<PAGE>
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 June 30, 2000, 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
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 July 31, 2000, 15,443,021 shares of the registrant's Common Stock, $.01
par value per share, were outstanding.
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION 3
Item 1 Financial Statements 3
Consolidated Balance Sheets - December 31, 1999 and June 30, 2000
(unaudited) 4
Consolidated Statements of Operations - Three months and
six months ended June 30, 1999 and 2000 (unaudited) 5
Consolidated Statements of Cash Flows - Six months ended
June 30, 1999 and 2000 (unaudited) 6
Notes to Consolidated Financial Statements - June 30, 2000 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 3 Quantitative and Qualitative Disclosures about Market Risk 14
PART II. OTHER INFORMATION II-1
Item 4 Submission of Matters to a Vote of Security Holders II-1
Item 5 Other Information II-1
Recent Developments II-1
Risks Associated with Forward-Looking Statements II-2
Item 6 Exhibits and Reports on Form 8-K II-3
SIGNATURES II-4
INDEX TO EXHIBITS II-5
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ -----------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,396 $ 13,520
Accounts receivable and notes receivable, less allowance for doubtful
accounts of $8,835 and $12,612, respectively 82,863 94,312
Notes receivable, shareholders - short-term 269 --
Inventories 5,695 5,727
Prepaid expenses and other current assets 8,396 9,566
----------- -----------
Total current assets 106,619 123,125
PROPERTY, PLANT AND EQUIPMENT, NET 46,512 49,364
GOODWILL AND OTHER INTANGIBLES, net of amortization of
$10,728 and $14,625, respectively 212,316 256,351
OTHER NONCURRENT ASSETS 3,908 4,629
----------- -----------
Total assets $ 369,355 $ 433,469
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 85,302 $ 61,720
Current maturities of long-term obligations 1,204 855
----------- -----------
Total current liabilities 86,506 62,575
LONG-TERM OBLIGATIONS, net of current maturities 85,172 138,416
OTHER LONG-TERM OBLIGATIONS 22,668 17,975
----------- -----------
Total liabilities 194,346 218,966
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
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,
14,581,639 and 15,419,031 shares issued and outstanding at
December 31, 1999 and June 30, 2000, respectively 146 154
Additional paid-in-capital 120,179 144,788
Retained earnings 55,185 70,212
----------- -----------
175,510 215,154
Less - Treasury stock, $.01 par value, 36,670 and 42,187 shares
at December 31, 1999 and June 30, 2000, respectively (501) (651)
----------- -----------
Total stockholders' equity 175,009 214,503
----------- -----------
Total liabilities and stockholders' equity $ 369,355 $ 433,469
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- --------------------------
1999 2000 1999 2000
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE $ 81,587 $ 114,400 $ 153,199 $ 222,165
COST OF SERVICES 49,958 68,140 94,106 133,813
DEPRECIATION 1,922 3,571 3,786 6,687
----------- ----------- ----------- -----------
Gross profit 29,707 42,689 55,307 81,665
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 18,644 25,331 34,199 48,805
AMORTIZATION 1,038 2,046 1,947 3,936
----------- ----------- ----------- -----------
Operating income 10,025 15,312 19,161 28,924
OTHER (INCOME) EXPENSE:
Interest expense 759 2,458 1,256 4,310
Interest income (109) (111) (214) (212)
Other income, net (186) (143) (231) (219)
----------- ----------- ----------- -----------
Income before income taxes 9,561 13,108 18,350 25,045
PROVISION FOR INCOME TAXES 3,824 5,243 7,340 10,018
----------- ----------- ----------- -----------
NET INCOME $ 5,737 $ 7,865 $ 11,010 $ 15,027
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE
Basic $ 0.41 $ 0.52 $ 0.79 $ 1.01
=========== =========== =========== ===========
Diluted $ 0.39 $ 0.50 $ 0.75 $ 0.96
=========== =========== =========== ===========
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
Basic 14,028 15,050 13,984 14,807
=========== =========== =========== ===========
Diluted 14,710 15,715 14,644 15,617
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------------
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,010 $ 15,027
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,733 10,623
Change in operating assets and liabilities:
Accounts receivable (7,063) (2,874)
Prepaid expenses and other assets 4,735 (3,066)
Accounts payable and other liabilities (3,743) (6,576)
----------- -----------
Net cash provided by operating activities 10,672 13,134
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (10,194) (6,656)
Cash paid for acquisitions, net of cash acquired (22,127) (61,008)
----------- -----------
Net cash used in investing activities (32,321) (67,664)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance, net 2,483 7,075
Distribution to shareholders of pooled companies -- (174)
Proceeds from long-term obligations 29,250 69,500
Principal payments on long-term obligations (12,463) (17,747)
----------- -----------
Net cash provided by financing activities 19,270 58,654
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,379) 4,124
CASH AND CASH EQUIVALENTS, beginning of period 14,592 9,396
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 12,213 $ 13,520
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
6
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements and related notes to
consolidated financial statements include the accounts of F.Y.I. Incorporated
and our subsidiaries.
In the opinion of our management, the accompanying consolidated financial
statements include all of our accounts and the adjustments necessary to
present fairly our financial position at June 30, 2000, our results of
operations for the three and six months ended June 30, 1999 and 2000, and our
cash flows for the six months ended June 30, 1999 and 2000. All significant
intercompany transactions have been eliminated. Although we believe 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 our
consolidated financial statements and the related notes thereto in our Annual
Report on Form 10-K filed with the Commission on March 23, 2000. The results
of operations for the three and six month periods ended June 30, 1999 and 2000
may not be indicative of the results for the full year.
Certain prior period amounts have been reclassified to make their
presentation consistent with the current year.
2. WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted net income per common share were computed in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." The differences between basic weighted average common shares and
diluted weighted average common shares and common stock equivalents are as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1999 2000 1999 2000
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Basic weighted average common shares 14,028 15,050 13,984 14,807
Weighted average options, warrants and
other contingent consideration 682 665 660 810
--------------- -------------- -------------- ---------------
Diluted weighted average common shares 14,710 15,715 14,644 15,617
=============== ============== ============== ===============
</TABLE>
7
<PAGE>
3. BUSINESS COMBINATIONS
2000 ACQUISITIONS
During the first six months of 2000, we acquired four document and
information management outsourcing solutions businesses, which were accounted
for as purchases (the "Purchased Companies"). These acquisitions were (i)
Mailing and Marketing, Inc., (ii) Global Direct, Inc., (iii) Pinnacle Legal
Copies, Inc. and (iv) PLCI, Inc., and Lexicode Corporation. The aggregate
consideration paid for the Purchased Companies consisted of $42.0 million in
cash and 115,152 shares of common stock. The preliminary allocation of the
purchase price is set forth below (in thousands):
<TABLE>
<S> <C>
Consideration Paid $ 44,796
Estimated Fair Value of Tangible Assets 15,109
Estimated Fair Value of Liabilities 9,469
Goodwill 39,156
</TABLE>
The weighted average fair market values of the shares of common stock used
in calculating the consideration paid for the Purchased Companies was $24.53
per share, which represents a 20% discount from the average trading price of
the common stock based on the length and type of restrictions in the purchase
agreements.
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 allocations are not expected to be materially
different than the final allocations.
CONTINGENT CONSIDERATION
Certain of our acquisitions are subject to adjustments in their overall
consideration based upon the achievement of specified earning targets over one
to three year periods. During the first six months of 2000, we paid
consideration of $15.8 million in cash and 377,685 shares of common stock in
relation to contingent consideration agreements that have been finalized.
Based upon the evaluation of cumulative earnings through June 30, 2000 against
the specified earnings targets, we have accrued aggregate contingent
consideration of approximately $23.6 million, of which $10.7 million is
classified as accounts payable and accrued liabilities and will be settled in
cash and $12.9 million is classified as long-term obligations and will be
settled in common stock. All of the periods applicable for the earnout targets
have not been completed, and the amounts paid at the conclusion are likely to
be different from amounts presently accrued.
INTANGIBLE ASSETS
All intangibles are considered enterprise goodwill. Based on the
historical profitability of the purchased companies and trends in the legal,
healthcare and other industries regarding the outsourcing of document
management functions in the foreseeable future, the enterprise goodwill is
being amortized over periods not to exceed 30 years. Management continually
evaluates whether events and circumstances indicate that the remaining
estimated useful life of intangible assets might 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 a majority of our acquisitions
is not deductible for income tax purposes.
8
<PAGE>
4. SEGMENT REPORTING
We and our subsidiaries are principally engaged in document and
information outsourcing services. We have identified segments based on
management responsibility as follows:
F.Y.I. Image: (i) electronic imaging services involving the conversion of
paper or microfilm documents into digitized information, database management
and indexing; (ii) analog services involving the conversion of paper documents
into microfilm images, film processing and computer based indexing and
formatting; (iii) data capture and database management services involving data
capture, data consolidation and elimination, storage, maintenance, formatting
and report creation; (iv) claims processing; and (v) integrated solutions,
which deliver technical services with a focus on document imaging, work flow,
COLD and document information management systems using third party imaging
systems.
F.Y.I. Legal: (i) automated litigation support, including document
conversion, computer indexing and automated document retrieval; (ii)
litigation consulting services such as discovery assistance, labor
discrimination, forensic analysis and other trial support services; (iii)
high-speed, multiple-set reproduction of documents; (iv) records acquisition
in the form of subpoena of business documents and service of process; and (v)
employee and investor services, which provide administration, record keeping
and information processing services.
F.Y.I. HealthSERVE: (i) processing a request for a patient's medical
records from a physician, insurance company, attorney, healthcare institution
or individual; (ii) off-site active storage of the medical records of
healthcare institutions; (iii) online delivery of images of selected medical
records for healthcare institutions; (iv) document and data conversion
services for healthcare institutions; (v) document conversion services for
disability and worker's compensation claims of state governments and other
government agencies; (vi) temporary staffing services; (vii) providing
attending physicians' statements for life and health insurance underwriting;
and (viii) managed care compliance reviews.
F.Y.I. Direct: (i) direct mail, which includes direct mail and fulfillment
services to clients who need rapid, reliable and cost-effective methods for
making large scale distributions of advertising, literature and other
information; (ii) full service commercial printing, including printing and
related services such as electronic prepress services, full-color report
production of annual reports, flyers and catalogs; and (iii) statement
processing.
9
<PAGE>
We measure segment profit as income before income taxes. Information on
segments follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $35,544 $22,272 $36,222 $20,362 $114,400
Income before income taxes 3,831 2,612 5,162 1,503 13,108
THREE MONTHS ENDED JUNE 30, 1999 (1)
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
Revenue $19,218 $22,197 $26,804 $13,368 $ 81,587
Income before income taxes 1,644 3,012 3,427 1,478 9,561
SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
Revenue $72,110 $43,555 $67,611 $38,889 $222,165
Income before income taxes 8,379 5,221 8,836 2,609 25,045
SIX MONTHS ENDED JUNE 30, 1999 (1)
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
Revenue $34,792 $42,834 $52,662 $22,911 $153,199
Income before income taxes 4,395 5,069 7,019 1,867 18,350
</TABLE>
(1) The 1999 segments have been reclassified to conform to our 2000
segment structure.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements 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 forward-looking statements is contained under
"Item 5. Other Information."
INTRODUCTION
We provide a wide variety of document and information outsourcing
solutions and draw upon our available services to develop solutions for our
clients based on their specific needs. The current document and information
outsourcing solutions that we provide are generally divided into the following
strategic business units: F.Y.I. HealthSERVE; F.Y.I. Legal; F.Y.I. Image; and
F.Y.I. Direct. See Note 4 in Notes to Consolidated Financial Statements for
further description of these strategic business units.
Cost of services consists primarily of compensation and benefits to
employees providing goods and services to our clients, occupancy costs,
equipment costs and supplies. Cost of services also includes the cost of
products sold for micrographics supplies and equipment, computer hardware and
software and business imaging supplies and equipment.
Selling, general and administrative expenses ("SG&A") consist primarily
of: (i) compensation and related benefits to sales and marketing, executive
management, accounting, human resources and other administrative employees;
(ii) other sales and marketing costs; (iii) communications costs; (iv)
insurance costs; and (v) legal and accounting professional fees and expenses.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
REVENUE
Revenue increased 40.2% from $81.6 million for the three months ended
June 30, 1999 to $114.4 million for the three months ended June 30, 2000.
This increase was largely due to revenue from the acquisitions completed
subsequent to June 30, 1999 and internal revenue growth, excluding acquired
revenue, of 14.3%. This revenue growth was primarily attributable to an
increase in government services revenue for document imaging services and
higher revenue from class action administration services.
GROSS PROFIT
Gross profit increased 43.7% from $29.7 million for the three months ended
June 30, 1999 to $42.7 million for the three months ended June 30, 2000,
largely due to acquisitions completed subsequent to June 30, 1999. Gross
profit as a percentage of revenue increased from 36.4% for the three months
ended June 30, 1999 to 37.3% for the three months ended June 30, 2000,
primarily due to favorable leverage from revenue growth in the government and
healthcare businesses and higher margins earned on class action administration
services.
11
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A increased 35.9% from $18.6 million, or 22.9% of revenue, for the
three months ended June 30, 1999 to $25.3 million, or 22.1% of revenue, for
the three months ended June 30, 2000. This increase was a result of SG&A at
companies acquired subsequent to June 30, 1999 and increased corporate
overhead required to manage the consolidated group.
OPERATING INCOME
Operating income increased 52.7% from $10.0 million, or 12.3% of revenue,
for the three months ended June 30, 1999 to $15.3 million, or 13.4% of
revenue, for the three months ended June 30, 2000, largely attributable to the
factors discussed above.
INCOME BEFORE INCOME TAXES AND NET INCOME
Income before income taxes increased 37.1% from $9.6 million for the three
months ended June 30, 1999 to $13.1 million for the three months ended June
30, 2000, and net income increased 37.1% from $5.7 million for the three
months ended June 30, 1999 to $7.9 million for the three months ended June 30,
2000, largely attributable to the factors discussed above.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
REVENUE
Revenue increased 45.0% from $153.2 million for the six months ended June
30, 1999 to $222.2 million for the six months ended June 30, 2000. This
increase was largely due to revenue from the acquisitions completed
subsequent to June 30, 1999 and internal revenue growth, excluding acquired
revenue, of 15.6%. This internal growth was primarily attributable
to continued growth in government services imaging revenue, higher healthcare
conversion revenue, and higher class action administration revenue.
GROSS PROFIT
Gross profit increased 47.7% from $55.3 million for the six months ended
June 30, 1999 to $81.7 million for the six months ended June 30, 2000, largely
due to acquisitions completed subsequent to June 30, 1999. Gross profit as a
percentage of revenue increased from 36.1% for the six months ended June 30,
1999 to 36.8% for the six months ended June 30, 2000, primarily due to higher
profit margins associated with government and healthcare services and class
action administration services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A increased 42.7% from $34.2 million, or 22.3% of revenue, for the six
months ended June 30, 1999 to $48.8 million, or 22.0% of revenue, for the six
months ended June 30, 2000. This increase was a result of SG&A at companies
acquired subsequent to June 30, 1999 and increased corporate overhead required
to manage the consolidated group.
12
<PAGE>
OPERATING INCOME
Operating income increased 51.0% from $19.2 million, or 12.5% of revenue,
for the six months ended June 30, 1999 to $28.9 million, or 13.0% of revenue,
for the six months ended June 30, 2000, largely attributable to the factors
discussed above.
INCOME BEFORE INCOME TAXES AND NET INCOME
Income before income taxes increased 36.5% from $18.4 million for the six
months ended June 30, 1999 to $25.0 million for the six months ended June 30,
2000, and net income increased 36.5% from $11.0 million for the six months
ended June 30, 1999 to $15.0 million for the six months ended June 30, 2000,
largely attributable to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, we had $60.6 million of working capital and $13.5
million of cash. Cash flows provided by operating activities for the six
months ended June 30, 2000 were $13.1 million. Net cash provided by operating
activities was approximately 87.4% of net income for the six months ended
June 30, 2000, mostly due to increased revenue and partially offset by income
tax payments and an increase in accounts receivable. Net cash used in
investing activities was $67.7 million, as we paid $61.0 million for
acquisitions, net of cash acquired, including contingent consideration
related to prior year acquisitions. Net cash provided by financing activities
was $58.7 million, primarily due to borrowings of $69.5 million on our line
of credit, net of principal payments on assumed debt of $135.5 million.
During the six months ended June 30, 1999, net cash flows provided by
operating activities were $10.7 million. Net cash used in investing activities
was $32.3 million, as we paid $22.1 million for acquisitions, net of cash
acquired. Net cash provided by financing activities was $19.3 million.
In February 1998, we entered into our line of credit with BNP Paribas (the
"1998 Credit Agreement"). Under this agreement, we initially could borrow on a
revolving credit basis loans in an aggregate outstanding principal amount up
to $65.0 million, subject to certain customary borrowing capacity
requirements. In April 1999 and August 1999, the 1998 Credit Agreement was
amended to increase the aggregate outstanding principal limit to $100 million
and $125 million, respectively. In November 1999, we further amended the 1998
Credit Agreement, increasing the aggregate principal limit to $150 million. In
May 2000, the 1998 Credit Agreement was further amended to increase the
aggregate principal limit to $175 million from $150 million. In July 2000, the
1998 Credit Agreement was amended to extend its revolving term by one year.
The availability under the 1998 Credit Agreement as of July 31, 2000 was $26.2
million for acquisitions, working capital and general corporate purposes.
Depending on the mix of stock and cash used to execute our acquisition
program, we may need to seek additional financing through the public or
private sale of equity or debt securities. There can be no assurance we could
secure such financing if and when it is needed or on terms we deem acceptable.
In January 2000, we registered on Form S-4 (Registration No. 333-92981)
3,012,217 shares of common stock for issuance in connection with our
acquisition program (the "Acquisition Shelf"), of which 2,897,065 shares were
available as of June 30, 2000.
13
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not ordinarily use financial instruments, such as derivatives, to
manage the impact of interest rate changes or other market risks in our
business and we are not party to any leveraged financial instruments.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 11, 2000, we held our annual meeting of stockholders. The
stockholders elected eight (8) directors. The director nominees received the
following votes:
<TABLE>
<CAPTION>
Number of Votes
---------------
Nominee For Against/Withheld Abstentions Broker Non-Votes
------- --- ---------------- ----------- ----------------
<S> <C> <C> <C>
Ed H. Bowman, Jr. 11,136,468 1,098,392 - -
Michael J. Bradley 11,498,508 736,352 - -
David Lowenstein 11,498,508 736,352 - -
Donald F. Moorehead, Jr. 11,498,508 736,352 - -
Joe A. Rose 11,498,508 736,352 - -
Hon. Edward M. Rowell 11,498,508 736,352 - -
Jonathan B. Shaw 11,498,508 736,352 - -
Thomas C. Walker 11,498,508 736,352 - -
</TABLE>
Additionally, the proposed warrants were approved and adopted with the
following votes:
<TABLE>
<CAPTION>
Number of Votes
---------------
For Against/Withheld Abstentions Broker Non-Votes
--- ---------------- ----------- ----------------
<S> <C> <C> <C>
10,733,192 564,309 23,520 913,839
</TABLE>
ITEM 5. OTHER INFORMATION
RECENT DEVELOPMENTS
ACQUISITIONS
In July 2000, we acquired RTI Laser Print Services, Inc., a statement
processing company located in Farmingdale, New York.
AMENDMENT TO CREDIT AGREEMENT
In July 2000, the 1998 Credit Agreement was amended to extend its
revolving term by one year.
OFFICERS
In June 2000, Margot T. Lebenberg resigned from her position as Senior
Vice President, Secretary and General Counsel. In July 2000, Timothy J.
Barker resigned his position of Executive Vice President and Chief Financial
Officer, but agreed to remain with us for a period of time to assist with his
successor's transition. On July 31, 2000, Barry L. Edwards joined us as
Executive Vice President and Chief Financial Officer.
II-1
<PAGE>
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements such as our
intentions, hopes, beliefs, expectations, strategies, predictions or any other
variation thereof or comparable phraseology of our future activities or other
future events or conditions within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "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, variations in quarterly results, volatility of our stock price,
development by competitors of new or superior products, technology or
services, the entry into the market by new competitors, the sufficiency of our
working capital and our ability to realize benefits from consolidating certain
general and administrative functions, to assimilate and integrate
acquisitions, to continue our acquisition program, to manage our growth, to
retain management, to implement our focused business strategy, to expand our
document and information management services geographically, to attract and
retain customers, to increase revenue by cross-selling services and to
successfully defend our company in ongoing and future litigation. Although we
believe 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 Report 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 us
or any other person that our objectives and plans will be achieved.
II-2
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a) Exhibits
10.79 Sixth Amendment to Amended and Restated Credit Agreement,
dated as of July 14, 2000, by and among F.Y.I. Incorporated,
BNP Paribas, Bank of America N.A., Bank One, Texas N.A. and
the Lenders named therein.
10.80 Employment Agreement between F.Y.I. Incorporated and
Barry L. Edwards
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
</TABLE>
II-3
<PAGE>
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: August 11, 2000 By: /s/ Ed H. Bowman, Jr.
--------------------------------------
Ed H. Bowman, Jr.
Chief Executive Officer and President
Date: August 11, 2000 By: /s/ Barry L. Edwards
--------------------------------------
Barry L. Edwards
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.79 Sixth Amendment to Amended and Restated Credit Agreement, dated as of
July 14, 2000, by and among F.Y.I. Incorporated, BNP Paribas, Bank of
America N.A., Bank One, Texas N.A. and the Lenders named therein.
10.80 Employment Agreement between F.Y.I. Incorporated and Barry L. Edwards
27.1 Financial Data Schedule
</TABLE>
II-5
