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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the quarterly period ended September 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the transition period from ____________ to ____________
Commission file number 0-27444
F.Y.I. INCORPORATED
-------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-2560895
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification
organization) No.)
3232 MCKINNEY AVENUE, SUITE 900, DALLAS, TEXAS 75204
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 953-7555
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
------ -----
As of November 12, 1996, 6,165,450 shares of the registrant's Common Stock,
$.01 par value per share, were outstanding.
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F.Y.I. INCORPORATED AND SUBSIDIARIES
FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
---------------------
Item 1 Financial Statements 3
Consolidated Balance Sheets - December 31, 1995 and September 30, 1996 4
Consolidated Statements of Operations - Three months and nine months
ended September 30, 1995 and 1996 5
Consolidated Statements of Cash Flows - Nine months ended September 30,
1995 and 1996 6
Notes to Consolidated Financial Statements - September 30, 1996 7
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 13
PART II. OTHER INFORMATION
-----------------
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
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F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 52 $ 3,336
Accounts receivable and notes receivable, less allowance - 14,191
Inventory - 567
Prepaid expenses and other current assets 52 687
------ --------
Total current assets 104 18,781
PROPERTY, PLANT AND EQUIPMENT, net 15 10,105
GOODWILL AND OTHER INTANGIBLES - 28,099
DEFERRED OFFERING COSTS 2,190 -
ACCOUNTS RECEIVABLE, SHAREHOLDER - LONG TERM - 643
OTHER NONCURRENT ASSETS 6 2,273
------ --------
Total assets $2,315 $ 59,901
====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $1,101 $ 7,177
Short-term obligations - 3,545
Current maturities of long-term obligations - 294
Unearned revenue - 686
Federal income taxes payable - 1,752
Current portion of deferred income taxes - 289
------ -------
Total current liabilities 1,101 13,743
LONG-TERM OBLIGATIONS, net of current maturities - 16,956
DEFERRED INCOME TAXES, net of current portion - 278
------ -------
Total liabilities 1,101 30,977
------ -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, $.01 par value, 1,000,000 and
0 shares authorized, 9,000 and 0 shares issued and
outstanding at December 31, 1995 and September 30, 1996,
respectively - -
Preferred stock, $.01 par value, 1,000,000 shares authorized,
0 shares issued and outstanding - -
Common stock, $.01 par value, 26,000,000 shares authorized,
663,125 and 5,928,074 shares issued and outstanding at
December 31, 1995 and September 30, 1996, respectively 7 59
Additional paid-in-capital 1,207 26,805
Retained earnings - 2,561
------ -------
1,214 29,425
Less - Treasury stock, $.01 par value, 0 and 36,670 shares
at December 31, 1995 and September 30, 1996, respectively - (501)
------ -------
Total stockholders' equity 1,214 28,924
------ -------
Total liabilities and stockholders' equity $2,315 $59,901
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(See Note 1)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
--------------- ----------------
1995 1996 1995 1996
------ ------- ------- -------
(unaudited)
<S> <C> <C> <C>
REVENUE:
Service revenue $ - $19,548 $ - $ 41,262
Product revenue - 1,571 - 4,211
Other revenue - 201 - 498
-------- ------- ----- --------
Total revenue - 21,320 - 45,971
COST OF SERVICES - 12,390 - 26,020
COST OF PRODUCTS SOLD - 1,251 - 3,225
DEPRECIATION - 390 - 1,023
-------- ------- ----- --------
Gross profit - 7,289 - 15,703
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES - 4,722 - 10,891
AMORTIZATION - 218 - 290
-------- ------- ----- --------
Operating income - 2,349 - 4,522
OTHER (INCOME) EXPENSE:
Interest expense - 362 - 479
Interest income - (27) - (207)
Other (income) expense, net - 20 - (40)
-------- ------- ----- --------
Income before income taxes - 1,994 - 4,290
PROVISION FOR INCOME TAXES - 806 - 1,729
-------- ------- ----- --------
NET INCOME $ - $ 1,188 $ - $ 2,561
======== ======== ===== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - 5,784 - 5,450
======== ======= ===== ========
NET INCOME PER COMMON SHARE $ - $ 0.21 $ - $ 0.47
======== ======= ===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(See Note 1)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
September 30, September 30,
1995 1996
------------- --------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ - $ 2,561
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization - 1,313
Deferred tax benefit (274)
Change in operating assets and liabilities:
Accounts receivable and notes receivable - (159)
Inventory - (58)
Prepaid expenses and other assets - (325)
Accounts payable and accrued liabilities - (1,798)
Unearned revenue - 95
----- --------
Net cash provided by operating activities - 1,355
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (7) (2,328)
Cash paid for acquisitions, net of cash received - (27,365)
----- --------
Net cash used for investing activities (7) (29,693)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance, net of underwriting
discounts and other costs (251) 23,448
Proceeds from preferred stock issuance 135 -
Proceeds from short-term obligations - 3,500
Proceeds from long-term obligations - 14,101
Cash paid for debt issuance costs - (1,602)
Principal payments on short-term obligations - (5,252)
Principal payments on long-term obligations - (2,573)
----- --------
Net cash (used in) provided by financing activities (116) 31,622
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (123) 3,284
CASH AND CASH EQUIVALENTS, beginning of period 669 52
----- --------
CASH AND CASH EQUIVALENTS, end of period $ 546 $ 3,336
===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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F.Y.I. INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
F.Y.I. Incorporated (the "Company" or "F.Y.I.") was founded in September
1994 to create a national, single source provider of document management
services to three primary client segments: healthcare institutions, professional
services firms and financial institutions. In January 1996, F.Y.I. acquired (the
"Acquisitions"), simultaneously with the closing of its initial public offering
(the "IPO") on January 23, 1996, seven document management services businesses
(the "Founding Companies"). The consideration for the Founding Companies
consisted of a combination of cash and common stock (the "Common Stock") of
F.Y.I.
Between September 1994 and the consummation of the IPO and the
Acquisitions, F.Y.I. did not conduct any significant operations. For accounting
purposes and for the purposes of the presentation of the financial statements
herein, January 31, 1996 has been used as the effective date of the
Acquisitions. Accordingly, the actual operating results of the Company
included in the Statement of Operations for the nine months ended September 30,
1996 represent the eight months of operations subsequent to the consummation
of the Acquisitions. Supplemental Statement of Operations Data for the nine
months ended September 30, 1996 are presented in Note 2 herein.
In the opinion of F.Y.I.'s management, the accompanying consolidated
financial statements include the accounts of the Company and all adjustments
necessary to present fairly the Company's financial position at September 30,
1996, its results of operations for the three and nine months ended September
30, 1995 and 1996, and its cash flows for the nine months ended September 30,
1995 and 1996. All significant intercompany accounts have been eliminated.
Although the Company believes that the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). These consolidated financial statements should
be read in conjunction with the combined financial statements of the Founding
Companies and the related notes thereto in F.Y.I.'s Annual Report on Form 10-K
filed with the Commission on April 10, 1996, as amended by F.Y.I.'s Annual
Report on Form 10-K/A filed with the Commission on April 29, 1996, and the
Company's Current Report on Form 8-K filed on September 9, 1996. The results of
operations for the interim periods ended September 30, 1996 and 1995 will not
be indicative of the results for the full year because the Company only had
operations for eight of the nine months and the impact of acquisitions recorded
as purchases, whose results are only included subsequent to the purchase date.
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2. INITIAL PUBLIC OFFERING OF COMMON STOCK AND THE ACQUISITIONS
Initial Public Offering
On January 26, 1996, the Company completed the IPO of 2,185,000 shares of
Common Stock (including the exercise of the underwriters' over-allotment
option) at $13.00 per share. Proceeds from the IPO, net of underwriting
discount and IPO costs, were approximately $22.9 million. Of these net
proceeds, approximately $7.1 million was used to pay a portion of the
consideration for the Acquisitions, approximately $7.7 million was used to
retire certain indebtedness of the Founding Companies, approximately $8.0
million was used for acquisitions subsequent to the IPO, and $0.1 million was
used as working capital.
Upon the closing of the IPO, the Company converted the 9,000 shares of
Series A Preferred Stock then outstanding into 542,557 shares of Common Stock.
Acquisitions of the Founding Companies
Simultaneously with the closing of the IPO, the Company acquired the
Founding Companies. The aggregate consideration paid by F.Y.I. to acquire the
Founding Companies was approximately $35 million, consisting of: (i)
$7,059,000 in cash; (ii) 1,878,933 shares of Common Stock; (iii) the assumption
and repayment of approximately $191,000 of indebtedness owed by a Founding
Company stockholder; and (iv) the distribution of cash and certain receivables
to certain stockholders of Founding Companies that were S corporations in the
amount of $3,450,000, representing the undistributed retained earnings of such
S corporations, upon which taxes have been paid by the stockholders.
The Acquisitions have been accounted for in accordance with generally
accepted accounting principles ("GAAP") as a combination of F.Y.I. and the
Founding Companies at historical cost, because: (i) the Founding Companies'
stockholders transferred assets to F.Y.I. in exchange for Common Stock and cash
simultaneously with the IPO; (ii) the nature of future operations of the
Company will be substantially identical to the combined operations of the
Founding Companies; and (iii) no former stockholder group of any of the
Founding Companies obtained a majority of the outstanding voting shares of the
Company.
Supplemental Data
Statement of Operations - Supplemental Data
The Statement of Operations Data for the nine months ended September 30,
1995 represent the unaudited combined statement of operations of the Founding
Companies for the period adjusted to give effect to: (i) compensation levels the
officers and owners have agreed to receive subsequent to the IPO; and (ii)
provision for income taxes as if all entities had been subject to federal and
state income taxes for the period. The Supplemental Statement of Operations Data
for the nine months ended September 30, 1996 represent a combination of: (i) the
audited results of the combined Founding Companies for the one month of
operations prior to the consummation of the Acquisitions adjusted for the
compensation and tax adjustments discussed above; and (ii) the audited results
of F.Y.I. Incorporated and Subsidiaries for the
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eight months subsequent to the consummation of the Acquisitions (which include
acquisitions subsequent to the IPO from the date of their respective
acquisition). The Supplemental Data are provided for information purposes only
and do not purport to present the results of operations of the Company had the
transactions assumed therein occurred on or as of the dates indicated, nor are
they necessarily indicative of the results of operations which may be achieved
in the future.
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------------- -------------------
(UNAUDITED IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenue $ 29,997 $ 44,749
Product revenue 4,815 4,606
Other revenue 674 532
-------- --------
Total revenue 35,486 49,887
Cost of services 19,064 28,216
Cost of products sold 3,890 3,532
Depreciation 898 1,113
-------- --------
Gross profit 11,634 17,026
Selling, general and administrative expenses (a) 7,657 11,705
Amortization 48 296
-------- --------
Operating income 3,929 5,025
Interest and other expenses, net 159 187
-------- --------
Income before income taxes 3,770 4,838
Provision for income taxes (b) 1,399 1,950
-------- --------
Net income $ 2,371 $ 2,888
======== ========
Net income per share $ 0.53
========
Weighted average shares outstanding 5,450
</TABLE>
(a) Adjusted for Founding Company pro forma Compensation Differential of $1,532
for 1995 and $683 for 1996.
(b) Adjusted for pro forma provision for taxes of $1,411 for 1995 and $351 for
1996.
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Weighted Average Shares Outstanding
The number of shares (in thousands) used in calculating net income per
share was determined as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1996
------------- -------------
<S> <C> <C>
Outstanding F.Y.I. shares after the IPO and the acquisitions
of the Operating Companies (as defined below) 5,768 5,434
Warrants to purchase stock under the treasury stock method 16 16
----- -----
Number of shares used in net income
per share calculation 5,784 5,450
===== =====
</TABLE>
3. BUSINESS COMBINATIONS
Since the IPO, the Company has acquired 13 additional businesses (together
with the Founding Companies, the "Operating Companies") which provide document
management services. All of the acquisitions are accounted for under the
purchase method of accounting.
In May 1996, the Company acquired the stock of B&B Information and Image
Management, Inc. ("B&B") and Premier Document Management, Inc. and PDM Services,
Inc. ("Premier"). In June 1996, the Company acquired all of the non-cash assets
of Robert A. Cook and Staff, Inc. and RAC Services, Inc. ("Cook"). In August
1996, the Company acquired C.M.R.S. Inc. ("CMRS"), Minnesota Medical Record
Service, Inc. ("Minnesota Medical Record") and Texas Medical Record Service,
Inc. ("Texas Medical Record") (collectively "Medical Record"). Also, as of
August 1996, the Company acquired ZIA Information Analysis Group ("ZIA"). B&B,
Premier, Cook, Medical Record and ZIA are considered significant subsidiaries
of the Company. The aggregate consideration paid for B&B, Premier, Cook,
Medical Record and ZIA consisted of $20,129,000 in cash and 585,589 shares of
Common Stock. The preliminary allocation of the purchase price is set forth
below:
<TABLE>
<S> <C>
Consideration Paid $28,123,000
Estimated Fair Value of Tangible Assets 10,758,000
Estimated Fair Value of Liabilities 7,527,000
Goodwill 24,892,000
</TABLE>
The fair market value of the shares of Common Stock used in calculating the
consideration paid was $13.65, which represents a 35% discount from the average
trading price of the Common Stock based on the length and type of restrictions
in the purchase agreements.
The Company acquired substantially all of the assets of Sacramento Valley
Records Management Co. ("Sacramento") and Microfilm Associates, Ltd.
("Microfilm) in February 1996; Octo, Incorporated ("Octo") in June 1996 and
Domor Data Processing ("Domor"), Rushmore Legal Support ("Rushmore"), and Index
Record Management ("Index") in July 1996. The aggregate consideration paid for
Sacramento, Microfilm, Octo, Domor, Rushmore and Index consisted of $3,017,000
in cash. The preliminary allocation of the purchase price is set forth below:
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<TABLE>
<S> <C>
Consideration Paid $3,017,000
Estimated Fair Value of Tangible Assets 720,000
Estimated Fair Value of Liabilities 433,000
Goodwill 2,730,000
</TABLE>
The estimated fair market values reflected above are based on preliminary
estimates and assumptions and are subject to revision. In management's
opinion, the preliminary allocation is not expected to be materially different
than the final allocation.
All intangibles are considered enterprise goodwill. Based on the historical
profitability of the purchased companies and trends in the legal, healthcare
and other industries to outsource document management functions in the
foreseeable future, the enterprise goodwill will be amortized over a period of
30 years. Management continually evaluates whether events and circumstances
indicate that the remaining estimated useful life of intangible assets may
warrant revisions or that the remaining balance of intangibles or other
long-lived assets may not be recoverable. To make this evaluation, management
uses an estimate of undiscounted net income over the remaining life of the
intangibles or other long-lived assets. The goodwill associated with the B&B,
Premier, Medical Record and ZIA acquisitions is not deductible for income tax
purposes.
Set forth below is a pro forma income statement for the nine months ended
September 30, 1996 and for the year ended December 31, 1995. The unaudited pro
forma data give effect to: (i) the acquisitions of B&B, Premier, Cook, Medical
Record and ZIA; (ii) the acquisitions of the Founding Companies; and (iii)
compensation and tax adjustments for all transactions as if the transactions
had occurred on January 1, 1995. The acquisitions of Sacramento, Microfilm,
Octo, Domor, Rushmore and Index have not been included in the pro forma
financial statements for periods prior to their acquisition date as the effect
is immaterial.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Year Ended Nine Months Ended
December 31, 1995 September 30, 1996
----------------- ------------------
(Unaudited In Thousands,
Except Per Share Data)
<S> <C> <C>
Revenue $ 78,160 $64,964
Income before income taxes 8,270 6,986
Net income 5,098 4,178
Net income per common share $ 0.87 $ 0.71
Average shares outstanding 5,872 5,872
======== =======
</TABLE>
4. CREDIT FACILITY
In April 1996, the Company and its subsidiaries entered into a credit
agreement, as amended (the "Line of Credit"), with Banque Paribas, as agent,
and the lenders named therein. Under the Line of Credit, the Company and its
subsidiaries may borrow, on a revolving credit basis, loans in an aggregate
outstanding principal amount up to $35.0 million from time to time
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under the secured revolving credit and acquisition facility, subject to certain
customary borrowing capacity requirements. The Company and its subsidiaries may
borrow up to an aggregate $30.0 million of term loans under the Credit
Agreement for acquisitions under prescribed conditions. The Company and its
subsidiaries may borrow revolving credit loans up to an aggregate $5.0 million
under the Credit Agreement for working capital and general corporate purposes.
The commitment to fund revolving credit loans expires April 14, 2001. The
commitment to fund term loans expires October 15, 1997. The annual interest
rate applicable to borrowings under this facility is, at the option of the
Company, (i) 1.50% plus the prime rate or (ii) 3.00% plus the Eurodollar rate.
The Credit Agreement requires mandatory prepayments in certain
circumstances. The outstanding principal balance of term loans as of October
15, 1997 shall thereafter be due and payable in 14 equal quarterly payments
beginning January 15, 1998, and ending April 15, 2001. The outstanding
principal balance of revolving credit loans will be due and payable on April
15, 2001. As of September 30, 1996, the Company had $3.5 million in borrowings
outstanding under this facility for working capital and corporate purposes, and
$14.1 million in borrowings outstanding under the term loans for acquisitions.
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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements of the Company and the related notes thereto appearing elsewhere in
this Report on Form 10-Q. Additional information concerning factors that could
cause results to differ materially from those in the forward-looking statements
is contained under the section "Risk Factors."
Introduction
F.Y.I. was founded in September 1994 to create a national, single source
provider of document management services. In January 1996, F.Y.I. acquired,
simultaneously with the closing of the IPO, the Founding Companies. The
Acquisitions have been accounted for in accordance with GAAP as a combination of
the Founding Companies at historical cost, and January 31, 1996 has been used as
the effective date of the Acquisitions. Between September 1994 and the
consummation of the IPO, F.Y.I. did not conduct any operations. Accordingly, the
actual operating results of the Company included in the Statement of Operations
for the nine months ended September 30, 1996 represent only the eight months of
operations subsequent to the consummation of the Acquisitions and the IPO.
During the period prior to the IPO, F.Y.I. incurred various legal, accounting,
marketing, travel and other costs in connection with the Acquisitions and the
IPO which were funded by the issuance of equity securities. Additional costs
associated with the Acquisitions and the IPO were paid with proceeds of the IPO.
Subsequent to the IPO and through September 30, 1996, the Company acquired
13 additional document management businesses. All of these Subsequent
Acquisitions have been accounted for using the purchase method of accounting.
The results of operations for these Subsequent Acquisitions are reflected in the
Company's financial statements based upon their individual acquisition dates.
Supplemental Statement of Operations Data represent the combined results
of: (i) the Founding Companies for the one month of operations prior to the
consummation of the Acquisitions and the IPO and (ii) F.Y.I. Incorporated and
Subsidiaries for the eight months of operations subsequent to the consummation
of the Acquisitions and the IPO. Such data are presented and discussed herein
in order to present the results of the Company since the consummation of the IPO
compared to the results of the combined Founding Companies for periods prior to
the IPO. The Supplemental Data are provided for information purposes only and do
not purport to present the results of operations of the Company had the
transactions assumed therein occurred on or as of the dates indicated. The
Founding Companies were not under common control or management. Accordingly,
such historical combined results may not be comparable to, or indicative of,
future performance.
The Company's revenue is classified as service revenue, product revenue and
other revenue. Service revenue relates to: (i) document and data conversion
services; (ii) records management services; (iii) database management and
related services; (iv) medical records release of information services; and (v)
litigation support services. Product revenue represents sales of micrographic
and business imaging supplies and equipment, primarily in conjunction with film
processing and other micrographic services. Other revenue consists of
commissions on the sales of imaging systems and equipment and franchising fees.
Cost of services consists primarily of compensation and benefits to
non-administrative employees, occupancy costs, equipment costs and supplies and
also includes the costs associated with other revenue discussed above. Cost of
products sold relates to micrographics and business imaging supplies and
equipment.
Selling, general and administrative expenses ("SG&A") consist primarily of
compensation and related benefits to the sales and marketing, executive
management, accounting, human resources and other administrative employees of
the Company, other sales and marketing costs, communications costs, insurance
costs and legal and accounting professional fees. SG&A subsequent to the IPO
include the costs of being a public company and the Company's executive
management team.
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The Company
The Company had conducted no significant operations from its inception
through the IPO and the Acquisitions. For accounting purposes and the
presentation of the actual financial results herein, January 31, 1996 has been
used as the effective date of the Acquisitions.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995 -- F.Y.I. INCORPORATED
For the three months ended September 30, 1996, revenue was $21.3 million,
gross profit was $7.3 million, operating income was $2.3 million, and net
income was $1.2 million. As previously mentioned, F.Y.I. had no operations
until February 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995 -- F.Y.I. INCORPORATED
For the nine months ended September 30, 1996, revenue was $46.0 million,
gross profit was $15.7 million, operating income was $4.5 million, and net
income was $2.6 million. As previously mentioned, F.Y.I. had no operations
until February 1996. For further discussion of supplemental operations for the
nine months ended September 30, 1996 and 1995, see "-- Supplemental."
Liquidity and Capital Resources
As of September 30, 1996, the Company had $5.0 million of working capital
and $3.3 million of cash. Cash flows provided by operating activities for the
nine months ended September 30, 1996 were $1.4 million. Cash used for investing
activities was $29.7 million, as the Company paid $27.4 million for
acquisitions, net of cash acquired. Cash provided by financing activities was
$31.6 million. The Company raised $22.9 million in the IPO, net of underwriting
discount and other costs associated with the IPO. The Company assumed $8.5
million of debt in the acquisition of the Founding Companies and subsequently
retired all of this debt with the proceeds of the IPO, with the exception of
approximately $0.4 million of debt with favorable interest rates and capital
lease obligations of approximately $0.4 million. In April 1996, the Company
negotiated a $35.0 million Line of Credit (see Note 4 of Notes to Consolidated
Financial Statements of F.Y.I. Incorporated and Subsidiaries). The Company paid
$1.6 million in costs to secure this financing. As of September 30, 1996, the
Company had borrowed $17.6 million under the Line of Credit to help fund the
acquisition program. The Company assumed $2.9 million of debt in the Subsequent
Acquisitions and retired $0.4 million of such debt. The assumed debt remaining
has interest rates more favorable than the Company's credit facility.
In the nine months ended September 30, 1995, the Company raised an
additional $0.1 million through the sale of Preferred Stock. During this period
the Company spent $0.3 million in activities related to the IPO and Acquisition
and ended the period with $0.5 million in cash. The Company had no other
operations during this period.
The Company anticipates that cash from operations, additional bank
financing available under the Line of Credit, the net proceeds of the proposed
Offering (the "Offering"), of 2,000,000 Company shares of Common Stock filed on
a Form S-1 Registration Statement on November 13, 1996 with the Securities and
Exchange Commission (the "Commission") and shares of Common Stock available
under the Acquisition Shelf (as defined below) will provide sufficient liquidity
to execute the Company's acquisition and internal growth plans for approximately
the next 12 months. The availability under the Line of Credit as of September
30, 1996 was $1.5 million for working capital and general corporate purposes,
and approximately $13.5 million for acquisitions. Should the Company accelerate
its acquisition program, the Company may need to seek additional financing
through the public or private sale of equity or debt securities. There can be
no assurance that the Company could secure such financing if and when it is
needed or on terms the Company deems acceptable. The Company has filed an
acquisition shelf Registration Statement on Form S-1 (Registration No. 333-108)
registering 2,000,000 shares of Common Stock for issuance in its acquisition
program (the "Acquisition Shelf"), of which 1,377,741 shares were available at
September 30, 1996. The Company expects to renegotiate the Line of Credit upon
consummation of the Offering in order to increase its flexibility in executing
acquisition strategy.
14
<PAGE> 15
Supplemental
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995 -- F.Y.I. INCORPORATED COMBINED WITH FOUNDING COMPANIES
Revenue
Total revenue. Total revenue increased 40.6% from $35.5 million for the
nine months ended September 30, 1995 to $49.9 million for the nine months
ended September 30, 1996. This increase was comprised of a 49.2% increase in
service revenue and was offset by a 6.0% decrease in product and other revenue.
Service revenue. Service revenue increased $14.8 million from $30.0
million for the nine months ended September 30, 1995 to $44.8 million for the
nine months ended September 30, 1996. This increase was largely due to: (i) the
Subsequent Acquisitions and (ii) internal growth in service revenue at the
Founding Companies of 9.0%. This internal growth was primarily attributable to
(i) an increase in medical records release revenue at Recordex and Permanent of
$1.5 million primarily attributable to the expansion into 32 additional
healthcare institutions in the Eastern U.S. and Texas during 1995 and 1996;
(ii) an increase in litigation support revenue at Researchers of $700,000
primarily due to increased overnight document production and increased medical
records subpoena and service of process requests; and (iii) an increase in
micrographics and electronic imaging revenue at Imagent of $323,000 attributable
to an overall increase in microfilming, scanning and coding projects, offset by
the reduction in microfilm processing revenue due to the loss of a customer in
early 1996.
Product and other revenue. Product and other revenue decreased
approximately $351,000 from $5.5 million for the nine months ended September 30,
1995 to $5.1 million for the nine months ended September 30, 1996. The decrease
in product revenue primarily resulted from a decline in sales to governmental
and related entities during the federal government shutdown in late 1995. This
decline in product revenue was offset by increased product revenue associated
with the purchase of B&B in May 1996. The decrease in other revenue was
attributable to decreased sales of micrographics equipment in 1996.
Gross profit
Gross profit increased 46.3% from $11.6 million for the nine months ended
September 30, 1995 to $17.0 million for the nine months ended September 30,
1996, largely due to the increases in revenue discussed above. Gross profit as
a percentage of revenue increased from 32.8% for the nine months ended
September 30, 1995 to 34.1% for the nine months ended September 30, 1996,
primarily due to the higher margin mix of revenue associated with the Subsequent
Acquisitions.
Selling, general and administrative expenses
SG&A increased 52.9%, from $7.7 million for the nine months ended
September 30, 1995 to $11.7 million for the nine months ended September 30,
1996, primarily due to: (i) the establishment of corporate overhead required to
execute the acquisition program and to manage the consolidated group of
companies; and (ii) SG&A associated with the Subsequent Acquisitions. SG&A as a
percentage of revenue (excluding corporate overhead) decreased from 21.7% for
the nine months ended September 30, 1995 to 20.7% for the nine months ended
September 30, 1996. This decrease was a result of: (i) a decrease in SG&A as a
percentage of revenue at the Founding Companies from 21.7% for the nine months
ended September 30, 1995 to 21.4% for the nine months ended September 30, 1996
primarily due to spreading the Company's fixed cost over a larger revenue base;
and (ii) lower average SG&A as a percentage of revenue associated with the
Subsequent Acquisitions relative to the Founding Companies.
Income before income taxes and net income
Income before income taxes increased 28.3% from $3.8 million for the nine
months ended September 30, 1995 to $4.8 million for the nine months ended
September 30, 1996, and net income increased 21.8%, from $2.4 million for the
nine months ended September 30, 1995 to $2.9 million for the nine months ended
September 30, 1996, largely attributable to the factors discussed above. Net
income for the nine months ended September 30, 1996 was impacted by a higher
effective tax rate attributable to the elimination of graduated tax rates as
the Founding Companies are now taxed on a consolidated basis and due to the
impact of nondeductible goodwill associated with certain of the Subsequent
Acquisitions.
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Since September 30, 1996, the Company has acquired two additional
businesses. First, as of October 1996, the Company acquired
Carton-Hodgson, Inc. and CH Direct, Inc., direct mail and fulfillment
businesses.
Second, in November 1996, the Company acquired Data Input Services
Corporation, Inc., a data input business.
The Company has contemporaneously with the filing of this Form 10-Q filed
with the Commission a Registration Statement on Form S-1 registering
2,783,000 shares of Common Stock in connection with the Offering. The
shares being registered include 2,000,000 shares to be sold by the
Company, 420,000 shares to be sold by selling stockholders and 363,000
shares subject to an over-allotment option granted by the Company to the
underwriters.
RISK FACTORS
LIMITED OPERATING HISTORY; RISKS OF INTEGRATION; ABILITY TO MANAGE GROWTH
F.Y.I. was founded in September 1994 and conducted no operations
prior to the consummation of the IPO. F.Y.I. acquired the Founding
Companies simultaneously with the closing of the IPO and has acquired 15
additional companies since that time (together with the Founding
Companies, the "Operating Companies"). Prior to their acquisition, these
companies operated as separate independent entities. Currently, the
Company has a decentralized financial reporting system and relies on the
existing reporting systems of the Operating Companies. The success of the
Company will depend, in part, on the Company's ability to integrate the
operations of the Operating Companies, including centralizing certain
functions to achieve cost savings and developing programs and processes
that will promote cooperation and the sharing of opportunities and
resources. F.Y.I.'s management group has been assembled recently and had
no previous experience in the document management services industry.
There can be no assurance that the management group will effectively be
able to oversee the combined entity and implement the Company's operating
or growth strategies. Further, to the extent that the Company is able to
implement fully its acquisition strategy, the resulting growth of the
Company will place significant demands on management and on the Company's
internal systems and controls. There can be no assurance that the
recently assembled management group will effectively be able to direct
the Company through a period of significant growth. In addition, no
assurance can be given that the Company's current systems will be
adequate for its future needs or that the Company will be successful in
implementing new systems.
A number of the Operating Companies offer different services, utilize
different capabilities and technologies and target different geographic
markets and client segments. While the Company believes that there are
substantial opportunities in integrating these businesses, these
differences increase the risk inherent in successfully completing such
integration. Further, there can be no assurance that the Company's
strategy to establish a single source provider for document management
services will be successful, or that the Company's target client segments
will accept the Company as a provider of such services. In addition,
there can be no assurance that the operating results of the Company will
match or exceed the combined individual operating results achieved by the
Operating Companies prior to their acquisition.
ACQUISITION STRATEGY
The Company's primary growth strategy is the acquisition of
additional document management services businesses that will complement
its existing businesses. There can be no assurance that the Company will
be able to identify or reach mutually agreeable terms with acquisition
candidates and their owners, or that the Company will be able to
profitably manage additional businesses or successfully integrate such
additional businesses into the Company without substantial costs, delays
or other problems. Acquisitions may involve a number of special risks
including: (i) adverse short-term effects on the Company's reported
operating results; (ii) diversion of management's attention; (iii)
dependence on retention, hiring and training of key personnel; (iv) risks
associated with unanticipated problems or legal liabilities; and (v)
amortization of acquired intangible assets. Some or all of these risks
could have a material adverse effect on the Company's operations and
financial performance. In addition, to the extent that consolidation
becomes more prevalent in the industry, the prices for attractive
acquisition candidates may be bid up to higher levels. In any event,
there can be no assurance that businesses acquired in the future will
achieve sales and profitability that justify the investment therein.
The Company is regularly in discussions with additional acquisition
candidates and may from time to time enter into letters of intent with
respect to the acquisition of such businesses. No assurance can be given,
however, that the Company will acquire any additional businesses.
16
<PAGE> 17
NEED FOR ADDITIONAL FINANCING TO CONTINUE ACQUISITION STRATEGY
The Company currently intends to finance future acquisitions by
using cash and its Common Stock for all or a portion of the consideration
to be paid. The Company filed the Acquisition Shelf with the Commission
relating to the separate offering of up to 2,000,000 shares of Common
Stock to be used as consideration for acquisitions effected by the
Company, of which 1,143,265 shares of Common Stock were available as of
November 12, 1996. In the event that the Company's Common Stock does not
maintain sufficient value, or potential acquisition candidates are
unwilling to accept the Company's Common Stock as consideration for the
sale of their businesses, the Company may be required to utilize more of
its cash resources, if available, in order to continue its acquisition
program. If the Company does not have sufficient cash resources, its
growth could be limited unless it is able to obtain capital through
additional debt or equity financings. In April 1996, the Company and its
subsidiaries entered into the Line of Credit, with Banque Paribas, as
agent, and the lenders named therein. Under the Line of Credit, the
Company and its subsidiaries may borrow, on a revolving credit basis,
loans in an aggregate outstanding principal amount of $5.0 million for
working capital and general corporate purposes and term loans in an
aggregate principal amount of $30.0 million for acquisitions, subject to
certain restrictions in the Line of Credit. As of November 12, 1996, the
availability under the Line of Credit was $2.5 million for working capital
and $8.8 million for acquisitions. There can be no assurance, however,
that funds available under the Line of Credit will be sufficient for the
Company's needs.
EFFECT OF POTENTIAL FLUCTUATIONS IN OPERATING RESULTS ON PRICE OF COMMON
STOCK; VOLATILITY OF STOCK PRICE
Results for any quarter are not necessarily indicative of the
results that the Company may achieve for any subsequent quarter or a full
fiscal year. Quarterly results may vary materially as a result of the
timing and structure of acquisitions, the timing and magnitude of costs
related to such acquisitions, the gain or loss of material client
relationships and variations in the prices charged by the Company for the
services it provides. In addition, since a significant portion of the
Company's revenue is generated on a project-by-project basis, the timing
or completion of material projects could result in fluctuations in the
Company's results of operations for particular quarterly periods. Such
fluctuations in operating results may adversely affect the market price
of the Company's Common Stock. The market price for the Company's shares
may also fluctuate in response to material announcements by the Company
or significant clients or competitors of the Company, changes in the
economic or other conditions impacting the Company's targeted client
segments or general economic conditions outside of the Company. Further,
the securities markets have experienced significant price and volume
fluctuations from time to time that have often been unrelated or
disproportionate to the operating performance of particular companies.
These broad fluctuations may adversely affect the market price of the
Common Stock.
DEPENDENCE ON CERTAIN CLIENT SEGMENTS AND TECHNOLOGY
The Company derives its revenue primarily from its three targeted
client segments: healthcare institutions, professional services firms and
financial institutions. Fundamental changes in the business practices of
any of these client segments, whether due to regulatory, technological or
other developments, could cause a material reduction in demand by such
clients for the services offered by the Company. Any such reduction in
demand would have a material adverse effect on the results of operations
of the Company. The document management services industry is characterized
by technological change, evolving customer needs and emerging technical
standards. Although the Company believes that it will be able to continue
to offer services based on the newest technologies, there can be no
assurance that the Company will be able to obtain the rights to use any
such technologies, that it will be able to effectively implement such
technologies on a cost-effective or timely basis or that such technologies
will not render obsolete the Company's role as a third party provider of
document management services.
COMPETITION
The document management services businesses in which the Company
competes and expects to compete are highly competitive. A significant
source of competition is the in-house document handling capability of the
Company's targeted client base. There can be no assurance that these
businesses will outsource more of their document management needs or that
such businesses will not bring in-house services that they currently
outsource. In addition, certain of the Company's competitors are larger
businesses and have greater financial resources than the Company. Certain
of these competitors operate in broader geographic areas than the
Company, and others may choose to enter the Company's areas of operation
in the future. In addition, the Company intends to enter new geographic
areas through internal growth and acquisitions and expects to encounter
significant competition from established competitors in each of such new
areas. As a result of this highly competitive environment, the Company
may lose customers or have difficulty in acquiring new customers and new
companies, and its results of operations may be adversely affected.
17
<PAGE> 18
RELIANCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of
its executive officers and on senior management of the Operating
Companies. Furthermore, the Company will also be dependent on the senior
management of businesses acquired in the future. If any of these people
is unable or unwilling to continue in his or her present role, or if the
Company is unable to attract and retain other skilled employees, the
Company's business could be adversely affected. The Company does not
intend to obtain key person life insurance covering any of its executive
officers or other members of senior management.
POTENTIAL LIABILITY FOR BREACH OF CONFIDENTIALITY
A substantial portion of the Company's business involves the handling
of documents containing confidential and other sensitive information.
Although the Company has established procedures intended to eliminate any
unauthorized disclosure of confidential information and, in some cases,
has contractually limited its potential liability for unauthorized
disclosure of such information, there can be no assurance that
unauthorized disclosures will not result in material liability to the
Company.
INCREASE IN MINIMUM WAGE
As of October 1, 1996, the federal minimum wage increased to $4.75
an hour. The second phase of the increase will be implemented on September
1, 1997, bringing the federal minimum wage to $5.15 an hour. In addition,
California and other states have increased or may increase their minimum
wage above the federal minimum. A significant number of the Company's
employees earn slightly above the minimum wage and, therefore, the Company
may have to increase salaries to remain competitive. Accordingly, the
Company's results of operations may be adversely affected.
CONTROL BY MANAGEMENT
Following the completion of the Offering, the directors and
executive officers of the Company will beneficially own approximately
20.4% of the then outstanding shares of Common Stock (19.5% if the
Underwriters' over-allotment option is exercised in full) and exercise
substantial control over the Company's affairs. These stockholders acting
together would likely be able to elect a sufficient number of directors to
control the Board of Directors and to approve or disapprove any matter
submitted to a vote of stockholders.
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON
STOCK
The market price of the Common Stock of the Company could be
adversely affected by the sale of substantial amounts of Common Stock of
the Company in the public market. After the completion of the Offering,
there will be 8,165,450 shares of Common Stock outstanding. The 2,420,000
shares offered in the Offering will be, and the 2,185,000 shares sold in
the IPO are, freely tradable without restriction unless acquired by
affiliates of the Company. Of such 8,165,450 shares, 2,664,615 shares,
together with 165,000 shares of Common Stock currently issuable upon
exercise of outstanding warrants, have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), which means
that they may be resold publicly only upon registration under the
Securities Act or in compliance with an exemption from the registration
requirements of the Securities Act, including the exemption provided by
Rule 144 under the Securities Act. Holders of all such unregistered
shares, however, have certain registration rights with respect to such
shares.
The Company has agreed not to sell or otherwise dispose of any shares
of Common Stock for a period of 90 days from the date of the Offering
without the prior written consent of Montgomery Securities, except that
the Company may issue Common Stock in connection with acquisitions or upon
the exercise of options. In addition, the former owners of the Founding
Companies and the initial stockholders of the Company (which together
include the Selling Stockholders) have agreed with the Company that they
will not sell any of their shares for a period of two years after January
26, 1996 (other than certain sales registered under the Securities Act and
a limited ability to pledge such shares as collateral). The Company has
agreed not to waive such restriction for a period of 90 days from the date
of the Offering without the prior written consent of Montgomery
Securities. Directors of the Company who are not subject to these
contractual restrictions have agreed not to contract to sell or otherwise
sell or dispose of any of their Common Stock for a period of 90 days after
the date of the Offering without the prior written consent of Montgomery
Securities.
The Company issued 856,735 shares of Common Stock as partial
consideration for acquisitions completed since the IPO. Such 856,735
shares were registered under the Acquisition Shelf and are freely tradable
(except for 36,670 shares held by a wholly-owned subsidiary of the
Company) unless acquired by parties to the acquisition or affiliates of
such parties, in which case they may be sold pursuant to Rule 145 under
the Securities Act. In addition, these shares are subject to contractual
restrictions on resale which generally expire two years from the date of
issuance.
The Company has reserved for issuance under its 1995 Stock Option
Plan (the "Plan") an aggregate of 650,000 shares of Common Stock, or 12%
of the aggregate number of shares of the Common Stock outstanding,
whichever is greater. The Company has registered the shares issuable upon
exercise of options granted under the Plan, and such shares will be
eligible for resale in the public market. As of November 12, 1996, the
Company had options to purchase 635,300 shares of Common Stock outstanding
under the Plan.
18
<PAGE> 19
EFFECT OF CERTAIN CHARTER PROVISIONS
The Board of Directors of the Company is empowered to issue preferred
stock without stockholder action. The existence of this "blank-check"
preferred could render more difficult or discourage an attempt to obtain
control of the Company by means of a tender offer, merger, proxy contest
or otherwise.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This filing contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that
all forward-looking statements involve risks and uncertainty, including
without limitation, the sufficiency of the Company's working capital and
the ability of the Company to realize benefits from consolidating certain
general and administrative functions, to continue its aggressive
acquisition program, to retain management, to implement its focused
business strategy to expand its document management services
geographically, to attract customers from other businesses, to increase
revenue by cross-selling services and to successfully defend itself in
ongoing and future litigation. Although the Company believes that the
assumptions underlying the forward looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and, therefore,
there can be no assurance that the forward-looking statements included in
this filing will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein,
the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and
plans of the Company will be achieved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
- -------------- -----------
10.23 -- Second Amendment to Credit Agreement, dated as of August
30, 1996, by and among F.Y.I. Incorporated and its
subsidiaries and Banque Paribas, IBJ Schroder Bank &
Trust, and First Source Financial LLP
21 -- List of subsidiaries of F.Y.I. Incorporated
27 -- Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K with the Commission on
September 9, 1996, reporting under Items 2, 5 and 7 thereto the acquisitions
by the Company of Medical Record and ZIA and including the following historical
restated and pro forma financial information of the Company reflecting recently
completed significant acquisitions:
19
<PAGE> 20
FINANCIAL STATEMENTS
NEW ACQUISITIONS
<TABLE>
<S> <C>
C.M.R.S. INCORPORATED
Report of Independent Public Accountants
Balance Sheets
Statements of Operations
Statements of Shareholder's Equity
Statements of Cash Flows
Notes to Financial Statements
MINNESOTA MEDICAL RECORD SERVICE, INC.
Report of Independent Public Accountants
Balance Sheets
Statements of Operations
Statements of Stockholder's Equity
Statements of Cash Flows
Notes to Financial Statements
TEXAS MEDICAL RECORD SERVICE INC.
Report of Independent Public Accountants
Balance Sheets
Statements of Operations
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements
ZIA INFORMATION ANALYSIS GROUP
Report of Independent Public Accountants
Balance Sheets
Statements of Operations
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements
PRO FORMA FINANCIAL STATEMENTS
F.Y.I. Incorporated and Subsidiaries
Pro Forma Balance Sheet - June 30, 1996 (unaudited)
Pro Forma Statement of Operations for the Year Ended December 31, 1995
(unaudited)
Pro Forma Statement of Operations for the Six Months Ended June 30, 1996
(unaudited)
Notes to Pro Forma Financial Statements (unaudited)
</TABLE>
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.
F.Y.I. Incorporated
Date: November 12, 1996 By: /s/ Ed H. Bowman, Jr.
--------------------------
Ed H. Bowman, Jr.
Chief Executive Officer
Date: November 12, 1996 By: /s/ David Lowenstein
--------------------------
David Lowenstein
Chief Financial Officer
(Principal Financial Officer)
Date: November 12, 1996 By: /s/ Timothy J. Barker
--------------------------
Timothy J. Barker
Chief Accounting Officer
(Principal Accounting Officer)
21
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.23 Second Amendment to Credit Agreement, dated as of August
30, 1996, by and among F.Y.I. Incorporated and its
subsidiaries and Banque Paribas, IBJ Schroder Bank &
Trust, and First Source Financial LLP
21 List of subsidiaries of F.Y.I. Incorporated
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.23
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment") is
entered into to be effective as of August 30, 1996, by and among F.Y.I.
Incorporated, a Delaware corporation ("F.Y.I."), Imagent Acquisition Corp., a
Delaware corporation ("Imagent"), Researchers Acquisition Corp., a Delaware
corporation ("Researchers"), Recordex Acquisition Corp., a Delaware
corporation ("Recordex"), DPAS Acquisition Corp., a Delaware corporation
("DPAS"), Leonard Archives Acquisition Corp., a Delaware corporation
("Leonard"), Deliverex Acquisition Corp., a Delaware corporation
("Deliverex"), Permanent Records Acquisition Corp., a Delaware corporation
("Permanent"), Deliverex Sacramento Acquisition Corp., a Delaware corporation
("Sacramento"), (F.Y.I., Imagent, Researchers, Recordex, DPAS, Leonard,
Deliverex, Permanent and Sacramento are collectively referred to as the
"Original Borrowers"), B&B (Baltimore-Washington) Acquisition Corp., a
Delaware corporation ("B&B"), Premier Acquisition Corp., a Delaware
corporation ("Premier"), Robert A. Cook Acquisition Corp., a Delaware
corporation ("Cook"), Peninsula Record Management, Inc., a California
corporation ("Peninsula"), RAC (California) Acquisition Corp., a Delaware
corporation ("RAC"), California Medical Record Service Acquisition Corp., a
Delaware corporation ("California Medical"), Minnesota Medical Record Service
Acquisition Corp., a Delaware corporation ("Minnesota Medical"), Texas Medical
Record Service Acquisition Corp., a Delaware corporation ("Texas Medical"),
ZIA Information Analysis Group, Inc., formerly known as ZIA Acquisition Corp.,
a Delaware corporation ("Zia") and Recordex Services, Inc., a Pennsylvania
corporation ("Recordex Services") (B&B, Premier, Cook, Peninsula, RAC,
California Medical, Minnesota Medical, Texas Medical, Zia and Recordex
Services are referred to collectively as the "New Borrowers") (the Original
Borrowers and the New Borrowers are referred to collectively as the
"Borrowers"), Banque Paribas, a bank organized under the laws of the Republic
of France, as Agent (the "Agent"), and the Lenders (as such term is defined in
the Credit Agreement, as hereinafter defined) which are parties hereto.
RECITALS
A. The Original Borrowers, the Agent and the Lenders entered into
that certain Credit Agreement dated as of April 18, 1996 (the "Original Credit
Agreement"), pursuant to which, among other things, the Lenders agreed to make
certain loans available to the Original Borrowers upon the terms and
conditions set forth therein;
B. The Borrowers, certain of the New Borrowers, the Agent and the
Lenders entered into that certain First Amendment to Credit Agreement dated as
of June 26, 1996 (the Original Credit Agreement, as amended, is hereinafter
referred to as the "Credit Agreement").
C. The Borrowers, the Agent and the Lenders desire to amend the Credit
Agreement in certain respects as more fully set out herein.
SECOND AMENDMENT TO CREDIT AGREEMENT Page 1
<PAGE> 2
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers, the Lenders, and the Agent hereby agree as
follows:
1. Terms. All terms used herein which begin with an initial capital
letter shall, unless otherwise expressly defined herein, have the same
definitions assigned to such terms in the Credit Agreement, as modified by
this Second Amendment.
2. Amendment to Definition of "EBITDA." Effective as of the date
hereof, the definition of "EBITDA" contained in Section 1.1 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:
"EBITDA" means, for any period, without duplication, the sum
of the following for F.Y.I. and its Subsidiaries (or other applicable
Person) for such period determined on a consolidated basis in
accordance with GAAP: (a) Consolidated Net Income, plus (b)
Consolidated Interest Expense, plus (c) income and franchise taxes to
the extent deducted in determining Consolidated Net Income, plus (d)
depreciation and amortization expense and other non-cash, non-tax
items to the extent deducted in determining Consolidated Net Income,
minus (e) non-cash income to the extent included in determining
Consolidated Net Income. For purposes of calculating the EBITDA of
F.Y.I. and its consolidated Subsidiaries for any period of four
consecutive fiscal quarters including, without limitation, the four
consecutive fiscal quarter period used in determining compliance with
the twelve month trailing EBITDA requirement in clause (e) of the
definition of Permitted Acquisition, the EBITDA associated with any
Person or assets acquired in a Permitted Acquisition during such
period of four consecutive fiscal quarters shall be added, without
duplication, in accordance with the following procedures: (a) if the
Permitted Acquisition and the EBITDA of the Person or assets acquired
were approved in writing by Required Lenders, that EBITDA will be
included for such period, and (b) if the Permitted Acquisition was
not required to be approved in writing by Required Lenders, (i) for
any calculation of EBITDA which takes place at the end of the fiscal
quarter in which the Permitted Acquisition took place, only the
actual EBITDA generated by the acquired Person or assets following
the Permitted Acquisition will be included in the calculation of
EBITDA for such period, (ii) for any calculation of EBITDA which
takes place at the end of the fiscal quarter following the fiscal
quarter in which the Permitted Acquisition took place, the actual
EBITDA generated by the acquired Person or assets following the
Permitted Acquisition in the most recent two fiscal quarters will be
multiplied by two and the result will be included in the calculation
of EBITDA for such period, (iii) for any calculation of EBITDA which
takes place at the end of the second fiscal quarter following the
fiscal quarter in which the Permitted Acquisition took place, the
actual EBITDA generated by the acquired Person or assets following
the Permitted Acquisition in the most recent
SECOND AMENDMENT TO CREDIT AGREEMENT Page 2
<PAGE> 3
three fiscal quarters will be multiplied by four-thirds (4/3) and the
result will be included in the calculation of EBITDA for such period,
and (iv) for any calculation of EBITDA which takes place at the end
of the third fiscal quarter following the fiscal quarter in which the
Permitted Acquisition took place, the actual EBITDA generated by the
acquired Person or assets following the Permitted Acquisition in the
most recent four fiscal quarters will be included in the calculation
of EBITDA for such period.
3. Amendment to Definition of "Permitted Acquisition." Effective as
of the date hereof, the definition of "Permitted Acquisition" contained in
Section 1.1 of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
"Permitted Acquisition" means any Acquisition which has been
approved in writing by the Agent and Required Lenders or any other
Acquisition which satisfies each of the following requirements: (a)
the acquiror (or surviving corporation if the acquisition is by means
of a merger) is (i) F.Y.I. or any other Borrower (subject to the
limitations of Section 9.18), or (ii) any Acquisition Subsidiary
which becomes a Borrower prior to or concurrently with the
Acquisition pursuant to Section 5.3 (unless disapproved by the Agent,
which disapproval shall be conclusively presumed by the failure of
the Agent for any reason to execute the appropriate Borrower Addition
Agreement in the space provided for acceptance by the Agent), (b) the
assets to be acquired in connection with such Acquisition are assets
that are to be used in the existing businesses of the acquiror as
such business is presently conducted, (c) such Acquisition has been
approved by the Board of Directors of the acquired entity, (d) the
acquired entity shall have generated positive EBITDA during the
twelve-month period preceding the Acquisition, as audited or reviewed
by an accounting firm acceptable to the Agent, after adjusting for
excess owners' compensation and other pro forma charges as validated
by the Agent, (e) Loans to fund such Acquisition will be permitted
only if the aggregate outstanding principal amount of the Loans after
giving effect to such Acquisition and (including any Loans required
in connection with such Acquisition) do not exceed 2.5 times EBITDA
for the four fiscal quarters most recently completed of F.Y.I. and
its Subsidiaries (and including the acquired entity's trailing twelve
month EBITDA, if audited or reviewed by an accounting firm acceptable
to the Agent) (EBITDA may include proforma adjustments to an acquired
entity's earnings acceptable to the Agent), (f) the highest possible
amount of Seller Earn Out to be paid in cash by any Borrower in
connection with an Acquisition shall not exceed $3,000,000 without
Required Lenders' approval, (g) from and after October 29, 1996, no
single Acquisition shall exceed $4,000,000 in total consideration
(including any Debt assumed or guaranteed in connection therewith),
without Required Lenders' approval, provided that all proposed
Acquisitions placed under contract or consummated in the same
calendar year and involving acquired entities each of which are more
than 50% owned by the same individuals or entities shall be
considered a single Acquisition for purposes of this clause (g), (h)
from and after October 29, 1996, the aggregate
SECOND AMENDMENT TO CREDIT AGREEMENT Page 3
<PAGE> 4
amount of all such Acquisitions closed without Required Lenders'
approval shall not exceed $4,000,000, in total consideration
(including any Debt assumed or guaranteed in connection therewith) in
any twelve month period without Required Lenders' approval, (i) prior
to and after giving effect to the Acquisition, no Default shall
exist, (j) after giving effect to such Acquisition, F.Y.I. will not
violate any financial covenant, (k) no material part of the Property
or business operations to be acquired is located outside the U.S. or
Canada, and (l) the Borrower shall have complied with Sections 6.5
and 8.15; provided, however, that up to $2,000,000 (valued at total
purchase consideration including any Debt assumed or guaranteed in
connection therewith) in Acquisitions made during the term of this
Agreement will be deemed to satisfy the requirements of items (d) or
(k) preceding so long as (i) all other elements of a Permitted
Acquisition have been satisfied, (ii) no such acquired entity or
entities shall have annual sales in excess of $4,000,000 or
cumulative EBITDA losses (individually for any one such acquired
entity or in the aggregate for all such acquired entities) in excess
of $300,000 incurred in the twelve-month period preceding the
respective dates of acquisition, and (iii) Mexico is the only
jurisdiction outside the U.S. or Canada where any material part of
the Property or business operations of the entity or entities to be
acquired is located.
4. Amendment to Definition of "Restricted Payment." Effective as of
the date hereof, the definition of "Restricted Payment" contained in Section
1.1 of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
"Restricted Payment" means (a) any dividend or other
distribution (whether in cash, Property or obligations), direct or
indirect, on account of (or the setting apart of money for a sinking
or other analogous fund for) any shares of any class of Capital Stock
of F.Y.I. or any of its Subsidiaries now or hereafter outstanding,
except a dividend payable solely in equity securities of F.Y.I.; (b)
any redemption, conversion, exchange, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of Capital Stock of F.Y.I. or
any of its Subsidiaries now or hereafter outstanding (except that
California Medical may own the 36,670 shares of F.Y.I. common stock
acquired by California Medical by virtue of the merger of Texas
Medical Records Service, Inc. into Texas Medical); (c) any loan,
advance or payment (pursuant to a tax sharing agreement or otherwise)
to F.Y.I.; and (d) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of F.Y.I. or any of its
Subsidiaries now or hereafter outstanding.
5. Amendment to Definition of "Seller Earn Out." Effective as of the
date hereof, the definition of "Seller Earn Out" contained in Section 1.1 of
the Credit Agreement is hereby amended and restated to read in its entirety as
follows:
"Seller Earn Out" means any obligation incurred by a Borrower in
connection with an Acquisition so long as such obligation either (a)
is approved in
SECOND AMENDMENT TO CREDIT AGREEMENT Page 4
<PAGE> 5
writing by the Agent and the Required Lenders as being Seller Earn
Out or (b) meets the following requirements: (i) is only payable by
the Borrower for performance by a seller, or a shareholder, officer
or director of a seller, of obligations over the passage of time
(e.g., non-compete payments) or in the event certain future
performance goals are achieved with respect to the assets or business
acquired, excluding any noncompete payments in excess of 15% of the
purchase price and excluding performance-based payments which are
greater than 750% of the earnings or cash flow on which they are
based and (ii) provides that the maximum potential liability of the
Borrower with respect thereto is limited.
6. Amendment to Section 9.5 of the Credit Agreement. Effective as of
the date hereof, Section 9.5 of the Credit Agreement is hereby amended by
deleting the last word of clause (i), "and", by adding the word "and" at the
end of clause (j), and adding the following new clause (k) as follows:
(k) California Medical may own the 36,670 shares F.Y.I. common
stock acquired by California Medical by virtue of the merger of Texas
Medical Records Service, Inc. into Texas Medical.
7. Amendment to Section 10.1 of the Credit Agreement. Effective as of
the date hereof, Section 10.1 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
Section 10.1 Consolidated Net Worth. F.Y.I. will at all times
maintain Consolidated Net Worth in an amount not less than the sum
of (a) $18,000,000 plus (b) 75% of cumulative Consolidated Net
Income, if positive for any fiscal quarter, i.e., exclusive of
negative Consolidated Net Income for any fiscal quarter, after the
Closing Date, plus (c) all Net Proceeds of each Equity Issuance
after the Closing Date minus the amount of any stock repurchase
consummated under the terms of Section 9.4(c).
8. Amendment to Section 10.2 of the Credit Agreement. Effective as of
the date hereof, Section 10.2 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
Section 10.2 Ratio of Total Senior Debt to EBITDA.
(a) F.Y.I. will not permit the ratio, calculated as of the
end of each fiscal quarter of F.Y.I. commencing with the fiscal
quarter ended June 30, 1996, of (i) Total Senior Debt to (ii)
EBITDA for the four fiscal quarters then ended for F.Y.I. and its
Subsidiaries to exceed the ratio set forth below for the period
during which such fiscal quarter end occurs:
SECOND AMENDMENT TO CREDIT AGREEMENT Page 5
<PAGE> 6
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From April 1, 1996, through September 30, 1997 2.75 to 1.00
From October 1, 1997, through March 31, 1998 2.50 to 1.00
From April 1, 1998, through March 31, 1999 2.25 to 1.00
From April 1, 1999, through March 31, 2000 1.75 to 1.00
From April 1, 2000 and at all times thereafter 1.25 to 1.00
</TABLE>
(b) F.Y.I. will not permit the ratio, calculated as of the end of
each fiscal quarter of F.Y.I. commencing with the fiscal quarter
ended June 30, 1996, of (i) the sum of (A) Total Senior Debt, plus
(B) the highest possible amount of all unpaid Seller Earn Out
payable pursuant to an Acquisition contract in cash over any period
of time, whether the payment of such Seller Earn Out is contingent
or otherwise, to (ii) the sum of (A) EBITDA for the four fiscal
quarters then ended for F.Y.I. and its Subsidiaries plus (B) the
EBITDA or EBIT required by the applicable Acquisition contract(s) to
generate the amount of Seller Earn Out set forth in (i)(B) above to
exceed the ratio set forth below for the period during which such
fiscal quarter end occurs:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From April 1, 1996, through September 30, 1997 2.75 to 1.00
From October 1, 1997, through March 31, 1998 2.50 to 1.00
From April 1, 1998, through March 31, 1999 2.25 to 1.00
From April 1, 1999, through March 31, 2000 1.75 to 1.00
From April 1, 2000 and at all times thereafter 1.25 to 1.00
</TABLE>
9. Amendment to Section 10.3 of the Credit Agreement. Effective as of
the date hereof, Section 10.3 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
Section 10.3 Ratio of Total Debt to EBITDA.
(a) F.Y.I. will not permit the ratio, calculated as of the end of
each fiscal quarter of F.Y.I. commencing with the fiscal quarter
ended June 30, 1996, of (i) Total Debt to (ii) EBITDA for the four
fiscal quarters then ended for F.Y.I. and its Subsidiaries to exceed
the ratio set forth below for the period during which such fiscal
quarter end occurs:
SECOND AMENDMENT TO CREDIT AGREEMENT Page 6
<PAGE> 7
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From April 1, 1996, through September 30, 1997 3.25 to 1.00
From October 1, 1997 through March 31, 1998 3.00 to 1.00
From April 1, 1998, through March 31, 1999 2.75 to 1.00
From April 1, 1999, through March 31, 2000 2.25 to 1.00
From April 1, 2000, and at all times thereafter 1.75 to 1.00
</TABLE>
(b) F.Y.I. will not permit the ratio, calculated as of the end of
each fiscal quarter of F.Y.I. commencing with the fiscal quarter
ended June 30, 1996, of (i) the sum of (A) Total Debt, plus (B) the
highest possible amount of all unpaid Seller Earn Out payable
pursuant to an Acquisition contract in cash over any period of time,
whether the payment of such Seller Earn Out is contingent or
otherwise, to (ii) the sum of (A) EBITDA for the four fiscal
quarters then ended for F.Y.I. and its Subsidiaries plus (B) the
EBITDA or EBIT required by the applicable Acquisition contract(s) to
generate the amount of Seller Earn Out set forth in (i)(B) above to
exceed the ratio set forth below for the period during which such
fiscal quarter end occurs:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From April 1, 1996, through September 30, 1997 3.25 to 1.00
From October 1, 1997 through March 31, 1998 3.00 to 1.00
From April 1, 1998, through March 31, 1999 2.75 to 1.00
From April 1, 1999, through March 31, 2000 2.25 to 1.00
From April 1, 2000, and at all times thereafter 1.75 to 1.00
</TABLE>
10. Representations and Warranties. The representations and
warranties made by the Borrowers in the Loan Documents, as the same are
amended hereby, are true and correct at the time this Second Amendment is
executed and delivered, except to the extent that such representations and
warranties are expressly by their terms made only as of the Closing Date or
another specified date.
11. Costs. The Borrowers jointly and severally agree to pay all costs
incurred in connection with the negotiation, preparation, execution and
consummation of this Second Amendment and the transactions preceding and
contemplated by this Second Amendment including, without limitation, the fees
and expenses of counsel to the Agent and the Lenders.
12. Miscellaneous.
(a) Headings. Section headings are for reference only, and shall not
affect the interpretation or meaning of any provision of this Second
Amendment.
SECOND AMENDMENT TO CREDIT AGREEMENT Page 7
<PAGE> 8
(b) No Waiver. No failure on the part of the Agent or the Lenders
to exercise, and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under the Loan
Documents shall operate as a waiver thereof, and no single or
partial exercise of any right, power, or privilege under the Loan
Documents shall preclude any other or further exercise thereof or
the exercise of any other right, power, or privilege.
(c) Effect of this Second Amendment. The Credit Agreement, as
amended by this Second Amendment, shall remain in full force and
effect except that any reference therein, or in any other Loan
Document, referring to the Credit Agreement, shall be deemed to
refer to the Credit Agreement, as amended by this Second Amendment.
(d) Governing Law. EXCEPT TO THE EXTENT THAT THE CREDIT
AGREEMENT EXPRESSLY PROVIDES OTHERWISE, THIS SECOND AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF TEXAS.
(e) Counterparts. This Second Amendment may be executed by the
different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same Second Amendment.
(f) NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
SECOND AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS
THE ENTIRE AGREEMENT AMONG THE PARTIES, AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective duly authorized officers as of
the date first above written.
BORROWERS:
F.Y.I. INCORPORATED
By: /s/ David Lowenstein
-----------------------
David Lowenstein
Executive Vice President
SECOND AMENDMENT TO CREDIT AGREEMENT Page 8
<PAGE> 9
IMAGENT ACQUISITION CORP. RESEARCHERS ACQUISITION CORP.
RECORDEX ACQUISITION CORP. DPAS ACQUISITION CORP. LEONARD
ARCHIVES ACQUISITION CORP. DELIVEREX ACQUISITION CORP.
PERMANENT RECORDS ACQUISITION CORP. DELIVEREX SACRAMENTO
ACQUISITION CORP. B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
PREMIER ACQUISITION CORP. ROBERT A. COOK ACQUISITION CORP.
PENINSULA RECORD MANAGEMENT, INC. RAC (CALIFORNIA) ACQUISITION
CORP. CALIFORNIA MEDICAL RECORD SERVICE ACQUISITION CORP.
MINNESOTA MEDICAL RECORD SERVICE ACQUISITION CORP. TEXAS
MEDICAL RECORD SERVICE ACQUISITION CORP. ZIA INFORMATION
ANALYSIS GROUP, INC. RECORDEX SERVICES, INC.
By: /s/ David Lowenstein
------------------------------------------------
David Lowenstein
Executive Vice President, acting on behalf of
each of the above
AGENT:
BANQUE PARIBAS, as Agent
By: /s/ Clark C. King III
------------------------------------------------
Name: Clark C. King III
----------------------------------------------
Title: Vice President
---------------------------------------------
By: /s/ Mark A. Radzik
------------------------------------------------
Name: Mark A. Radzik
----------------------------------------------
Title: Vice President
---------------------------------------------
SECOND AMENDMENT TO CREDIT AGREEMENT Page 9
<PAGE> 10
LENDERS:
BANQUE PARIBAS
By: /s/ Clark C. King III
------------------------------------------------
Name: Clark C. King III
----------------------------------------------
Title: Vice President
---------------------------------------------
By: /s/ Mark A. Radzik
------------------------------------------------
Name: Mark A. Radzik
----------------------------------------------
Title: Vice President
---------------------------------------------
FIRST SOURCE FINANCIAL LLP
By: FIRST SOURCE FINANCIAL, INC., its
Agent/Manager
By: /s/ John Walding
-------------------------------------------
Name: John Walding
----------------------------------------
Title: Vice President
----------------------------------------
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ DeVer G. Warner
------------------------------------------------
Name: DeVer G. Warner
----------------------------------------------
Title: Vice President
---------------------------------------------
SECOND AMENDMENT TO CREDIT AGREEMENT Page 10
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
Deliverex Acquisition Corp.
DPAS Acquisition Corp.
Imagent Acquisition Corp.
Leonard Archives Acquisition Corp.
Permanent Records Acquisition Corp.
Recordex Acquisition Corp.
California Medical Record Service Acquisition Corp.
Texas Medical Record Service Acquisition Corp.
Minnesota Medical Record Service Acquisition Corp.
ZIA Information Analysis Group, Inc.
Researchers Acquisition Corp.
Deliverex Sacramento Acquisition Corp.
B&B (Baltimore-Washington) Acquisition Corp.
Premier Acquisition Corp.
Robert A. Cook Acquisition Corp.
RAC (California) Acquisition Corp.
CH Acquisition Corp.
DISC Acquisition Corp.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,336
<SECURITIES> 0
<RECEIVABLES> 15,266
<ALLOWANCES> 1,075
<INVENTORY> 567
<CURRENT-ASSETS> 18,781
<PP&E> 21,444
<DEPRECIATION> 11,339
<TOTAL-ASSETS> 59,901
<CURRENT-LIABILITIES> 13,743
<BONDS> 16,956
0
0
<COMMON> 59
<OTHER-SE> 28,865
<TOTAL-LIABILITY-AND-EQUITY> 59,901
<SALES> 4,211
<TOTAL-REVENUES> 45,971
<CGS> 3,225
<TOTAL-COSTS> 30,268
<OTHER-EXPENSES> 11,181
<LOSS-PROVISION> 573
<INTEREST-EXPENSE> 479
<INCOME-PRETAX> 4,290
<INCOME-TAX> 1,729
<INCOME-CONTINUING> 2,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,561
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
</TABLE>
