<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 September 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 November 8, 2000, 16,064,371 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 SEPTEMBER 30, 2000
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION 3
Item 1 Financial Statements 3
Consolidated Balance Sheets - December 31, 1999 and September 30,
2000 (unaudited) 4
Consolidated Statements of Operations - Three months and
nine months ended September 30, 1999 and 2000
(unaudited) 5
Consolidated Statements of Cash Flows - Nine months
ended September 30, 1999 and 2000 (unaudited) 6
Notes to Consolidated Financial Statements - September 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 15
PART II. OTHER INFORMATION II-1
Item 6 Exhibits and Reports on Form 8-K II-1
SIGNATURES II-2
INDEX TO EXHIBITS II-3
</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, SEPTEMBER 30,
1999 2000
---------------- ----------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,396 $ 13,400
Accounts receivable and notes receivable, less allowance for doubtful
accounts of $8,835 and $13,581, respectively 82,863 95,869
Notes receivable, stockholders - short-term 269 --
Inventories 5,695 5,682
Prepaid expenses and other current assets 8,396 9,161
---------------- ----------------
Total current assets 106,619 124,112
PROPERTY, PLANT AND EQUIPMENT, net 46,512 51,322
GOODWILL AND OTHER INTANGIBLES, net of amortization of $10,728 and $16,945,
respectively 212,316 267,358
OTHER NONCURRENT ASSETS 3,908 4,749
---------------- ----------------
Total assets $ 369,355 $ 447,541
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 85,302 $ 70,358
Current maturities of long-term obligations 1,204 700
---------------- ----------------
Total current liabilities 86,506 71,058
LONG-TERM OBLIGATIONS, net of current maturities 85,172 129,868
OTHER LONG-TERM OBLIGATIONS 22,668 17,707
---------------- ----------------
Total liabilities 194,346 218,633
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 15,648,286 shares issued and outstanding at
December 31, 1999 and September 30, 2000, respectively 146 156
Additional paid-in-capital 120,179 150,902
Retained earnings 55,185 78,501
---------------- ----------------
175,510 229,559
Less - Treasury stock, $.01 par value, 36,670 and 42,187 shares
at December 31, 1999 and September 30, 2000, respectively (501) (651)
---------------- ----------------
Total stockholders' equity 175,009 228,908
---------------- ----------------
Total liabilities and stockholders' equity $ 369,355 $ 447,541
================ ================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
1999 2000 1999 2000
-------------- -------------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE $ 95,591 $ 118,384 $ 244,553 $ 340,548
COST OF SERVICES 58,921 70,376 148,789 204,187
DEPRECIATION 2,349 3,530 6,136 10,217
-------------- -------------- -------------- --------------
Gross profit 34,321 44,478 89,628 126,144
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 21,045 25,641 55,244 74,447
AMORTIZATION 1,286 2,318 3,233 6,254
-------------- -------------- -------------- --------------
Operating income 11,990 16,519 31,151 45,443
OTHER (INCOME) EXPENSE:
Interest expense 1,421 2,901 2,678 7,212
Interest income (80) (125) (295) (338)
Other income, net 22 (73) (209) (292)
-------------- --------------- --------------- ---------------
Income before income taxes 10,627 13,816 28,977 38,861
PROVISION FOR INCOME TAXES 4,251 5,526 11,591 15,544
-------------- -------------- -------------- --------------
NET INCOME $ 6,376 $ 8,290 $ 17,386 $ 23,317
============= ============= ============= =============
NET INCOME PER COMMON SHARE
Basic $ 0.45 $ .54 $ 1.23 $ 1.55
============= ============= ============= =============
Diluted $ 0.42 $ .51 $ 1.17 $ 1.47
============= ============= ============= =============
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
Basic 14,277 15,471 14,081 15,029
=============== ============== ============== ==============
Diluted 15,190 16,368 14,826 15,867
=============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
1999 2000
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $17,386 $23,317
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,369 16,471
Change in operating assets and liabilities:
Accounts receivable (5,563) (3,435)
Prepaid expenses and other assets (7,758) (1,457)
Accounts payable and other liabilities (2,436) (3,138)
------------- -------------
Net cash provided by operating activities 10,998 31,758
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (15,308) (9,739)
Cash paid for acquisitions, net of cash acquired (62,684) (72,459)
------------- -------------
Net cash used in investing activities (77,992) (82,198)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance, net 3,619 11,768
Proceeds from long-term obligations 72,750 77,500
Principal payments on long-term obligations (16,138) (34,824)
------------- -------------
Net cash provided by financing activities 60,231 54,444
NET CHANGE IN CASH AND CASH EQUIVALENTS (6,763) 4,004
CASH AND CASH EQUIVALENTS, beginning of period 14,592 9,396
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 7,829 $ 13,400
============= =============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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 September 30, 2000, our results of
operations for the three and nine months ended September 30, 1999 and 2000,
and our cash flows for the nine months ended September 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 nine month periods
ended September 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
1999 2000 1999 2000
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Basic weighted average common shares 14,277 15,471 14,081 15,029
Weighted average options, warrants and other
contingent consideration 913 897 745 838
--------------- -------------- -------------- ---------------
Diluted weighted average common shares 15,190 16,368 14,826 15,867
=============== ============== ============== ===============
</TABLE>
7
<PAGE>
3. BUSINESS COMBINATIONS
2000 ACQUISITIONS
During the first nine months of 2000, we acquired five 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 PLCI, Inc., (iv) Lexicode Corporation, and (v) RTI Laser
Print Services, Inc. The aggregate consideration paid for the Purchased
Companies consisted of $51.0 million in cash and 205,351 shares of common
stock. The preliminary allocation of the purchase price is set forth below
(in thousands):
<TABLE>
<S> <C>
Consideration Paid $ 56,196
Estimated Fair Value of Identifiable Assets 19,000
Estimated Fair Value of Liabilities 10,624
Goodwill 47,820
</TABLE>
The weighted average fair market values of the shares of common stock
used in calculating the consideration paid for the Purchased Companies was
$25.44 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 from 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 nine months of 2000, we paid
consideration of $18.2 million in cash and 382,685 shares of common stock in
relation to contingent consideration agreements that have been finalized.
Based upon the evaluation of cumulative earnings through September 30, 2000
against the specified earnings targets, we have accrued aggregate contingent
consideration of approximately $26.3 million, of which $13.8 million is
classified as accounts payable and accrued liabilities and will be settled in
cash and $12.5 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 additional amounts may be payable in
future periods under the terms of the agreements.
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 cash flows 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 (Computer Output to Laser Disc) 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
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 SEPTEMBER 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 $36,320 $22,751 $37,337 $21,976 $118,384
Income before income taxes 3,803 3,507 4,695 1,811 13,816
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999 (1)
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $37,007 $20,918 $24,884 $12,782 $95,591
Income before income taxes 5,752 2,124 2,109 642 10,627
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 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 $108,430 $66,306 $104,948 $60,864 $340,548
Income before income taxes 12,181 8,729 13,531 4,420 38,861
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999 (1)
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $71,528 $62,610 $74,758 $35,657 $244,553
Income before income taxes 10,263 7,150 8,987 2,577 28,977
</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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUE
Revenue increased 23.8% from $95.6 million for the three months ended
September 30, 1999 to $118.4 million for the three months ended September 30,
2000. This increase was largely due to revenue from the acquisitions
completed subsequent to September 30, 1999 and internal revenue growth,
excluding acquired revenue, of 8.4%. 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 29.6% from $34.3 million for the three months
ended September 30, 1999 to $44.5 million for the three months ended
September 30, 2000, largely due to acquisitions completed subsequent to
September 30, 1999. Gross profit as a percentage of revenue increased from
35.9% for the three months ended September 30, 1999 to 37.6% for the three
months ended September 30, 2000, primarily due to favorable leverage from
revenue growth in the government and healthcare businesses, higher margins on
recent acquisitions and higher margins earned on class action administration
services.
11
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A increased 21.8% from $21.0 million, or 22.0% of revenue, for the
three months ended September 30, 1999 to $25.6 million, or 21.7% of revenue,
for the three months ended September 30, 2000. This increase was a result of
SG&A at companies acquired subsequent to September 30, 1999 and increased
corporate overhead required to manage the consolidated group.
OPERATING INCOME
Operating income increased 37.8% from $12.0 million, or 12.5% of revenue,
for the three months ended September 30, 1999 to $16.5 million, or 14.0% of
revenue, for the three months ended September 30, 2000, largely attributable
to the factors discussed above.
INCOME BEFORE INCOME TAXES AND NET INCOME
Income before income taxes increased 30.0% from $10.6 million for the
three months ended September 30, 1999 to $13.8 million for the three months
ended September 30, 2000, and net income increased 30% from $6.4 million for
the three months ended September 30, 1999 to $8.3 million for the three
months ended September 30, 2000, largely attributable to the factors
discussed above.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1999
REVENUE
Revenue increased 39.3% from $244.6 million for the nine months ended
September 30, 1999 to $340.5 million for the nine months ended September 30,
2000. This increase was largely due to revenue from the acquisitions
completed subsequent to September 30, 1999 and internal revenue growth,
excluding acquired revenue, of 14.7%. 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 40.7% from $89.6 million for the nine months ended
September 30, 1999 to $126.1 million for the nine months ended September 30,
2000, largely due to acquisitions completed subsequent to September 30, 1999.
Gross profit as a percentage of revenue increased from 36.6% for the nine
months ended September 30, 1999 to 37.0% for the nine months ended September
30, 2000, primarily due to higher profit margins associated with government
and healthcare services, higher than average margins on acquisitions and
class action administration services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A increased 34.8% from $55.2 million, or 22.6% of revenue, for the
nine months ended September 30, 1999 to $74.4 million, or 21.9% of revenue,
for the nine months ended September 30, 2000. This increase was a result of
SG&A at companies acquired subsequent to September 30, 1999 and increased
corporate overhead required to manage the consolidated group.
12
<PAGE>
OPERATING INCOME
Operating income increased 45.9% from $31.2 million, or 12.7% of revenue,
for the nine months ended September 30, 1999 to $45.4 million, or 13.3% of
revenue, for the nine months ended September 30, 2000, largely attributable
to the factors discussed above.
INCOME BEFORE INCOME TAXES AND NET INCOME
Income before income taxes increased 34.1% from $29.0 million for the
nine months ended September 30, 1999 to $38.9 million for the nine months
ended September 30, 2000, and net income increased 34.1% from $17.4 million
for the nine months ended September 30, 1999 to $23.3 million for the nine
months ended September 30, 2000, largely attributable to the factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, we had $53.1 million of working capital and $13.4
million of cash. Cash flows provided by operating activities for the nine
months ended September 30, 2000 were $31.8 million. Net cash provided by
operating activities was approximately 136% of net income for the nine months
ended September 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 $82.2 million for the nine months ended
September 30, 2000, as we paid $72.5 million for acquisitions, net of cash
acquired, including contingent consideration related to prior year
acquisitions. Net cash provided by financing activities was $54.4 million for
the nine months ended September 30, 2000, primarily due to borrowings of
$77.5 million on our line of credit, net of principal payments of $34.8
million on long-term obligations.
During the nine months ended September 30, 1999, net cash flows provided
by operating activities were $11.0 million. Net cash used in investing
activities during such period was $78.0 million, as we paid $62.7 million for
acquisitions, net of cash acquired. Net cash provided by financing activities
during such period was $60.2 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
October 31, 2000 was $36.2 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 2,806,866 shares were
available as of September 30, 2000.
13
<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. Further, we disclaim any obligation to update any such
forward-looking statements.
14
<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.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.81 Letter agreement, dated July 25, 2000, between Timothy J. Barker
and F.Y.I. Incorporated regarding modifications to Employment
Agreement.
10.82 Employment Agreement dated as of August 1, 2000 between F.Y.I.
Incorporated and Charles S. Gilbert.
10.83 Employment Agreement, dated as of September 5, 2000, between
F.Y.I. Incorporated and Michael S. Rupe.
27.1 Financial Data Schedule
27.2 1999 Restated Financial Data Schedule
(b) Reports on Form 8-K
None
II-1
<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: November 13, 2000 By: /s/ Ed H. Bowman, Jr.
--------------------------------------------
Ed H. Bowman, Jr.
Chief Executive Officer and President
Date: November 13, 2000 By: /s/ Barry L. Edwards
--------------------------------------------
Barry L. Edwards
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
II-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.81 Letter agreement, dated July 25, 2000, between Timothy J. Barker and
F.Y.I. Incorporated regarding modifications to Employment Agreement.
10.82 Employment Agreement dated as of August 1, 2000 between F.Y.I.
Incorporated and Charles S. Gilbert.
10.83 Employment Agreement, dated as of September 5, 2000, between F.Y.I.
Incorporated and Michael S. Rupe.
27.1 Financial Data Schedule
27.2 1999 Restated Financial Data Schedule
</TABLE>
II-3
