<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-22125
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 36-4069408
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
875 N. Michigan Avenue, Suite 3000 Chicago, Illinois 60611
(Address of principal executive (Zip Code)
offices)
(312) 255-5000
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 September 30, 2000, there were 21,661,627 shares of Class A Common
Stock and 2,897,566 shares of Class B Common Stock of the Registrant
outstanding.
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<PAGE>
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
PART I--FINANCIAL INFORMATION:
<TABLE>
<S> <C>
Item 1: Financial Statements
Consolidated Balance Sheets as of March 31 and September 30, 2000...... 3
Consolidated Statements of Net Income and Comprehensive Income for the
Six Months Ended September 30, 1999 and 2000.......................... 4
Consolidated Statements of Cash Flows for the Six Months Ended
September 30, 1999
and 2000.............................................................. 5
Notes to Consolidated Financial Statements............................. 6
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 8
Item 3: Quantitative and Qualitative Disclosure about Market Risk.......... 12
PART II--OTHER INFORMATION:
Item 6: Exhibits and Reports on Form 8-K................................... 13
SIGNATURES................................................................. 14
</TABLE>
2
<PAGE>
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March September 30,
31, 2000 2000
-------- -------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................ $182,945 $209,973
Accounts receivable, net of allowance of $1,279 and
$1,620 as of March 31, 2000 and September 30, 2000,
respectively........................................ 10,596 17,318
Income taxes receivable.............................. 13,874 8,908
Prepaid expenses and deferred income taxes........... 7,144 9,588
-------- --------
Total current assets............................... 214,559 245,787
Computers, equipment and training software, net........ 8,214 9,433
Other assets........................................... 15,981 21,167
Goodwill, net.......................................... 10,656 15,525
-------- --------
Total assets....................................... $249,410 $291,912
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable..................................... $ 3,759 $ 5,787
Note payable, current portion........................ 500 500
Other accrued liabilities............................ 26,333 38,353
-------- --------
Total current liabilities.......................... 30,592 44,640
Note payable, less current portion..................... 500 --
-------- --------
Total liabilities.................................. 31,092 44,640
Stockholders' equity:
Preferred Stock, $1.00 par value, 2,000 shares
authorized, no shares issued........................ -- --
Class A common stock, $.001 par value, 40,000 shares
authorized, 22,432 issued as of March 31, 2000 and
21,662 issued as of September 30, 2000.............. 22 22
Class B common stock, $.001 par value, 20,000 shares
authorized, 2,701 issued as of March 31, 2000 and
2,898 issued as of September 30, 2000............... 3 3
Additional paid-in capital........................... 195,372 208,476
Notes receivable from sale of common stock........... (232) (368)
Accumulated other comprehensive income............... 539 951
Retained earnings.................................... 32,679 48,253
-------- --------
228,383 257,337
Less Class A Common Stock in treasury, at cost, 770
shares held........................................... 10,065 10,065
-------- --------
Total stockholders' equity......................... 218,318 247,272
-------- --------
Total liabilities and stockholders' equity......... $249,410 $291,912
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Six
Months Months
Ended September Ended September
30, 30,
--------------- ----------------
1999 2000 1999 2000
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net revenues................................. $30,467 $59,878 $56,185 $112,036
------- ------- ------- --------
Operating expenses:
Project personnel and related expenses..... 16,198 31,758 30,143 59,458
Professional development and recruiting.... 3,052 6,337 5,137 11,136
Marketing and sales........................ 1,534 2,981 3,132 6,250
Management and administrative support...... 4,095 8,006 7,580 14,962
Goodwill amortization...................... 70 396 124 704
------- ------- ------- --------
Total operating expenses................. 24,949 49,478 46,116 92,510
------- ------- ------- --------
Income from operations....................... 5,518 10,400 10,069 19,526
Other income, net............................ 413 3,282 778 6,005
------- ------- ------- --------
Income before taxes.......................... 5,931 13,682 10,847 25,531
Income taxes................................. 2,313 5,336 4,230 9,957
------- ------- ------- --------
Net income................................... 3,618 8,346 6,617 15,574
Unrealized gain (loss) from securities, net
of income tax expense (benefit) of ($540)
and $302 for the three and six months ended
September 30, 2000, respectively............ -- (918) -- 412
------- ------- ------- --------
Comprehensive income......................... $ 3,618 $ 7,428 $ 6,617 $ 15,986
======= ======= ======= ========
Basic net income per share of common stock... $ 0.18 $ 0.34 $ 0.33 $ 0.64
Diluted net income per share of common stock. $ 0.14 $ 0.28 $ 0.27 $ 0.52
Shares used in computing basic net income per
share of common stock....................... 20,415 24,231 20,359 24,198
Shares used in computing diluted net income
per share of common stock................... 25,009 29,859 24,457 29,768
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six
Months
Ended September
30,
------------------
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 6,617 $ 15,574
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,072 3,311
Deferred income taxes.................................. -- 303
Tax benefits from employee stock plans................... 1,145 5,066
Changes in assets and liabilities, net of effects of
acquisition:
Accounts receivable.................................... (90) (6,412)
Prepaid expenses and other............................. (776) 2,240
Accounts payable....................................... 1,108 1,784
Other assets and liabilities........................... (10,079) 9,629
-------- --------
Net cash provided by (used in) operating activities........ (1,003) 31,495
-------- --------
Cash flows from investing activities:
Capital expenditures, net................................ (3,283) (3,791)
Payments for purchase of companies....................... (3,214) (3,241)
Other assets............................................. -- (2,354)
-------- --------
Net cash used in investing activities...................... (6,497) (9,386)
-------- --------
Cash flows from financing activities:
Repayment of note payable................................ -- (500)
Stock issuance costs..................................... -- (4)
Common stock issued...................................... 2,690 5,484
Purchase of treasury stock............................... (4,781) --
-------- --------
Net cash provided by (used in) financing activities........ (2,091) 4,980
-------- --------
Effect of exchange rate changes on cash.................... -- (61)
-------- --------
Net increase (decrease) in cash and cash equivalents....... (9,591) 27,028
Cash and cash equivalents at beginning of period........... 47,698 182,945
-------- --------
Cash and cash equivalents at end of period................. $ 38,107 $209,973
-------- --------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest................. $ 13 $ 13
Cash paid during the period for income taxes............. 2,606 24
Supplemental disclosure of noncash investing and financing
Activities:
Issuance of common stock for notes....................... $ 264 $ 483
Issuance of acquisition note payable..................... 1,000 --
Issuance of common stock in acquisitions................. 1,842 2,422
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Basis of Reporting
The accompanying consolidated financial statements of Diamond Technology
Partners Incorporated (the "Company") include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. Certain prior period amounts
have been reclassified to conform with current period presentation. In the
opinion of management, the consolidated financial statements reflect all
normal and recurring adjustments that 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 nor 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 additional disclosures, including
a summary of the Company's accounting policies, which have not changed. The
consolidated results of operations for the quarter ended September 30, 2000,
are not necessarily indicative of results for the full year.
B. Business Combinations
In May 2000, the Company acquired Momentus Group Limited ("Momentus"), a
London-based e-business consulting company. Under the terms of the acquisition
agreement, the Company paid approximately $2.9 million in cash and delivered
44,252 shares of the Company's Class A Common Stock. Additionally, Momentus
may be paid a maximum of 69,265 shares of the Company's Class A Common Stock
over the next two years upon the achievement of certain performance measures.
In October 1999, the Company acquired Leverage Information Systems, Inc.,
("Leverage"), a San Francisco based systems architecture and development
company specializing in the building of complex web sites and intranets. Under
the terms of the acquisition, the Company paid $1.0 million in cash and issued
97,500 shares of the Company's Class A Common Stock.
In April 1999, the Company acquired OmniTech Consulting Group, Inc.
("OmniTech"), a Chicago-based change management firm specializing in web-based
and other multimedia corporate learning. Under the terms of the acquisition
agreement, the Company paid $4.0 million in cash, and issued a $1.0 million
note and 115,641 shares of the Company's Class A Common Stock. Additionally,
OmniTech may be paid a maximum of $2 million over the two years following the
closing date upon achievement of certain performance measures.
The acquisitions are being accounted for under the purchase method of
accounting and, accordingly, the operating results of OmniTech, Leverage, and
Momentus have been included in the Company's consolidated financial statements
since the date of acquisition. The excess of net assets acquired ("Goodwill")
recorded for OmniTech, Leverage, and Momentus approximated $16.7 million, and
is being amortized on a straight-line basis ranging from 7 to 25 years.
6
<PAGE>
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following summarized unaudited pro forma financial information for the
three and six months ended September 30, 1999 and 2000 assumes the OmniTech,
Leverage, and Momentus acquisitions occurred as of April 1, 1999:
<TABLE>
<CAPTION>
Three Months Six Months
Ended September Ended September
30, 30,
--------------- ----------------
1999 2000 1999 2000
------- ------- ------- --------
(in millions, except per share
data)
(Unaudited)
<S> <C> <C> <C> <C>
Net Revenues............................. $30,942 $59,878 $57,761 $112,257
Net income............................... 2,988 8,346 5,410 15,496
Earnings per share:
Basic.................................. $ 0.15 $ 0.34 $ 0.26 $ 0.64
Diluted................................ $ 0.12 $ 0.28 $ 0.22 $ 0.52
</TABLE>
These amounts are based upon certain assumptions and estimates, and do not
necessarily represent results that would have occurred if the acquisition had
taken place on the basis assumed above, nor are they indicative of the results
of future combined operations.
C. Significant Event
In September 2000, the Company announced that it signed a definitive
agreement to merge with Cluster Telecom B.V. ("Cluster"), a pan-European
management and consulting firm specializing in wireless technology, Internet
and digital strategies. Under the terms of the agreement, the Company will pay
$44 million in cash and an aggregate of 13.9 million shares and options of
Diamond's Class B Common Stock. The Company filed a Registration Statement on
Form S-4 on October 12, 2000. The Company anticipates closing the acquisition,
subject to shareholder approval, prior to December 31, 2000. The combined
Company will be known as DiamondCluster International, Inc.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
information contained in the Consolidated Financial Statements and notes
thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This
Quarterly Report on Form 10-Q contains forward-looking statements that involve
risks and uncertainties. See "Forward-Looking Statements" below.
Overview
We are an e-business services firm that synthesizes business and industry
insight with technology expertise to create innovative digital strategies for
leading national and multinational businesses. Once conceived, we believe such
strategies must be implemented rapidly in order to maximize competitive
benefits. We have experienced substantial revenue growth since our inception,
generating net revenues of $112.0 million from 89 clients during the six
months ended September 30, 2000. We employed 632 client-serving professionals
as of September 30, 2000.
Our revenues are comprised of professional fees for services rendered to
our clients which are billed either monthly or semi-monthly in accordance with
the terms of the client engagement. Prior to the commencement of a client
engagement, we and our client agree on fees for services based upon the scope
of the project, our staffing requirements and the level of client involvement.
We recognize revenue as services are performed in accordance with the terms of
the client engagement. Out-of-pocket expenses are reimbursed by our clients
and offset against expenses incurred and are not included in recognized
revenues. Provisions are made for estimated uncollectible amounts based on our
experience. Although from time to time we have been required to make revisions
to our clients' estimated deliverables, to date none of such revisions has had
a material adverse effect on our operating or financial results.
The largest portion of our costs consist primarily of employee-related
expenses for our client-serving professionals and other direct costs, such as
third-party vendor costs and unbilled travel costs associated with the
delivery of services to our clients. The remainder of our costs are comprised
of the expenses associated with the development of our business and the
support of our client-serving professionals, such as professional development
and recruiting, marketing and sales, and management and administrative
support. Professional development and recruiting expenses consist primarily of
recruiting and training content development and delivery costs. Marketing and
sales expenses consist primarily of the costs associated with our development
and maintenance of our marketing materials and programs. Management and
administrative support expenses consist primarily of the costs associated with
operations, finance, information systems, facilities and other administrative
support for project personnel.
We regularly review our fees for services, professional compensation and
overhead costs to ensure that our services and compensation are competitive
within the industry. In addition, we monitor the progress of client projects
with client senior management. We manage activities of our professionals by
closely monitoring engagement schedules and staffing requirements for new
engagements. Because most of our client engagements are, and may be in the
future, terminable by our clients without penalty, an unanticipated
termination of a client project could require us to maintain underutilized
employees. While professional staff must be adjusted to reflect active
engagements, we must maintain a sufficient number of senior professionals to
oversee existing client engagements and participate in our sales efforts to
secure new client assignments.
8
<PAGE>
Results of Operations
The following table sets forth for the periods indicated, selected
statements of operations data as a percentage of net revenues:
<TABLE>
<CAPTION>
For the
Three For the Six
Months Months
Ended Ended
September September
30, 30,
------------ ------------
1999 2000 1999 2000
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenues.................................. 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Operating expenses:
Project personnel and related expenses...... 53.2 53.0 53.7 53.1
Professional development and recruiting..... 10.0 10.6 9.1 9.9
Marketing and sales......................... 5.0 5.0 5.6 5.6
Management and administrative support....... 13.5 13.4 13.5 13.4
Goodwill amortization....................... 0.2 0.6 0.2 0.6
----- ----- ----- -----
Total operating expenses.................. 81.9 82.6 82.1 82.6
----- ----- ----- -----
Income from operations........................ 18.1 17.4 17.9 17.4
Other income, net............................. 1.4 5.4 1.4 5.4
----- ----- ----- -----
Income before taxes........................... 19.5 22.8 19.3 22.8
Income taxes.................................. 7.6 8.9 7.5 8.9
----- ----- ----- -----
Net income.................................... 11.9% 13.9% 11.8% 13.9%
===== ===== ===== =====
</TABLE>
Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999
Our net income of $8.3 million during the quarter ended September 30, 2000
improved from $3.6 million during the same period in the prior year as a
result of increased revenues, partially offset by an increase in the cost of
our client-serving professionals and an increase in expenses required to
support our growth during the period.
Our net revenues increased 97% to $59.9 million during the quarter ended
September 30, 2000 as compared to $30.5 million during the same period in the
prior year. The increase in our net revenues reflects an increase in the
volume of services delivered to new clients, continued services to our
existing client base, continued growth of our Diamond Marketspace Solutions
practice, as well as three acquisitions. We served 61 clients during the
quarter ended September 30, 2000 as compared to 70 clients during the same
period in the prior year. This decrease in clients was due to our acquisition
of Omnitech Consulting Group in April of 1999, from which we inherited 38 new
clients, most of which were not clients during the quarter ended September 30,
2000.
Project personnel and related expenses increased $15.6 million to $31.8
million during the quarter ended September 30, 2000 as compared to the same
period in the prior year. In aggregate, project personnel and related expenses
increased 96% from the same period in the prior year due to increases in both
the number and compensation of our client-serving professionals to respond to
growth. We increased our client-serving professional staff from 378 at
September 30, 1999 to 632 at September 30, 2000. As a percentage of net
revenues, project personnel and related expenses decreased from 53.2% to 53.0%
during the quarter ended September 30, 2000, as compared to the same period in
the prior year.
Professional development and recruiting expenses increased $3.3 million to
$6.3 million during the quarter ended September 30, 2000 as compared to the
same period in the prior year. This increase reflects our recruiting and
training of a greater number of client-serving professionals and an associated
increase in recruiting and training resources. As a percentage of net
revenues, these expenses increased to 10.6% as compared to 10.0% during the
same period in the prior year.
9
<PAGE>
Marketing and sales expenses increased from $1.5 million to $3.0 million
during the quarter ended September 30, 2000 as compared to the same period in
the prior year as a result of increased spending in:
. The publication of our magazine, Context, which transitioned from a
quarterly publication to a bi-monthly publication and is now being
marketed at selected newsstands across the United States and distributed
to senior executives in Europe;
. The conduct and sponsorship of several Insight and other seminars for
prospective clients; and
. The hiring of additional marketing staff to further develop our corporate
branding and marketing initiatives.
As a percentage of net revenues, these expenses remained consistent at 5.0%.
Management and administrative support expenses increased from $4.1 million
to $8.0 million, or 96%, during the quarter ended September 30, 2000 as
compared to the same period in the prior year as a result of the additional
facilities, including the opening of the San Francisco office in the third
fiscal quarter of FY 2000 and the London office in the fourth fiscal quarter
of FY 2000, equipment and personnel necessary to support our growth and
increased consulting capacity. As a percentage of net revenues, these expenses
decreased from 13.5% to 13.4% as a result of our improved operating leverage
resulting from our net revenue growth.
Goodwill amortization increased $330 thousand from $70 thousand to $400
thousand during the quarter ended September 30, 2000 as compared to the same
period in the prior year primarily as a result of the acquisitions of Leverage
and Momentus which were completed in October 1999 and May 2000, respectively.
As a percentage of net revenues, these expenses increased from 0.2% to 0.6%.
Other income increased $2.9 million from $400 thousand to $3.3 million
during the quarter ended September 30, 2000 as compared to the same period in
the prior year primarily as a result of an increase in cash balances, which
went from $38.1 million as of 9/30/99 to $210.0 million as of September 30,
2000. As a percentage of net revenues, other income increased from 1.4% to
5.4%.
Six Months Ended September 30, 2000 Compared to Six Months Ended September 30,
1999
Our net income of $15.6 million during the six months ended September 30,
2000 improved from $6.6 million during the same period in the prior year as a
result of increased revenues, partially offset by an increase in the cost of
our client-serving professionals and an increase in expenses required to
support our growth during the period.
Our net revenues increased 99% to $112.0 million during the six months
ended September 30, 2000 as compared to the same period in the prior year. The
increase in our net revenues reflects an increase in the volume of services
delivered to new clients, continued services to our existing client base,
continued growth of our Diamond Marketspace Solutions practice, as well as
three acquisitions. We served 70 clients during the six months ended September
30, 2000 as compared to 89 clients during the same period in the prior year.
This decrease in clients was due to our acquisition of Omnitech Consulting
Group in April of 1999, from which we inherited 38 new clients, most of which
were not clients during the six months ended September 30, 2000.
Project personnel and related expenses increased $29.3 million to $59.5
million during the six months ended September 30, 2000 as compared to the same
period in the prior year. In aggregate, project personnel and related expenses
increased 97% from the same period in the prior year due to increases in both
the number and compensation of our client-serving professionals to respond to
growth. We increased our client-serving professional staff from 378 at
September 30, 1999 to 632 at September 30, 2000. As a percentage of net
revenues, project personnel and related expenses decreased from 53.7% to 53.1%
during the six months ended September 30, 2000, as compared to the same period
in the prior year.
Professional development and recruiting expenses increased $6.0 million to
$11.1 million during the six months ended September 30, 2000 as compared to
the same period in the prior year. This increase reflects our recruiting and
training of a greater number of client-serving professionals and an associated
increase in recruiting and training resources. As a percentage of net
revenues, these expenses increased to 9.9% as compared to 9.1% during the same
period in the prior year.
10
<PAGE>
Marketing and sales expenses increased from $3.1 million to $6.3 million
during the six months ended September 30, 2000 as compared to the same period
in the prior year as a result of increased spending in:
. The publication of our magazine, Context, which transitioned from a
quarterly publication to a bi-monthly publication and is now being
marketed at selected newsstands across the United States and distributed
to senior executives in Europe;
. The conduct and sponsorship of several Diamond Exchange, Insight, and
other seminars for prospective clients; and
. The hiring of additional marketing staff to further develop our corporate
branding and marketing initiatives.
As a percentage of net revenues, these expenses remained consistent at 5.6%.
Management and administrative support expenses increased from $7.6 million
to $15.0 million, or 97%, during the six months ended September 30, 2000 as
compared to the same period in the prior year as a result of the additional
facilities, including the opening of the San Francisco office in the third
fiscal quarter of FY 2000 and London office in the fourth fiscal quarter of FY
2000, equipment and personnel necessary to support our growth and increased
consulting capacity. As a percentage of net revenues, these expenses decreased
from 13.5% to 13.4% as a result of our improved operating leverage resulting
from our net revenue growth.
Goodwill amortization increased $580 thousand from $120 thousand to $700
thousand during the six months ended September 30, 2000 as compared to the
same period in the prior year primarily as a result of the acquisitions of
Leverage and Momentus which were completed in October 1999 and May 2000,
respectively. As a percentage of net revenues, these expenses increased from
0.2% to 0.6%.
Other income increased $5.2 million from $800 thousand to $6.0 million
during the six months ended September 30, 2000 as compared to the same period
in the prior year, primarily as a result of an increase in cash balances from
$38.1 million as of 9/30/99 to $210.0 million as of September 30, 2000. As a
percentage of net revenues, other income increased from 1.4% to 5.4%.
Liquidity and Capital Resources
In March 2000, we completed a public offering and sold 1,500,000 shares of
Class A Common Stock at a price of $80.13 per share. We realized approximately
$114.0 million in connection with the sale, net of payment of the
underwriters' commissions and other expenses of the offering. In the offering,
an additional 1,775,000 shares were sold by selling stockholders.
We maintain a revolving line of credit pursuant to the terms of an
unsecured credit agreement from a commercial bank under which we may borrow up
to $10.0 million at an annual interest rate based on the prime rate or based
on the LIBOR plus 1.75%, at our discretion. This line of credit has been
reduced to account for letters of credit outstanding. As of September 30,
2000, we had approximately $9.9 million available under this line of credit.
Our billings for the quarter ended September 30, 2000 totaled $71.7
million. These amounts include billings to clients for out-of-pocket expenses
that are reimbursed by clients which are not included in recognized revenues.
Our gross accounts receivable balance of $18.9 million at September 30, 2000
represents 24 days of billings for the quarter.
In October 1998 our Board of Directors authorized the repurchase, from time
to time, of up to one million shares of our Class A Common Stock. These
repurchases were authorized to be made in the open market or in privately
negotiated transactions. At September 30, 2000, the number of shares purchased
under this authorization was 769,950 shares at an aggregate cost of $10.1
million. We intend to fund future repurchases through our cash balances.
We believe that our current cash balances, existing lines of credit and
cash flow from existing and future operations, will be sufficient to fund our
operating requirements at least through fiscal 2001. Should our business
expand more rapidly than expected, we believe that additional bank credit
would be available to fund any additional operating and capital requirements.
In addition, we could consider seeking additional public or private debt or
equity financing to fund future growth opportunities.
11
<PAGE>
Forward-Looking Statements
Statements contained anywhere in this report that are not historical facts
contain forward-looking statements including such statements identified by the
words "anticipate", "believe", "estimate", "expect" or similar terminology
used with respect to us and our management. These forward-looking statements
are subject to risks and uncertainties that could cause our actual results,
performance and prospects to differ materially from those expressed in, or
implied by, the forward-looking statements. The forward-looking statements
speak only as of the date hereof and we undertake no obligation to revise or
update them to reflect events or circumstances that arise in the future.
Readers are cautioned not to place undue reliance on forward-looking
statements. For a statement of the Risk Factors that might cause our actual
operating or financial results to differ materially, see Exhibit 99.1 to this
Quarterly Report on Form 10-Q.
Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes since March 31, 2000.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1-5
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation (filed as Exhibit 3.1 to the Registration
Statement on Form S-3 (File No. 333-30666) and incorporated herein
by reference)
3.2 By-Laws (filed as Exhibit 3.2 to the Registration Statement on Form
S-3 (File No. 333-30666) and incorporated herein by reference)
27.0 Financial Data Schedule
99.1 Risk Factors
(b) Reports on Form 8-K
A report on Form 8-K was filed on September 11, 2000 related to the
acquisition of Cluster Telecom B.V.
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<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.
Diamond Technology Partners
Incorporated
Date: November 1, 2000
/s/ Melvyn E. Bergstein
By: _________________________________
Melvyn E. Bergstein
Chairman, Chief Executive Officer
and Director
Date: November 1, 2000
/s/ Karl E. Bupp
By: _________________________________
Karl E. Bupp
Vice President, Chief Financial
Officer and Treasurer
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