<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
--------------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934
For the quarterly period ended June 28, 1996
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934
Commission File Number: 0-25746
RENAISSANCE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3150009
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
(Address of principal executive offices)
Telephone Number (617) 259-8833
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
--- ---
As of August 6, 1996, there were 6,963,158 shares of the Registrant's Common
Stock, $.0001 par value per share, outstanding.
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<PAGE>
RENAISSANCE SOLUTIONS, INC.
Form 10-Q for the Fiscal Quarter Ended June 28, 1996
Table of Contents
PART I. FINANCIAL INFORMATION Page No.
---------
Item 1. Financial Statements:
Consolidated Statements of Income for the
six months ended June 28, 1996 and June 30, 1995........... 3
Consolidated Balance Sheets as of
June 28, 1996 and December 31, 1995........................ 4
Consolidated Statements of Cash Flows for the
six months ended June 28, 1996 and June 30, 1995 .......... 5
Notes to Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 7
PART II. OTHER INFORMATION Page No.
---------
Item 4. Submission of Matters to a Vote of Securityholders......... 11
Item 6. Exhibits and Reports on Form 8-K........................... 11
Signatures................................................. 12
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RENAISSANCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Amount in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, 1996 June 30, 1995 June 28, 1996 June 30,1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues........................... $ 8,549 $ 5,308 $ $16,344 $ 10,064
--------------- --------------- --------------- ---------------
Cost and expenses:
Professional personnel.......... 4,629 2,819 9,111 5,326
Professional development and
recruiting...................... 286 294 609 638
Marketing and sales............. 411 109 688 243
General and administrative...... 1,454 939 2,814 1,828
--------------- --------------- ---------------- ---------------
Total costs and expenses........ 6,780 4,161 13,222 8,035
--------------- --------------- ---------------- ---------------
Income from operations............. 1,769 1,147 3,122 2,029
Interest expense................... (11) (1) (39) (51)
Interest income.................... 291 160 421 170
--------------- --------------- ---------------- ---------------
Income before taxes................ 2,049 1,306 3,504 2,148
Income taxes....................... 795 523 1,362 523
--------------- --------------- ---------------- ---------------
Net income......................... $ 1,254 $ 783 $ 2,142 $ 1,625
=============== =============== ================ ===============
Pro forma data:
Historical income before income
taxes............................. $ 2,049 $ 1,306 $ 3,504 $ 2,148
--------------- --------------- --------------- ---------------
Historical income taxes............ 795 523 1,362 523
Additional provision for income
taxes.............................. --- --- --- 336
--------------- --------------- --------------- ---------------
Pro forma provision for income
taxes.............................. 795 523 1,362 859
--------------- --------------- ---------------- ---------------
Pro forma net
income............................. $ 1,254 $ 783 $ 2,142 $ 1,289
=============== =============== ================ ===============
Pro forma net income per
share.............................. $ 0.17 $ 0.13 $ 0.31 $ 0.23
=============== =============== ================ ===============
Pro forma weighted average number of
common and common equivalent shares
outstanding........................ 7,323 6,085 6,968 5,416
=============== =============== ================ ===============
</TABLE>
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RENAISSANCE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
June 28, 1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............... $ 24,144 $ 6,040
Marketable securities................... 13,458 4,890
Accounts receivable, net................ 8,134 5,791
Unbilled services, net.................. 3,390 3,759
Receivable from officers/shareholders... --- 278
Prepaid expenses and other current
assets................................ 876 161
------------ ------------
Total current assets................. 50,002 20,919
------------ ------------
Property and equipment, net................... 2,793 2,034
Other assets 72 72
------------ ------------
Total assets......................... $ 52,867 $ 23,025
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings................... $ --- $ 1,500
Accounts payable........................ 1,035 1,150
Accrued payroll and related costs...... 1,180 850
Accrued income taxes.................... 247 270
Other accrued liabilities............... 101 62
Advance payments........................ 85 341
------------ ------------
Total current liabilities 2,648 4,173
Other liabilties.............................. 138 87
------------ ------------
Total liabilities....................... 2,786 4,260
------------ ------------
Stockholders' equity..........................
Preferred stock, $.01 par value,
authorized
2,000,000 shares, none issued........... --- ---
Common stock, $.0001 par value, authorized
20,000,000 shares, issued and outstanding
6,963,158 shares at June 28, 1996 and
5,969,396 shares at December 31, 1995... 1 1
Additional paid in capital................. 43,546 14,337
Warrants to acquire common stock........... 1,600 1,600
Cumulative foreign currency loss........... (40) (46)
Unrealized gain (loss) on marketable
securities.............................. (6) 35
Retained earnings.......................... 4,980 2,838
------------ ------------
Stockholders' (deficiency) equity....... 50,081 18,765
------------ ------------
Total liabilities and stockholders'
equity............................... $ 52,867 $ 23,025
============ ============
</TABLE>
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<PAGE>
RENAISSANCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 28, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Cash flows from Operating Activities:
Net Income............................. $ 2,142 $ 1,625
Adjustments to reconcile net income to
net cash:
Depreciation and amortization.......... 279 127
Change in:
Accounts receivable, net............ (2,343) (1,929)
Unbilled services, net.............. 369 (1,084)
Receivable from officers/
shareholders...................... 278 ---
Prepaid expenses.................... (715) (218)
Accounts payable.................... (115) 461
Accrued payroll and related costs... 330 85
Accrued income taxes................ (23) 523
Other accrued liabilities........... 39 66
Advanced payments................... (256) (949)
Increase in other liabilties........ 51 ---
----------- -----------
Net cash provided by (used for)
operating activities................. 36 (1,293)
----------- -----------
Cash flows from investing activities:
Purchase of marketable
securities........................ (8,568) ---
Expenditures for property and (1,038) (414)
equipment.........................
----------- -----------
Net cash used for investing
activities........................ (9,606) (414)
----------- -----------
Cash flows from Financing Activities:
Issuance of common stock, net....... 29,209 15,704
Sale of warrants to acquire common
stock............................ --- 1,600
Payment of shareholder
distributions.................... --- (3,426)
Repayment of short-term
borrowings....................... (1,500) 300
Payment on notes payable -
Gemini..................... --- (2,000)
----------- -----------
Net cash provided by financing
activities....................... 27,709 12,178
----------- -----------
Effect of exchange rate changes on
cash and cash equivalents........... (35) ---
------------ -----------
Increase in cash and cash
equivalents......................... 18,104 10,471
Cash and cash equivalents,
beginning of period................. 6,040 1,384
------------ -----------
Cash and cash equivalents, end of
period.............................. $ 24,144 $ 11,855
=========== ===========
Supplemental disclosure of cash flow
information:
Interest paid....................... $ 25 $ 86
=========== ===========
Income taxes paid................... $ 260 $ ---
=========== ===========
</TABLE>
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<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Reorganization and Basis of Presentation
Renaissance Solutions, Inc. ("Renaissance" or the "Company") was organized
as a Delaware corporation in March 1992. In December 1993, the Company
contributed all of its assets, subject to all of its liabilities, to
Renaissance Strategy Group Limited Partnership, a Delaware limited
partnership (the "Partnership"), in exchange for the sole general
partnership interest in the Partnership. The business of the Company was
conducted by the Partnership from December 1, 1993 to April 3, 1995.
Pursuant to a reorganization agreement (the "Reorganization Agreement")
entered into among the Company, the Partnership, the limited partners of the
Partnership, the holders of certain units of economic interest ("Units") in
the Partnership and the holders of certain options to purchase Units,
effective April 3, 1995 (i) the Company issued 4,567,396 shares of its
Common Stock in exchange for all of the outstanding limited partnership
interests and Units in the Partnership, and (ii) options to purchase
1,730,000 Units outstanding as of such date were exchanged for options to
purchase 432,605 shares of Common Stock. Immediately thereafter, the
Partnership was dissolved and all of its assets and liabilities were
distributed to and assumed by the Company. The reorganization of the Company
described above is referred to herein as the "Reorganization." The
Reorganization has been accounted for in a manner similar to a pooling of
interests and, except as otherwise indicated or where the context otherwise
requires, the information set forth in these financial statements has been
adjusted to give retroactive effect to the Reorganization. References herein
to the "Company" and "Renaissance" refer to Renaissance Solutions, Inc., and
with respect to operations between December 1, 1993 and April 3, 1995 (the
date of the Reorganization), the Partnership, and its wholly-owned
subsidiary, Renaissance Solutions Limited.
The consolidated financial statements at June 28, 1996 and for the three and
six months ended June 28, 1996 and June 30, 1995 are unaudited and reflect
all adjustments (consisting only of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with
management's discussion and analysis of financial condition and results of
operations, included in the Company's 1995 Annual Report to Stockholders.
The results of operations for the three and six months ended June 28, 1996
are not necessarily indicative of the results for the entire fiscal year
ending December 31, 1996.
2. Initial Public Offering
On April 11, 1995, the Company completed its initial public offering of
Common Stock, whereby the Company issued 1,400,000 shares of Common Stock
and an additional 885,000 shares were offered by existing stockholders of
the Company. The net proceeds from the sale of the shares by the Company
were approximately $15,926,000 after deducting estimated offering expenses
of $1,000,000. Approximately $1,872,000 of the net proceeds of the offering
were used to repay a note due to Gemini Consulting, Inc. ("Gemini") and
$3,426,475 of the net proceeds were used to repay notes payable to the
Company's stockholders incurred by the Company in connection with the
payment of partnership distributions in January and March 1995.
Simultaneously with the closing of the offering, the Company also sold
warrants to Gemini to acquire 633,600 shares of the Company's Common Stock
for cash of $1,600,000.
3. Follow-on Offering
On May 17, 1996, the Company completed a follow-on public offering, whereby
Company issued 902,125 shares of Common Stock and existing shareholders sold
647,500 shares of Common Stock. The net proceeds from the sale of shares by
the Company were approximately $28,263,000, after deducting estimated
offering expenses of $225,000.
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<PAGE>
4. Income Per Share
Pro forma income per share is based on the weighted average number of common
and dilutive common equivalent shares (common stock options and warrants)
outstanding during each period presented. The pro forma weighted average
number of common shares assumes that 10,002 shares of common stock issued in
March 1994 and all stock options granted in 1995 and 1996 were outstanding
for all periods presented. Common equivalent shares are not included in the
per share calculations where the effect of their inclusion would be anti-
dilutive, except in accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 83. This Bulletin requires that all common shares
issued and options to purchase shares of common stock granted by the Company
during the twelve-month period prior to filing of its initial public
offering be included in the calculation as if they were outstanding for all
periods. The pro forma weighted average number of common shares for the
three and six months ended June 30, 1995 also assume that approximately
300,000 shares of the 1,400,000 shares issued in the Company's initial
public offering, the proceeds of which were used to repay stockholder notes
totaling approximately $3,426, 475, were outstanding for all of the six
months ended June 30, 1995.
5. Income Taxes
Prior to the Reorganization the Company operated as an S corporation or a
limited partnership, neither of which was subject to federal or state income
taxes. Accordingly, no federal or state income tax provision was required
for the Company for the three months ended March 31, 1995. The provision for
income taxes for the six months ended June 28, 1996 was based on an
estimated tax rate of 39% for the entire fiscal year.
The pro forma provision for income taxes for the three months ended March
31, 1995 reflects the estimated amounts of income taxes which would have
been payable for that period if the Company had operated as a taxable C
corporation. Beginning with the three months ended June 30, 1995, the
Company was subject to federal and state income taxes at the statutory tax
rates then in effect. The components of the Company's actual and pro forma
deferred tax assets and liabilities as of June 28, 1996 and June 30, 1995
were not material.
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
Overview
The Company derives substantially all of its revenues from management consulting
and client/server systems integration services. The Company markets its
services directly and through a Teaming Agreement with Gemini Consulting, Inc.
("Gemini"). Pursuant to the Teaming Agreement, which was entered into effective
as of November 1, 1994 and superseded a prior agreement entered into in June
1993, Renaissance and Gemini have agreed to market and perform certain service
offerings on a collaborative basis. Approximately 36% of the Company's revenues
in the fiscal quarter ended June 28, 1996 resulted from its relationship with
Gemini; approximately 22% of revenues were from billings to Gemini and
approximately 14% of revenues were from billings directly to third parties.
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve a number of risks and uncertainties. Among the important factors that
could cause actual results to differ materially from those indicated by such
forward-looking statements are the factors set forth in the Company's Annual
Report on Form 10-K under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operation - - Certain Factors That May Affect
Future Results," which are incorporated by reference herein.
-7-
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's consolidated
statements of income.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, 1996 June 30, 1995 June 28, 1996 June 30, 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Statement of Income Data:
Revenues.................................... 100.0% 100.0% 100.0% 100.0%
--------------- --------------- --------------- ---------------
Cost and expenses:
Professional personnel.................... 54.2% 53.1% 55.8% 52.9%
Professional development and recruiting 3.3 5.5 3.7 6.3
Marketing and sales....................... 4.8 2.1 4.2 2.4
General and administrative................ 17.0 17.7 17.2 18.2
--------------- --------------- --------------- ---------------
Total costs and expenses................ 79.3 78.4 80.9 79.8
--------------- --------------- --------------- ---------------
Income from operations...................... 20.7 21.6 19.1 20.2
Interest expense............................ (.1) --- (.2) (.6)
Interest income............................. 3.4 3.0 2.6 1.7
--------------- --------------- --------------- ---------------
Income before taxes......................... 24.0 24.6 21.5 21.3
Income taxes................................ 9.3 9.9 8.4 5.2
--------------- --------------- --------------- ---------------
Net income.................................. 14.7% 14.7% 13.1% 16.1%
=============== =============== =============== ===============
Pro forma data:
Historical income before income taxes....... 24.0% 24.6% 21.5% 21.3%
--------------- --------------- --------------- ---------------
Historical income taxes..................... 9.3 9.9 8.4 5.2
Additional provision for income taxes....... --- --- --- 3.3
--------------- --------------- --------------- ---------------
Pro forma income taxes...................... 9.3 9.9 8.3 8.5
--------------- --------------- --------------- ---------------
Pro forma net income........................ 14.7% 14.7% 13.1% 12.8%
=============== =============== =============== ===============
</TABLE>
Revenues increased 61% to $8.5 million in the second quarter of 1996 from $5.3
million in the second quarter of 1995. Revenue for the first six months of 1996
increased 62% to $16.3 million from $10.1 million in the first six months of
1995. The increase in revenues for both the three and six months ended June 28,
1996 were primarily attributable to the increased level of services performed
for customers by both the Company's Strategic Services Group and Performance
Innovation Services Group. Revenues from Gemini represented 36% and 42% of total
revenues for both the three and six month periods ended June 28, 1996 and June
30, 1995, respectively. Revenues from the three operating companies of AT&T
represented, in the aggregate, approximately 52% and 32% of the Company's
revenues in the three month period ended June 28, 1996 and June 30, 1995,
respectively. Revenues from the three operating companies of AT&T represented,
in the aggregate, approximately 46% and 31% of the Company's total revenues in
the six month periods of 1996 and 1995.
Professional personnel costs increased 64% in the second quarter of 1996 to $4.6
million, or 54% of revenues, from $2.8 million, or 53.1% of revenues, in the
second quarter of 1995. The number of full-time equivalent professional
employees increased to 101 at June 28, 1996 from 66 at June 30, 1995.
Professional personnel costs for the first six months of 1996 increased 71% to
$9.1 million, or 56% of revenues, from $5.3 million, or 53% of revenues, in the
first six months of 1995. The increase in personnel cost resulted from the
impact of standardization of all employee compensation adjustments to January of
each year beginning in January 1996, accelerated hiring due to the expansion of
the Company's client base, and professional time investment in Web-based
information services offering.
Professional development and recruiting costs decreased 3% in the second quarter
of 1996 to $286,000, or 3% of revenues, from $294,000, or 6% of revenues, in the
second quarter of 1995. Professional development and recruiting costs for the
first six months of 1996 decreased 5% to $609,000, or 4% of revenues, from
$638,000, or 6% of revenues, in the first six months of 1995. This decrease in
professional development and recruiting costs resulted primarily from the
Company's having accelerated most of the second quarter hiring and related
development and recruiting into the first quarter of 1996.
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<PAGE>
Marketing and sales expenses increased 277% in the second quarter of 1996 to
$411,000, or 5% of revenues, from $109,000, or 2% of revenues, in the second
quarter of 1995. Marketing and sales expenses for the first six months of 1996
increased 183% to $688,000, or 4% of revenues, from $243,000, or 2% of revenues,
in the first six months of 1995. These increases in marketing and sales
expenses reflect costs associated with an increase in the number of executive
seminars and conference presentations, the development of additional marketing
materials and expanded public and investor relations activities, as well as
expenses related to the Company's annual report and annual stockholders'
meeting. The Company is expanding its marketing and sales efforts and therefore
expects related expenses to increase as a percentage of revenues in the future.
General and administrative expenses increased 55% in the second quarter of 1996
to $1.5 million, or 17% of revenues, from $0.9 million, or 18% of revenues, in
the second quarter of 1995. General and administrative expenses for the first
six months of 1996 increased 54% to $2.8 million, or 17% of revenues, from $1.8
million, or $18% of revenues, in the first six months of 1995. These increases
in general and administrative expenses resulted primarily from expansion of
office space in Lincoln, Chicago, New York and London, increased cost of
technological and communications infrastructure, insurance and benefit costs,
and other administrative expenses to support the growth of the Company's
business.
Interest income increased 82% in the second quarter of 1996 to $291,000, or 3.4%
of revenues, from $160,000, or 3.0% of revenues, for the second quarter of 1995.
Interest income for the first six months of 1996 increased 148% to $421,000, or
3% of revenues from $170,000, or 2% of revenues in the first six months of 1995.
These increases in interest income were primarily attributable to the investment
of proceeds from higher operating cash balances and interest earned on
investment of proceeds from the Company's follow-on public offering. Interest
expense in the second quarter of 1996 was $11,000, as compared to $1,000 for the
second quarter of 1995. Interest expense decreased to $39,000 in the first six
months of 1996, from $51,000 in the first six months of 1995, due to decreased
usage of the Company's line of credit with a major Boston bank.
The provision for income taxes in the second quarter of 1996 was $795,000
compared with a tax provision of $523,000 in the second quarter of 1995. The
provision for income taxes in the first six months of 1996 was $1.4 million,
compared with a proforma tax provision of $859,000 in the first six months of
1995. The 1995 figures were computed as if the Company had been taxable as a C
Corporation since its inception. Prior to its Reorganization on April 3, 1995,
the Company was not subject to federal or state income taxes at the Company
level. The 1996 second quarter estimated effective tax rate was 39%, compared to
40% in the second quarter of 1995.
Under the Teaming Agreement, during the six month period commenced on May 1,
1995 and ended October 31, 1995, Gemini was obligated to provide the Company
with bookings (as defined in the Teaming Agreement) of $8.25 million. The actual
bookings for such period totaled approximately $1.9 million. Gemini satisfied
the approximately $6.3 million deficiency through a combination of revenues
generated from client work referred to Renaissance by Gemini, work performed by
Renaissance as a subcontractor for Gemini and work performed by Renaissance
directly for Gemini. A portion of the deficiency satisfied directly by Gemini
is payable in installments through September 1, 1996. During the six month
period commenced on November 1, 1995 and ended April 30, 1996, Gemini was
obligated to provide the Company with bookings of $7.0 million. Bookings
attributable to the period ended April 30, 1996 were $1.2 million. Gemini has
issued Renaissance a Purchase Order for the deficiency of $5.8 million.
Liquidity and Capital Resources
To date, the Company's financing requirements have been met through a
combination of funds generated by operations, loans from Gemini, bank
borrowings, loans from certain of the Company's stockholders, the sale of Common
Stock in the Company's two public offerings and the sale of the Gemini Warrants.
At June 28, 1996, the Company had working capital of $47.4 million, an increase
of $30.7 million as compared to working capital of $16.7 million at December 31,
1995. The increase was primarily attributable to proceeds received from the
Company's follow-on public offering in May of 1996.
Net cash provided by operating activities of $36,000 for the six month period
ended June 28, 1996 resulted primarily from net income from operations of $2.1
million, non-cash items of depreciation and amortization of
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<PAGE>
$279,000, a decrease in unbilled services of $369,000, a decrease in receivables
from officer/shareholders of $278,000, a reduction in accrued payroll of
$330,000, other accrued liabilities of $39,000 and other liabilities of $51,000,
offset by increases in accounts receivable of $2.3 million and prepaid expense
of $715,000, and a reduction in accounts payable of $115,000, accrued income
taxes of $23,000 and advanced payments of $256,000.
Net cash used for investing activities of $9.6 million during the six month
period ended June 28, 1996 resulted primarily from the purchase of marketable
securities of $8.6 million.
The Company made a partnership distribution totaling $2.7 million in January
1995, which represented the cumulative net earnings of the Partnership from
December 1, 1993 through December 31, 1994. The Company made a final partnership
distribution totaling $754,475 in March 1995, which represented the estimated
amount of the Partnership's net earnings during the period commencing on January
1, 1995 and ending immediately prior to the Reorganization. Both the January
1995 and the March 1995 partnership distributions were evidenced by the
Company's promissory notes (the "Stockholder Notes"). The partnership
distributions represent earnings of the Partnership upon which the recipients of
the Stockholder Notes have been or will be required to pay income taxes.
On April 11, 1995, the Company completed its initial public offering of Common
Stock, whereby the Company issued 1,400,000 shares of Common Stock and an
additional 885,000 shares were offered by existing stockholders of the Company.
The net proceeds from the sale of the shares by the Company were approximately
$15.9 million, after deducting estimated offering expenses of $1.0 million.
Approximately $1.9 million of the net proceeds of the offering were used to
repay a note due to Gemini and $3.4 million of the net proceeds were used to
repay the Stockholder Notes. Simultaneously with the closing of the offering,
the Company also sold warrants to Gemini (the "Gemini Warrants") to acquire
633,600 shares of the Company's Common Stock for cash of $1.6 million.
On May 7, 1996, the Company entered into an unsecured revolving line of credit
agreement with Fleet Bank providing for borrowings of up to $3.5 million. This
line of credit expires on June 1, 1997. No borrowings were outstanding under
this facility as of June 28, 1996. The bank revolving credit line includes
customary financial and other covenants relating to the maintenance of certain
financial tests, such as minimum tangible net worth and quarterly profitability,
and restricting the Company's ability to incur additional indebtedness. On May
22, 1996, the Company entered into a revolving line of credit agreement with
Barclays Bank in London providing for borrowings of up to (Pounds)750,000. No
borrowings were outstanding under the line as of June 28, 1996.
On May 17, 1996, the Company completed a follow-on public offering, whereby the
Company issued 902,125 shares of Common Stock and existing shareholders sold
647,500 shares of Common Stock. The net proceeds from the sale of shares by the
Company were approximately $28,263,000, after deducting estimated offering
expenses of $225,000.
Management believes that the net proceeds of its two public offerings, together
with funds generated by operations, the proceeds from the sale of the Gemini
Warrants, existing cash balances and borrowings under the bank lines, will be
sufficient to meet the Company's working capital and capital expenditure
requirements for at least the next twelve months. Thereafter, the Company's
liquidity will be materially dependent upon its internally generated funds and
its ability to obtain funds from financings from external sources, in the form
of either additional equity or indebtedness. The Company's ability to issue and
sell equity securities may be limited by the terms of the Teaming Agreement. The
Company's ability to borrow will be a function of the level of its internally
generated funds and the assets of its business that are available to serve as
collateral, which will consist primarily of accounts receivable.
-10-
<PAGE>
PART II. OTHER INFORMATION
Items 1-3 None
Item 4 Submission of Matters to a Vote of Securityholders
The Company held its Annual Meeting of Stockholders (the "Annual
Meeting") on May 10, 1996. At the Annual Meeting, the stockholders
of the Company elected Harry M. Lasker (by votes of 5,524,462 shares
of Common Stock in favor of Mr. Lasker and 24,200 shares of Common
Stock withheld from Mr. Lasker) and Robert S. Kaplan (by votes of
5,535,862 shares of Common Stock in favor of Mr. Kaplan and 12,800
shares of Common Stock withheld from Mr. Kaplan) as Class I
Directors. Each of Messrs. Lasker and Kaplan is to serve for a term
of three years. The other directors of the Company, whose terms of
office as directors continued after the Annual Meeting are David A.
Lubin, John F. Rockart, and David P. Norton.
At the Annual Meeting, stockholders holding 5,548,162 shares of
Common Stock voted to ratify appointment of Deloitte & Touche LLP as
the Company's independent auditors for the 1996 fiscal year.
Stockholders holding 500 shares of Common Stock voted against such
ratification. No abstentions or "broker non-votes" were recorded at
the Annual Meeting.
Item 5 None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment to Line of Credit Agreement, dated as of
May 7, 1996, by and between the Company and Fleet
National Bank.
10.2 Barclays Bank PLC Facility, dated as of April 26,
1996, by and between Renaissance Solutions Limited and
Barclays Bank PLC.
11. Statement Regarding Computation of Earnings per Share.
99. Pages 30 through 35 of the Company's Annual Report on
Form 10-K for the period ended December 31, 1995
(which is not deemed filed except to the extent that
portions thereof are expressly incorporated by
reference herein).
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fiscal
quarter ended June 28, 1996
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RENAISSANCE SOLUTIONS, INC.
(Registrant)
Dated: August 6, 1996 /s/ David P. Norton
________________________________
David P. Norton
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 6, 1996 /s/ George A. McMillan
________________________________
George A. McMillan
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
-12-
<PAGE>
AMENDMENT TO LINE OF CREDIT AGREEMENT
-------------------------------------
THIS AGREEMENT (the "Amendment") is made as of May 7, 1996 by
and between RENAISSANCE SOLUTIONS, INC. (the "Borrower") and FLEET
NATIONAL BANK (the "Bank").
RECITALS
--------
A. The Borrower and Shawmut Bank, N.A., are parties to a
Commercial Revolving Line of Credit Agreement dated June 30, 1995
(the "Loan Agreement") providing for a discretionary line of
--------------
credit in favor of the Borrower (the "Line of Credit"). Fleet
--------------
National Bank of Massachusetts is successor-in-merger to Shawmut
Bank, N.A. and the Bank is successor-in-merger to Fleet National
Bank of Massachusetts. Capitalized terms used herein without
definition have the meanings assigned to them in the Loan
Agreement.
B. The Borrower has requested an extension of the
Expiration Date, an increase in the Line of Credit and a removal
of the sublimit on Letters of Credit, and the Bank is willing to
agree to the same, subject to the terms and conditions set forth
below.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Amendment to Loan Agreement.
---------------------------
The Loan Agreement is hereby amended as follows:
(a) Line of Credit. Section 2.1 of the Loan Agreement is
--------------
amended by deleting the first sentence thereof and in its place
inserting the following sentence:
Pursuant to the terms of this Agreement and upon
satisfaction of the conditions precedent referred to in
Section 4 hereof, the Bank may, in its sole discretion, lend
to the Borrower, and the Borrower may, in its sole
discretion, borrow from the Bank, advances not to exceed the
difference between (a) $3,500,000 and (b) the Letter of
Credit Liabilities (the "Line of Credit"). In addition, the
date of June 1, 1996 set forth in the second sentence of
Section 2.1 is deleted and in its place the date of June 1,
1997 is substituted as the Termination Date.
-1-
<PAGE>
(b) Letters of Credit. Section 2.10(a) of the Loan
-----------------
Agreement is deleted in its entirety and in its place the
following language is inserted:
(a) Subject to the terms and conditions hereof and the
receipt by the Bank of a duly completed Letter of Credit
Application and in reliance on the representations and
warranties herein contained, during the period from the date
hereof to the Termination Date, the Borrower may, in its sole
discretion request and the Bank may, in its sole discretion,
issue, one or more Letters of Credit for the account of the
Borrower; provided, however, that after giving effect to any
such request, the Letter of Credit Liabilities shall not
exceed (i) $3,500,000 minus (ii) the aggregate amount of
advances made by the Bank pursuant to Section 2.1 hereof and
then outstanding.
(c) Tangible Net Worth. Section 7.5 of the Loan Agreement
------------------
is amended by deleting it in its entirety and inserting in its
place the following language:
7.5 Tangible Net Worth. The Borrower shall not permit
------------------
Borrower's Tangible Net Worth to fall below $18,000,000 at
any time.
(d) Exhibits. Exhibit 1, being the form of Note originally
--------
executed and delivered by the Borrower, is hereby replaced by a
new Exhibit 1 attached hereto (as amended, renewed, supplemented
or revised from time to time, the "Note").
(e) Prime Rate. All references in the Loan Agreement to the
----------
"Base Rate" shall hereafter be changed and amended to refer to the
Prime Rate.
(f) Facility Fee. The annual facility fee set forth in
------------
Section 2.11(b) is hereafter increased from $10,000 to $17,500.
2. No Further Amendments.
---------------------
Except as specifically amended hereby, the Loan Agreement
shall remain unmodified and in full force and effect and is hereby
ratified and affirmed in all respects, and the indebtedness of the
Borrower to the Bank evidenced thereby is hereby reaffirmed in all
respects.
3. Certain Representations, Warranties and Covenants of the
--------------------------------------------------------
Borrower.
--------
The Borrower represents and warrants and covenants to the
Bank, after giving effect to this Amendment, as follows:
-2-
<PAGE>
(a) The execution and delivery of this Amendment, the new
Note and the other documents delivered in connection herewith have
been duly authorized by all requisite corporate action on the part
of the Borrower.
(b) No material adverse change has occurred in the assets,
liabilities, financial condition, business or prospects of the
Borrower from that disclosed in the annual audited financial
statements most recently furnished to the Bank.
(c) The Borrower hereby confirms in all respects all
agreements executed by the Borrower in connection with any and all
financing from the Bank to the Borrower.
4. Conditions.
----------
The effectiveness of this Amendment is subject to the
following conditions:
(a) The Borrower shall have executed and delivered to the
Bank (or shall have caused to be executed and delivered to the
Bank by the appropriate persons), on or prior to the date of
execution of this Amendment, the following:
(i) This Amendment and the new Note;
(ii) True and complete copies of any required stockholders'
and/or directors' consents or resolutions, authorizing
the execution and delivery of this Amendment and the new
Note, certified by the clerk or secretary of the
Borrower, in form reasonably satisfactory to the Bank;
and
(iii) Such other agreements and documents as the Bank shall
reasonably request in connection with this Amendment and
the other documents referred to herein.
(b) All legal matters incident to the transactions
contemplated hereby shall be satisfactory to counsel for the Bank.
5. Miscellaneous.
-------------
(a) This Amendment shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
(b) This Amendment may be executed by the parties hereto in
several counterparts hereof and by the different parties hereto on
separate counterparts hereof, all of which counterparts shall
together constitute one and the same agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, the Bank and the Borrower have caused
this Amendment to be duly executed as a sealed instrument by their
duly authorized representatives, all as of the day and year first
above written.
RENAISSANCE SOLUTIONS, INC.
By: /s/ William T. Jenkins
-------------------------------
Print Name: William T. Jenkins
Title: Vice President Finance
and Administration
FLEET NATIONAL BANK
By: /s/ Luke Tsokanis
------------------------
Print Name: Luke Tsokanis
Title: Vice President
-4-
<PAGE>
EXHIBIT 1
---------
FLEET NATIONAL BANK COMMERCIAL REVOLVING LINE OF CREDIT
PROMISSORY NOTE
$3,500,000 Dated June 30, 1995
and amended and restated
on May 7, 1996
For value received, RENAISSANCE SOLUTIONS, INC. (the
"Borrower") hereby promises to pay to the order of FLEET NATIONAL
BANK, successor in merger to Fleet National Bank of Massachusetts,
successor in merger to Shawmut Bank, N.A. (the "Bank"), at the
office of the Bank located at One Federal Street, Boston,
Massachusetts 02211, or at such other address as the holder hereof
may designate, the principal sum of THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($3,500,000) or the aggregate unpaid principal
amount of all advances made by the Bank to the Borrower pursuant
to the terms of the Agreement (as defined below), whichever is
less, in lawful money of the United States. If any advances are
made during the period from the date hereof until June 1, 1997 (as
such date may be extended, in writing from time to time, in the
Bank's sole and absolute discretion, the "Termination Date"),
subject to the terms and conditions of the Agreement, the Borrower
may borrow, repay and reborrow; provided, however, that for any
period of twelve (12) consecutive months there shall be no
borrowings or reborrowings and no outstanding principal under this
Note for at least thirty (30) consecutive days; and provided,
further, that all outstanding principal plus accrued and unpaid
interest shall be paid in full on the Termination Date.
The outstanding principal of all advances will bear interest
at a per annum rate equal to the Prime Rate (as defined below).
Changes in the rate of interest resulting from changes in the
Prime Rate shall take place immediately without notice or demand
of any kind. Interest on the outstanding principal of all
advances shall be payable at the rate set forth above commencing
on August 1, 1995 and continuing monthly thereafter on the same
day of each succeeding month and on the Termination Date.
Interest shall be computed on the basis of a three hundred sixty
(360)-day year and actual days elapsed. Upon default or after
maturity or after judgment has been rendered on this Note, the
unpaid principal of all advances shall, at the option of the Bank,
bear interest at a rate which is four (4) percentage points per
annum greater than that which would otherwise be applicable. The
term "Prime Rate" as used herein shall mean the annual interest
rate announced by the Bank from time to time as its Prime Rate.
<PAGE>
All payments shall be applied first to the payment of all
interest on the unpaid principal of all advances due under this
Note and the balance on account of the principal of all advances
due under this Note. The Bank is authorized, but not required, to
charge principal and interest due on this Note and all other
amounts due hereunder to any account of the Borrower when and as
it becomes due.
The Bank may collect a late charge not to exceed five percent
(5.00%) of any installment of interest or principal, or of any
other amount due to the Bank which is not paid or reimbursed by
the Borrower within fifteen (15) days after the due date thereof
to defray the extra cost and expense involved in handling such
delinquent payment and the increased risk of non-collection. The
minimum late charge shall be $15.00.
If, at any time, the rate of interest, together with all
amounts which constitute interest and which are reserved, charged
or taken by Bank as compensation for fees, services or expenses
incidental to the making, negotiating or collection of any advance
evidenced hereby, shall be deemed by any competent court of law,
governmental agency or tribunal to exceed the maximum rate of
interest permitted to be charged by the Bank to the Borrower,
then, during such time as such rate of interest would be deemed
excessive, that portion of each sum paid attributable to that
portion of such interest rate that exceeds the maximum rate of
interest so permitted shall be deemed a voluntary prepayment of
principal.
Borrower may prepay this Note, in whole or in part, at any
time, without penalty or premium. If, at any time, the aggregate
principal amount of all advances outstanding under this Note shall
exceed the maximum amount permitted by this Note, the Borrower
shall immediately prepay so much of the outstanding principal
balance, together with accrued interest on the portion of
principal so prepaid, as shall be necessary in order that the
unpaid principal balance, after giving effect to such prepayments,
shall not be in excess of the maximum amount permitted by this
Note. Any such prepayment will be applied first to the payment of
accrued interest to the date of the prepayment and the remainder
to the unpaid principal balance of this Note.
Upon the happening of any Event of Default, all advances
outstanding hereunder, together with accrued interest thereon,
shall, at the option of the Bank, accelerate and become
immediately due and payable and any obligation of the Bank to
advance hereunder shall terminate without demand or notice of any
kind. Failure to exercise such option shall not constitute a
waiver of the right to exercise the same in the event of any
subsequent default.
<PAGE>
This Note has been executed and delivered in accordance with
the Commercial Revolving Line of Credit Agreement (the
"Agreement") dated June 30, 1995 herewith between the Borrower and
Shawmut Bank, N.A., predecessor to the Bank, incorporated herein
by reference, which sets forth further terms and conditions upon
which the entire unpaid principal hereof and all interest hereon
may become due and payable prior to the Termination Date, and
generally as to further rights of the Bank and duties of the
Borrower and any guarantor, endorser or surety of any obligation
of the Borrower to the Bank (a "Guarantor") with respect hereto.
All advances made by the Bank to the Borrower shall be evidenced
by the books and records of the Bank which shall be conclusive,
absent manifest error.
Borrower and each Guarantor of this Note agree to pay all
taxes levied or assessed upon the outstanding principal against
any holder of this Note and to pay all costs, including attorneys'
fees, costs relating to the appraisal and/or valuation of assets
and all other costs and expenses in the collection, protection,
reservation, defense, administration or enforcement of this Note
or any guaranty or endorsement of this Note or in any litigation
arising out of the transactions of which this Note or any guaranty
or endorsement of this Note is a part.
Borrower and each Guarantor hereby give the Bank a lien and
right of set off for all of Borrower's and each Guarantor's
liabilities and obligations upon and against all the deposits,
credits, collateral and property of the Borrower and each
Guarantor, now or hereafter in the possession, custody,
safekeeping or control of the Bank or any entity under the control
of Fleet Financial Group, Inc. or in transit to any of them. At
any time, without demand or notice, Bank may set off the same or
any part thereof and apply the same to any liability or obligation
of the Borrower or any Guarantor even though unmatured and whether
or not the Bank is otherwise fully secured.
THE BANK, THE BORROWER AND EACH GUARANTOR IRREVOCABLY WAIVE
ALL RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING HEREAFTER
INSTITUTED BY OR AGAINST THE BANK, THE BORROWER OR ANY GUARANTOR
IN RESPECT OF THIS NOTE OR ARISING OUT OF ANY DOCUMENT, INSTRUMENT
OR AGREEMENT EVIDENCING, GOVERNING OR SECURING THIS NOTE,
INCLUDING THE AFORESAID AGREEMENT.
BORROWER AND EACH GUARANTOR (1) ACKNOWLEDGE THAT THE ADVANCES
EVIDENCED BY THIS NOTE ARE PART OF A COMMERCIAL TRANSACTION AND
(2) TO THE EXTENT PERMITTED BY ANY STATE OR FEDERAL LAW, WAIVE THE
RIGHT ANY OF THEM MAY HAVE TO PRIOR NOTICE OF AND A HEARING ON THE
RIGHT OF ANY HOLDER OF THIS NOTE TO ANY REMEDY OR COMBINATION OF
REMEDIES THAT ENABLES SAID HOLDER, BY WAY OF ATTACHMENT, FOREIGN
ATTACHMENT, GARNISHMENT OR REPLEVIN TO DEPRIVE BORROWER OR ANY
<PAGE>
GUARANTOR OF ANY OF THEIR PROPERTY, AT ANY TIME, PRIOR TO FINAL
JUDGMENT IN ANY LITIGATION INSTITUTED IN CONNECTION WITH THIS
NOTE. The Borrower and each Guarantor further, waive diligence,
demand, presentment for payment, notice of nonpayment, protest and
notice of protest, and notice of any renewals or extensions of
this Note, and all rights under any statute of limitations, and
agree that the time for payment of this Note may be changed and
extended at Bank's sole discretion, without impairing their
liability hereon, and further consent to the release of all or any
part of the security for the payment hereof at the discretion of
Bank, or the release of any party liable for this obligation
without affecting the liability of the other parties hereto. Any
delay on the part of the Bank in exercising any right hereunder
shall not operate as a waiver of any such right, and any waiver
granted for one occasion shall not operate as a waiver in the
event of any subsequent default.
The Borrower specifically acknowledges and agrees that the
Bank is under no obligation to make any advance to the Borrower
pursuant to this Note or the aforesaid Agreement. The making of
an advance at any time, shall not be deemed a waiver of or
consent, agreement or commitment by, the Bank to the making of any
future advance to the Borrower.
If any provision of this Note shall, to any extent, be held
invalid or unenforceable, then only such provision shall be deemed
ineffective and the remainder of this Note shall not be affected.
This Note shall bind the heirs, executors, administrators,
successors and assigns of the Borrower and all Guarantors hereto
and shall inure to the benefit of the Bank, its successors and
assigns.
This Note is executed as a sealed instrument and shall be
governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
Witness RENAISSANCE SOLUTIONS, INC.
/s/ Sally Dexter By: /s/ William T. Jenkins
------------------- -------------------------------
Print Name: William T. Jenkins
Title: Vice President Finance
and Administration
<PAGE>
BARCLAYS BANK PLC
International Corporate Group -- North American Corporate Team
P.O. Box 544, 54 Lombard Street, London EC3V 9EX
Telephone: (0171) 699 5000
PRIVATE & CONFIDENTIAL
----------------------
The Directors Your Ref:
Renaissance Solutions Limited Our Ref:
22 Grafton Street Direct Line:
London
W1X3LD
26th April 1996
Dear Sirs
We are pleased to advise you that Barclays Bank PLC ("the Bank")
has agreed to provide aggregate short term facilities of up to
f425,000 (Four Hundred and Twenty Five Thousand pounds sterling)
(the "Facility") to Renaissance Solutions Limited ("the Borrower")
as detailed below.
The Schedules attached hereto form part of the terms and
conditions of this letter.
Following completion of the acceptance detailed below, the
facility will be available for drawing by the Borrower, subject to
the following terms and conditions:
1. OPTIONS AVAILABLE WITHIN AND UTILISATION OF THE FACILITY
The Facility may be utilised by way of the following options and
in accordance with the provisions of the Schedules related
thereto:
Overdraft (see Schedule A)
Banks Automated Clearing System `BACS' (see Schedule B)
Branch Originated BACS System `BOBS' (see Schedule C)
Within the Facility the aggregate of the liabilities due, owing or
incurred thereunder shall not at any time exceed f425,000.
Within the Facility the liabilities incurred or due and owing
under option A shall not at any time exceed f210,000.
Within the Facility the liabilities incurred or due and owing
under option B shall not at any time exceed f180,000.
<PAGE>
Within the Facility the liabilities incurred or due and owing
under option A shall not at any time exceed f35,000.
The Sterling equivalent of the currencies utilised or available to
be utilised under the Facility may be calculated by the Bank at
any time by reference to the Bank's spot rate of exchange in the
London Exchange Market for the sale of the relevant currency or
currencies for Sterling.
2. AVAILABILITY
All monies owing under the Facility are repayable upon written
demand by the Bank and/or any undrawn portion of the facility may
be cancelled by the Bank, at any time. Following demand and/or
cancellation, no further utilisation may be made under the
facility. The Bank may, at any time after such demand and/or
cancellation [i] call for payment of full cash cover for the full
amount of all liabilities outstanding.
The Bank may require the Borrower to give security over cash cover
paid to the Bank (together with interest accruing thereon) in form
and substance satisfactory to the Bank to secure the Borrower's
liabilities to the Bank under the Facility.
The Borrower shall indemnify the bank on demand against any loss,
liability or expense which the Bank may reasonably sustain or
incur as a consequence of making such demand or as a consequence
of non-performance by the borrower of any obligation under this
letter.
Any monies not paid following a demand under this clause shall
continue to bear interest in respect of any outstanding interest
period under the Sterling Overdraft, and as calculated in the
respective Schedules.
Following maturity of each outstanding drawing under the Facility,
the amounts of such drawings, and the amounts of any payments made
by the Bank on behalf of the Borrower under Facilities, will,
except for those amounts where cash cover has been made by the
Borrower as for above, continue to bear interest at 1.75% per
annum over the Bank's Base Rate current from time to time until
payment is made. Interest shall, if unpaid, be compounded on the
Bank's usual charging dates. Interest will continue to be charged
and compounded on this basis after as well as before demand or
judgement.
The Bank reserves the right, at any time following a demand under
this clause, to purchase with Sterling any currency necessary to
convert any amounts outstanding under the Facility, together with
interest accrued thereon, to Sterling, whereupon the Borrower
-2-
<PAGE>
shall then become liable to pay the Bank forthwith the relevant
Sterling amounts, together with all costs and expenses incurred by
the Bank. Interest will continue to be charged as detailed above.
In the absence of demand or cancellation by the Bank, the Facility
is available for utilisation until 24th April 1997. However, the
Bank will be pleased to discuss the Borrower's future requirements
shortly before that date.
3. SECURITY AND/OR GUARANTEE(S)
The Borrower's obligations hereunder will be secured by any
security which is now held, or hereafter may be held, by the Bank
to secure all moneys and liabilities which shall from time to time
be due, owing or incurred to the Bank by the Borrower, whether
actually or contingently.
4. FEES
A negotiation fee of f1,500 will be payable by the Borrower to the
Bank on acceptance of this offer.
5. CANCELLATION
Any undrawn part of the Facility may be cancelled by the Borrower
subject to the Borrower:
(i) giving the Bank not less than seven days' notice in
writing (such notice, once given, shall be irrevocable)
6. INFORMATION
The Borrower undertakes to provide the Bank with copies of its
audited Consolidated Profit and Loss account and Balance Sheet as
soon as they are available and not later than 180 days from the
end of each accounting reference period together with Renaissance
Solutions, Inc's Annual Report, 10K and 10Q's as soon as they are
available and not later than 60 days from the end of each
accounting reference period; any other information which the Bank
may reasonably request from time to time.
7. CHANGE IN CIRCUMSTANCES
In the event of any change in applicable law or regulation or the
existing requirements of, or any new requirements being imposed
by, the Bank of England or other regulatory authority the result
of which, in the sole opinion of the Bank, is to increase the cost
of it of funding, maintaining or making available the Facility (or
any undrawn amount thereof) or to reduce the effective return to
-3-
<PAGE>
the Bank, then the Borrower shall pay to the Bank such sum as may
be certified by the Bank to the Borrower as shall compensate the
Bank for such increased cost or such reduction.
8. SET-OFF
Any sum of money at any time standing to the credit of the
Borrower with the Bank in any currency upon any account or
otherwise (whether or not any such account is held in the
Borrower's name) or provided to the Bank as cash cover for any
bills and/or any outstanding liabilities under the Facility, may
be applied by the Bank at any time (without notice to the
Borrower) in or towards the discharge of any money or liabilities
now or hereafter due, owing or incurred to the Bank by the
Borrower hereunder (whether presently payable or not).
9. CURRENT INDEMNITY
If, for any reason, any amount payable to the Bank is received or
recovered in a currency other than the contractual currency in
which it is due, then, to the extent that the amount actually
received or recovered by the Bank (when converted by the Bank into
the contractual currency at the applicable rate of exchange) falls
short of the amount due in the contractual currency, the Borrower
shall, as a separate and independent obligation, reimburse the
Bank on demand (on a full indemnity basis) for the amount of such
shortfall.
10. APPLICABLE LAW
This letter shall be governed by, construed and take effect in
accordance with English Law.
11. ACCEPTANCE
Prior to the facility being utilised, the Borrower shall provide
the 54 Lombard Street, London, EC3V 9EX branch of the Bank (the
"Branch") with the following:
(a) the enclosed duplicate of this letter duly signed on the
Borrower's behalf as evidence of acceptance of the terms and
conditions stated herein,
(b) a certified true copy of a resolution of the Borrower's Board
of Directors:
(i) accepting the Facility on the terms and conditions
stated herein,
-4-
<PAGE>
(ii) authorising a specified person, or persons, to sign
and return to the Bank the duplicate of this letter,
(iii) authorising the Bank to accept instructions and
confirmations in connection with the Facility signed
in accordance with the Bank's signing mandate current
from time to time, and to accept instructions in
connection with drawings under the Facility, by any
person specifically authorised to give such
instructions,
(c) confirmed specimens of the signature of those officers
referred to in (b)(ii) above.
This offer will remain available until 26th May 1996, after which
it will lapse if not accepted.
Yours faithfully,
for and on behalf of
BARCLAYS BANK PLC
/s/ Jeremy Masding
-------------------------
JEREMY MASDING
SENIOR CORPORATE MANAGER
ICG-NORTH AMERICA
Accepted on the terms and conditions stated herein, pursuant to a
resolution of the Board of Directors (a certified true copy of
which is attached hereto).
for and on behalf of
RENAISSANCE SOLUTIONS LIMITED
DIRECTOR /s/ Harry M. Lasker
---------------------
DATE May 22, 1996
-------------------------
DIRECTOR /s/ David A. Lubin
---------------------
DATE 5/22/1996
-------------------------
-5-
<PAGE>
SCHEDULE A
STERLING OVERDRAFT
The sterling overdraft will be available on the Borrower's current
account at the Branch with interest charged at a rate of 1% per
annum over the Bank's Base Rate current from time to time.
Interest together with other charges will be debited to the
Borrower's current account at the Branch quarterly in arrears in
March, June, September and December each year or at such other
times as may be determined by the Bank, and such interest will be
calculated on the basis of actual days elapsed over 365 day year.
SCHEDULE B
BANKS AUTOMATED CLEARING SYSTEM (`BACS')
Utilisation under the `BACS' facility should be in accordance with
the terms and conditions already agreed.
SCHEDULE C
BRANCH ORIGINATED BACS SYSTEM (`BOBS')
Utilisation under the `BOBS' facility should be in accordance with
the terms and conditions already agreed.
<PAGE>
RENAISSANCE SOLUTIONS LIMITED
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS HELD
AT LINCOLN, MASSACHUSETTS, USA
ON MAY 20, 1996
PRESENT:
The Board of Directors met to discuss and approve the following in
connection with Barclays Bank PLC Facility letter dated 26th April
1996:
(i) accepting the Facility and the terms and conditions
stated herein
(ii) authorising a specified person, or persons, to sign and
return to the Bank the duplicate of the Facility Letter
(iii) authorising the Bank to accept instructions and
confirmations in connection with the Facility signed in
accordance with the Bank's signing mandate current from
time to time.
The above was unanimously approved and William T. Jenkins was
authorised to sign and return the facility letter to Barclays Bank
PLC.
CERTIFIED that the foregoing is a true copy of the resolutions
passed as aforesaid.
/s/ William T. Jenkins DIRECTOR /s/ Harry M. Lasker SECRETARY
---------------------- -------------------
<PAGE>
Exhibit 11
RENAISSANCE SOLUTIONS, INC.
COMPUTATION OF PRO FORMA EARNINGS PER COMMON SHARE
(Unaudited - Amount in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, 1996 June 30, 1995 June 28, 1996 June 30, 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Weighted average number of common and
common equivalent shares outstanding:
Common stock............................... 6,452 5,906 6,221 5,237
Stock Options (treasury stock method)...... 871 179 747 179
--------------- --------------- --------------- ---------------
Total................................... 7,323 6,085 6,968 5,416
=============== =============== =============== ===============
Pro forma net income per common share......... $ .17 $ .13 $ .31 $ .23
=============== =============== =============== ===============
</TABLE>
<PAGE>
will be required in 1996, establishes financial accounting and
reporting standards for stock-based employee compensation plans.
The Company has not determined the effects of implementing
SFAS 121 and SFAS 123 on its financial position and results of
operations for any future period.
Certain Factors That May Affect Future Results
The following important factors, among others, could cause
actual results to differ materially from those indicated by
forward-looking statements made in this Annual Report on Form 10-K
and presented elsewhere by management from time to time.
Dependence on Gemini. Pursuant to the Teaming Agreement, the
Company and Gemini have agreed to market and perform certain
service offerings on a collaborative basis. The Company currently
relies on Gemini for a significant portion of the Company's
marketing activities. Approximately 79% and 54% of the Company's
revenues in 1994 and 1995, respectively, resulted from its
relationship with Gemini; approximately 65% and 24%, respectively,
of revenues were from services billable to Gemini and
approximately 14% and 30%, respectively, of revenues were from
services billable directly to third parties. As a result, the
Company's success is currently dependent in large part on the
success of Gemini's marketing efforts.
Gemini has committed to provide the Company with certain
minimum bookings during the term of the Teaming Agreement, subject
to the satisfaction of certain conditions. In the event that
during any of the six month periods during the term of the Teaming
Agreement bookings obtained by Renaissance from Gemini customers
or customers of joint service offerings by Renaissance and Gemini
are less than specified guaranteed bookings, Gemini has agreed,
subject to the satisfaction of certain conditions, to retain the
services of Renaissance for a fee equal to the amount of the
deficiency. Purchase orders from Gemini providing for Renaissance
to perform services over no more than a twelve month period and
containing certain other terms qualify as bookings under the
Teaming Agreement. If at the end of any twelve month period
covered by a purchase order from Gemini, a bookings deficiency
still remains, Gemini is required to make a compensating payment
to Renaissance of 25% of the remaining deficiency (50% with
respect to any remaining deficiency relating to the six month
period ending April 30, 1996) in full satisfaction of the
remaining deficiency.
The Company monitors Gemini's progress in meeting its
bookings commitments through regular conference calls and meetings
with Gemini representatives. "Bookings" are generally defined for
purposes of the Teaming Agreement as gross fees (excluding expense
reimbursements) committed to Renaissance as a result of the
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relationship with Gemini during the applicable period, as
evidenced by a written agreement between the Company and the
customer for the delivery of goods or services within twelve
months, plus any such fees actually collected by the Company
during such period which are not evidenced by a written agreement.
Gemini generally is treated as having satisfied its bookings
commitment regardless of whether revenues are recognized by
Renaissance with respect to a particular engagement. For example,
under the Teaming Agreement, 50% of the fees attributable to a
cancelled contract count towards Gemini's bookings commitment if
such cancellation is not primarily attributable to the actions or
omissions of Gemini. In accordance with industry practice, nearly
all of the Company's contracts are terminable by either the
customer or the Company on short or no notice and without penalty.
In addition, Gemini does not guarantee the collectibility of any
receivables resulting from customer engagements under the Teaming
Agreement.
The Teaming Agreement has a term of five years, commencing on
November 1, 1994. The Teaming Agreement is subject to earlier
termination upon the occurrence of certain events, including a
change in control of the Company (as defined in the Teaming
Agreement). In the event that the Teaming Agreement is terminated
by Gemini during the first four years following the commencement
of the Teaming Agreement as a result of the Company's breach or
bankruptcy or as a result of a change in control of the Company,
Renaissance is required to pay a termination fee to Gemini in the
amount of $1,600,000. While the Company is currently building its
internal marketing force and seeking additional strategic
alliances, the termination of the Teaming Agreement would have a
material adverse effect on the Company's business and results of
operations.
Under the Teaming Agreement, the Company has agreed to train
Gemini in the use of the Company's Balanced Scorecard, desktop
application and certain other methodologies during the first four
years of the term of the Teaming Agreement and to perpetually
license these methodologies, to the extent developed during the
first four years of the term of the Teaming Agreement, to Gemini
on a non-exclusive basis. As a result, during the term of the
Teaming Agreement Gemini personnel may perform services in
connection with joint service offerings which might otherwise be
performed by Company personnel. In addition, following the
termination of the Teaming Agreement, Gemini will be in a position
to compete with the Company using know-how and methodologies which
might otherwise be proprietary to the Company.
Pursuant to the Teaming Agreement, Renaissance has agreed not
to work for or enter into any comparable teaming agreement with
certain specified competitors of Gemini during the term of the
Teaming Agreement and for a period of one year thereafter. In
addition, the Teaming Agreement imposes certain restrictions on
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<PAGE>
the ability of the Company to issue additional capital stock and
on the ability of the Company's principal stockholders to dispose
of their Common Stock prior to the first anniversary of the
termination of the Teaming Agreement. These provisions may have
the effect of delaying or preventing transactions involving a
change in control of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares
over then current market values.
Concentration of Revenues. The Company has in the past
derived, and may in the future derive, a significant portion of
its revenues from a relatively limited number of major projects.
The Company's revenues and earnings can fluctuate from quarter to
quarter based on the number of customer engagements and the
requirements of these engagements. In accordance with industry
practice, nearly all of the Company's contracts are terminable by
either the customer or the Company on short or no notice and
without penalty. An unanticipated termination of a major project
could have a material adverse effect on the Company's business and
results of operations.
Variability of Quarterly Operating Results. Variations in
the Company's revenues and operating results occur from quarter to
quarter as a result of a number of factors. Quarterly revenues
and operating results can depend on the size of customer
engagements during a quarter, the number of working days in a
quarter and employee utilization rates. The timing of revenues is
difficult to forecast because the Company's sales cycle is
relatively long in the case of new customers and may depend on
factors such as the size and scope of assignments and general
economic conditions. Because a high percentage of the Company's
expenses are relatively fixed, a variation in the level of
customer assignments can cause significant variations in operating
results from quarter to quarter and could result in losses. The
Company attempts to manage its personnel utilization rates by
closely monitoring project timetables and staffing requirements
for new projects. While the number of professional staff may be
adjusted to some degree to reflect active projects, the Company
must maintain a sufficient number of senior professionals to
oversee existing customer projects and participate in securing new
customer engagements. In addition, most of the Company's
engagements are terminable without customer penalty. An
unanticipated termination of a major project could result in an
increase in underutilized employees and a decrease in revenues and
profits or the incurrence of losses.
Limited Operating History. The Company was organized in
March 1992. Although the Company has been profitable in each of
its last eight quarters, and has recorded net income of $2.8
million and $3.7 million (or $2.2 million and $3.3 million if the
Company had been taxable as a C corporation for the entire fiscal
year) for the twelve months ended December 31, 1994 and 1995,
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<PAGE>
respectively, the Company recorded a net loss of $1.7 million
(both on an actual basis and if the Company had been taxable as a
C corporation) for the twelve months ended December 31, 1993. In
1994 and 1995, the Company experienced a significant increase in
customer assignments and substantial revenue growth and
profitability. Due to the Company's limited operating history,
there can be no assurance that the recent revenue growth and
profitability will continue. In order to support the growth of
its business, the Company expanded its operations during 1994 and
1995 and expects to continue such expansion. The planned increase
in the Company's operating expenses resulting from this expansion
may adversely affect the Company's operating results and
profitability if revenues do not increase as anticipated.
Dependence on Principal Service Offerings; Need to Develop
New Offerings. The Company currently derives substantially all of
its revenue from two service offerings, consulting services based
on its Balanced Scorecard methodology and client/server systems
integration services relating to the design and development of
desktop applications to support business processes. Any factor
adversely affecting the sales or profitability of these services
could have a material adverse effect on the Company's business and
results of operations. The market for desktop applications of the
type offered by the Company is new, reflecting the greater use of
client/server architecture and related computer and computer
software technology. Accordingly, there can be no assurance that
this market will develop as anticipated by the Company.
The Company's future success will depend in significant part
on its ability to successfully develop and introduce new service
offerings and improved versions of existing service offerings.
There can be no assurance that the Company will be successful in
developing, introducing on a timely basis and marketing such
service offerings or that any service offerings will be accepted
in the market. Moreover, services offered by others may render
the Company's services non-competitive or obsolete.
Project Risks. Many of the Company's engagements involve
projects which are critical to the operations of its customers'
businesses and which provide benefits that may be difficult to
quantify. The Company's failure or inability to meet a customer's
expectations in the performance of its services could result in
the incurrence by the Company of a financial loss and could damage
the Company's reputation and adversely affect its ability to
attract new business. In addition, an unanticipated difficulty in
completing a project could have an adverse effect on the Company's
business and results of operations.
Management of Growth. The Company is currently experiencing
a period of rapid growth which has placed and could continue to
place a strain on the Company's financial, management and other
resources. The Company's ability to manage its staff and
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<PAGE>
facilities growth effectively will require it to continue to
improve its operational, financial and other internal systems and
to train, motivate and manage its employees. If the Company's
management is unable to manage growth effectively and new
employees are unable to achieve anticipated performance levels,
the Company's business and results of operations could be
adversely affected.
Competition. The management consulting and client/server
systems integration markets are subject to rapid change and are
highly competitive. The Company competes with and faces potential
competition for customer assignments and experienced personnel
from a number of companies that have significantly greater
financial, technical and marketing resources, generate greater
revenues and have greater name recognition than does the Company.
In addition, the management consulting and client/server systems
integration markets are highly fragmented and served by numerous
firms, many of which serve only their respective local markets.
The Company's customers primarily consist of major corporations,
and there are an increasing number of professional services firms
seeking management consulting and client/server systems
integration engagements from that customer base. The Company
believes that the principal competitive factors in the management
consulting and client/server systems integration industries
include the nature of the services offered, quality of service,
responsiveness to customer needs, experience, technical expertise
and price. There can be no assurance that the Company will
continue to compete successfully with its existing competitors or
will be able to compete successfully with any new competitors.
International Operations. Sales outside North America
accounted for approximately 15.7% of the Company's revenues in the
year ended December 31, 1995. The Company intends to expand its
presence in European markets and anticipates that international
sales will account for an increasing portion of revenues in the
future. International revenues are subject to a number of risks,
including the following: agreements may be difficult to enforce
and receivables difficult to collect through a foreign country's
legal system; foreign customers may have longer payment cycles;
foreign countries could impose additional withholding taxes or
otherwise tax the Company's foreign income, impose tariffs or
adopt other restrictions on foreign trade; fluctuations in
exchange rates could affect product demand and adversely affect
the profitability in U.S. dollars of services provided by the
Company in foreign markets where payment for the Company's
services is made in the local currency; U.S. export licenses may
be difficult to obtain; and the protection of intellectual
property in foreign countries may be more difficult to enforce.
There can be no assurance that any of these factors will not have
a material adverse effect on the Company's business and results of
operations.
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<PAGE>
Intellectual Property Rights. The Company relies upon a
combination of trade secret, nondisclosure and other contractual
arrangements, and copyright and trademark laws to protect its
proprietary rights. The Company presently holds no patents or
registered copyrights, trademarks or service marks. The Company
generally enters into confidentiality agreements with its
employees, consultants, customers and potential customers and
limits distribution of its proprietary information. There can be
no assurance that the steps taken by the Company in this regard
will be adequate to deter misappropriation of its proprietary
information or that the Company will be able to detect
unauthorized use and take appropriate steps to enforce its
intellectual property rights. Although the Company believes that
its services and products do not infringe on the intellectual
property rights of others, there can be no assurance that such a
claim will not be asserted against the Company in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
All financial statements required to be filed hereunder are
filed as Appendix A hereto, are listed under Item 14(a), and are
incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in part
under the caption "Executive Officers of the Company" in PART I
hereof, and the remainder is contained in the Company's Proxy
Statement for the Company's Annual Meeting of Stockholders to be
held on May 10, 1996 (the "1996 Proxy Statement") under the
caption "PROPOSAL 1 - ELECTION OF DIRECTORS" and is incorporated
herein by this reference.
Officers are elected on an annual basis and serve at the
discretion of the Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained under the
caption "PROPOSAL 1 - ELECTION OF DIRECTORS" in the Company's 1996
Proxy Statement and is incorporated herein by this reference.
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
JUNE 28, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-30-1996
<PERIOD-END> JUN-28-1996
<CASH> 24,144
<SECURITIES> 13,458
<RECEIVABLES> 11,905
<ALLOWANCES> 381
<INVENTORY> 0
<CURRENT-ASSETS> 50,002
<PP&E> 3,623
<DEPRECIATION> 830
<TOTAL-ASSETS> 52,876
<CURRENT-LIABILITIES> 2,648
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 50,080
<TOTAL-LIABILITY-AND-EQUITY> 52,867
<SALES> 8,549
<TOTAL-REVENUES> 8,549
<CGS> 0
<TOTAL-COSTS> 6,780
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 2,049
<INCOME-TAX> 795
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