2000.
19
<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 thereunto duly authorized.
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
Date: May 12, 2000 By: /s/ John J. Gavin, Jr.
-----------------------
John J. Gavin, Jr.
Senior Vice President and
Chief Financial Officer
By: /s/ Louis P. Persico
---------------------
Louis P. Persico
Vice President, Controller and
Chief Accounting Officer
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description UPDATE REQUIRED
----------- -----------
3(i)(1) Amended and Restated Certificate of Incorporation of the
Company, as amended.
3(ii)(2) Amended and Restated By-laws of the Company.
4.1(3) Rights Agreement dated June 23, 1997 by and between the Company
and ChaseMellon Shareholder Services, LLC ( the "Rights
Agreement").
4.2(4) Amendment No. 1 to the Rights Agreement dated September 30,
1998 by and between the Company and ChaseMellon Shareholder
Services, LLC.
11 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
- -------------------------------------------------------------------------------
(1) Incorporated herein by reference to Exhibit 3.1 to the Company's
Report on Form 10-Q for the period ended June 30, 1998.
(2) Incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 33-56338).
(3) Incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A/A filed on September 30, 1998.
(4) Incorporated herein by reference to Exhibit 4.2 to the Company's
Registration Statement on Form 8-A/A filed on September 30, 1998.
21
<PAGE>
Exhibit 11
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
---------- ----------
<S> <C> <C>
Net income/(loss) $ (4,275) $ 7,459
========== ==========
Basic:
Weighted average number of common shares outstanding 62,270 59,301
========== ==========
Net income/(loss) per share $ (.07) $ .13
========== ==========
Diluted:
Weighted average number of common shares outstanding 62,270 59,301
Dilutive effects of stock options - 4,758
---------- ----------
Weighted average number of common and
common equivalent shares outstanding 62,270 64,059
========== ==========
Net income/(loss) per share $ (.07) $ .12
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 57,950
<SECURITIES> 28,785
<RECEIVABLES> 142,480
<ALLOWANCES> 10,414
<INVENTORY> 0
<CURRENT-ASSETS> 283,176
<PP&E> 103,445
<DEPRECIATION> 51,872
<TOTAL-ASSETS> 376,178
<CURRENT-LIABILITIES> 97,355
<BONDS> 0
0
0
<COMMON> 627
<OTHER-SE> 276,764
<TOTAL-LIABILITY-AND-EQUITY> 376,178
<SALES> 0
<TOTAL-REVENUES> 147,592
<CGS> 125,174
<TOTAL-COSTS> 168,287
<OTHER-EXPENSES> (13,543)
<LOSS-PROVISION> 1,049
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> (7,125)
<INCOME-TAX> (2,850)
<INCOME-CONTINUING> (4,275)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,275)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
