SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 1-7675
AUDITS & SURVEYS WORLDWIDE, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-1809586
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
650 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10011
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 627-9700
Indicate by check mark whether the registrant (l) 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 [_]
The number of shares outstanding of each of the issuer's classes of
common stock, as of August 11, 1997 was:
Class Number of Shares
----- ----------------
Common Stock, $0.01 par value 13,105,102
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets-
June 30, 1997 and December 31, 1996 3-4
Condensed Consolidated Statements of Income-
Three Months and Six Months ended June 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows-
Six Months ended June 30, 1997 and 1996 6
Condensed Consolidated Statement of Stockholders' Equity-
June 30, 1997 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9-10
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security-Holders. 11
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
JUNE 30, 1997 DEC. 31,1996
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 516 3,827
Accounts receivable:
Billed 7,833 9,161
Unbilled 6,056 2,714
Refundable income taxes 118 --
Prepaid expenses and inventories 1,722 1,259
Other current assets 438 529
Net assets held for sale 300 300
Receivable from sale of asset 500 --
------- -------
Total current assets 17,483 17,790
------- -------
PROPERTY AND EQUIPMENT, NET 3,391 2,962
RECEIVABLE FROM SALE OF ASSET -- 500
PREPAID PENSION COSTS 1,090 1,090
DEFERRED INCOME TAX ASSET 2,788 2,906
OTHER ASSETS 1,539 1,725
------- -------
TOTAL ASSETS $26,291 $26,973
======= =======
See notes to condensed consolidated financial statements.
3
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
JUNE 30, 1997 DEC. 31,1996
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank debt $ 2,100 $ --
Accounts payable and accrued expenses 5,241 4,483
Accrued payroll and bonuses 717 2,505
Dividends payable -- 655
Customer billings in excess of revenues earned 3,404 5,234
Income taxes payable -- 417
Current portion of long-term debt 612 555
Current portion of capital lease obligations 84 88
------- -------
Total current liabilities 12,158 13,937
------- -------
LONG-TERM DEBT-Net of current portion 2,012 1,943
CAPITAL LEASE OBLIGATIONS-Net of current portion 130 153
DEFERRED INCOME TAX LIABILITY 464 464
OTHER LIABILITIES 2,018 2,009
------- -------
Total liabilities 16,782 18,506
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 1,000,000 shares
authorized and unissued -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 13,105,102 shares issued at June 30,
1997 and 13,099,103 shares issued at
December 31, 1996 131 131
Additional paid-in capital 4,391 4,369
Retained earnings 4,976 3,948
Cumulative foreign currency translation adjustment 11 19
------- -------
Total stockholders' equity 9,509 8,467
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,291 $26,973
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollar amounts in thousands except for per share data)
================================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 16,011 $ 15,897 $ 32,933 $ 30,300
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs 7,442 7,771 16,022 14,448
Selling, general and
administrative expense 7,149 6,156 14,037 12,331
Incentive bonuses 552 723 952 1,213
Interest expense 72 96 136 177
Other expense (income) - net 96 (90) 43 (226)
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES 15,311 14,656 31,190 27,943
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 700 1,241 1,743 2,357
PROVISION FOR
INCOME TAXES 287 558 715 1,065
------------ ------------ ------------ ------------
NET INCOME $ 413 $ 683 $ 1,028 $ 1,292
============ ============ ============ ============
NET INCOME PER SHARE $ .03 $ .05 $ .08 $ .10
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 13,103,549 13,099,103 13,101,338 13,099,103
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollar amounts in thousands)
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,028 $ 1,292
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 497 323
Deferred income taxes 118 68
Amortization of deferred charges 184 13
Accrued rent 96 (6)
Changes in operating assets and liabilities:
Accounts receivable (2,014) (959)
Prepaid expenses and inventories (463) (333)
Other current assets 91 21
Other assets -- 166
Income taxes payable (534) 690
Accounts payable and accrued expenses 758 (639)
Accrued payroll and bonuses (1,788) 88
Customer billings in excess of revenues earned (1,830) (316)
Other (86) (138)
------- -------
Net cash (used in) provided by operating activities (3,944) 270
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (495) (233)
Payment of merger costs -- (124)
Proceeds from sale of assets -- 650
------- -------
Net cash (used in) provided by investing activities (495) 293
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings 2,100 1,800
Dividends to stockholders (655) --
Principal payments of debt (304) (2,680)
Principal payments of capital lease obligations (27) (28)
Issuance of common stock and director's options 22 7
------- -------
Net cash provided by (used in) financing activities 1,136 (901)
------- -------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH (8) 35
------- -------
NET (DECREASE) IN CASH (3,311) (303)
CASH, BEGINNING OF PERIOD 3,827 936
------- -------
CASH, END OF PERIOD $ 516 $ 633
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for: Interest $ 102 $ 280
======= =======
Income taxes $ 1,099 $ 304
======= =======
SUPPLEMENTAL DISCLOSURE OF NON CASH
INVESTING AND FINANCING ACTIVITIES:
Financing of capital improvements $ 430
=======
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
(Dollar amounts in thousands)
================================================================================
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1996 13,099,103 $ 131 $ 4,369 $ 3,948 $ 19 $ 8,467
Net income -- -- -- 1,028 1,028
Shares issued upon
exercise of employee
stock options 5,999 -- 12 -- -- 12
Directors' options -- -- 10 -- -- 10
Foreign Currency
Translation Adjustment -- -- -- -- (8) (8)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE
JUNE 30, 1997 13,105,102 $ 131 $ 4,391 $ 4,976 $ 11 $ 9,509
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Audit & Surveys Worldwide, Inc. (the "Company") and its majority
owned subsidiary, Audits & Surveys Europe, Ltd. All significant intercompany
transactions and balances have been eliminated.
The 1997 and 1996 condensed consolidated financial statements have been prepared
by the Company and are unaudited. In the opinion of the Company's management all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
the interim periods have been made. Certain information and footnote disclosures
required under generally accepted accounting principles have been condensed or
omitted from the consolidated financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission. The condensed
consolidated financial statements presented herein should be read in conjunction
with the year-end consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996. The results of operations for the three-month and six-month periods ended
June 30, 1997 are not necessarily indicative of the results to be expected for
any other interim period or for the entire year.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Revenues for the second quarter of 1997 were $16.0 million compared with $15.9
million in the second quarter of 1996. Revenues for the first six months of 1997
increased $2.6 million (8.7%) to $32.9 million compared with $30.3 million in
the first six months of 1996. The increase in revenues for the six month period
of 1997 was principally attributable to higher revenues from international
consumer tracking studies and several custom and syndicated audit research
services.
Direct costs, as a percentage of revenues, were 46.5% in the second quarter and
48.7% in the first six months of 1997 compared with 48.9% and 47.7%,
respectively, in the same periods of 1996. The period to period changes in
direct costs, as a percentage of revenue, are generally reflective of changes in
the mix of research revenues. In addition, direct costs in 1997 include higher
costs incurred in the development of expanded syndicated research services. Such
syndicated services include a program which tracks personal computer sales in
eight Western European countries and a program to provide primary audience
database research to monitor household demographics, product usage and
lifestyles of subscribers and newsstand buyers of U.S. magazines.
Selling, general and administrative (SG&A) expenses increased $1 million (16.1%)
in the second quarter and $1.7 million (13.8%) in the first six months of 1997.
Approximately 75% of the SG&A increases were in payroll and related costs and
resulted from the addition of personnel as well as normal salary adjustments.
The costs associated with additional personnel include the staffing of the Asia
Pacific office in Manila, which opened in early 1997, expansion of the research
staffs in the US as well as at Audits & Surveys Europe in London and additions
to technical support staff particularly in information services. The remainder
of the increases in SG&A expenses was spread over various expenses such as rent,
utilities, depreciation and computer costs.
The provision for incentive bonuses was $.2 million lower in the second quarter
and $.3 million lower in the first six months of 1997 compared with the same
periods of 1996. The lower provisions resulted from the decrease in year-to-date
operating income on which the incentive bonuses are calculated.
Other expense increased in the second quarter and first six months of 1997
principally as a result of the termination of a sublease between the Company and
a subtenant for a portion of the space at the Company's New York headquarters. A
significant portion of the space previously occupied by the subtenant will be
occupied by the Company to accommodate additional personnel.
Income taxes for the second quarter and first six months of 1997 have been
provided at approximately 41% of reported pretax income compared with 45%
provided in the second quarter and first six months of 1996. The interim tax
provisions are based on estimates of the effective tax rate anticipated for the
full year.
9
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1997, the Company had working capital of $5.3 million and a current
ratio of 1.44 to 1 compared with working capital of $3.9 million and a current
ratio of 1.28 to 1 at December 31, 1996.
Cash flow from operations and borrowings under its credit facilities with its
bank are the Company's principal sources of funds. The Company's cash flow and
borrowings have historically been sufficient to provide funds for working
capital, capital expenditures and payment of indebtedness. In June, 1997, the
Company's secured line of credit with its bank was extended to June 30, 1998 and
was increased from $2,500,000 to $4,000,000.
Net cash used in operating activities was $3,944,000 consisting primarily of net
income of $1,028,000 plus non-cash expenses of $895,000 offset primarily by
increases in accounts receivable of $2,014,000, decreases in customer billings
in excess of revenue earned of $1,830,000 and decreases in accrued payroll and
bonuses of $1,788,000.
Net cash used in investing activities was $495,000 resulting from the purchases
of equipment.
Net cash provided by financing activities was $1,136,000 consisting primarily of
net proceeds from short term bank borrowings of $2,100,000 offset by payments of
dividends to stockholders of $655,000 and repayments of bank borrowings and
other debt of $331,000.
The Company believes that its credit arrangements with its bank combined with
funds generated by its operations will be adequate to fund its planned capital
expenditures, meet its debt obligations and finance its operations for at least
the next twelve months.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On June 13, 1997 the Company held its 1997 Annual Meeting of Stockholders (the
"1997 Meeting"). At the 1997 Meeting, the Company's stockholders elected 11
directors to serve until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. The vote for such directors was as
follows:
For Withheld
--- --------
Solomon Dutka 10,808,384 74,603
H. Arthur Bellows, Jr. 10,871,675 11,312
Carl Ravitch 10,871,707 11,280
Joseph Plummer 10,871,586 11,401
Charles E. Bradley 10,871,682 11,305
Brian G. Dyson 10,870,207 12,780
Matthew Goldstein 10,871,707 11,280
Robert C. Miller 10,871,707 11,280
William Newman 10,871,707 11,280
Sol Young 10,871,561 11,426
William A. Zebedee 10,871,586 11,401
In addition, at the 1997 Meeting the Company's stockholders voted with respect
to the approval of the 1997 Stock Option Plan and the ratification of the
appointment of Deloitte & Touche LLP as the Company's independent public
accountants to audit the Company's consolidated financial statements for 1997.
In connection with the approval of the 1997 Stock Option Plan, 9,668,264 shares
were cast for the proposal, 516,978 shares were cast against the proposal and
holders of 4,070 shares abstained from voting. In connection with the
ratification of Deloitte & Touche LLP, 10,876,359 shares were cast for the
proposl, 4,679 shares were cast against the proposal and the holders of 1,949
votes abstained from voting.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.*
a. Exhibits:
10.14 Amendment dated March 25, 1997 to Employment
Agreement between the Company and Solomon Dutka
dated March 24, 1995.
10.15 Amendment dated March 25, 1997 to Employment
Agreement between the Company and H. Arthur
Bellows, Jr. dated March 24, 1995.
10.16 Amendment dated March 25, 1997 to Employment
Agreement between the Company and Carl Ravitch
dated March 24, 1995.
10.17 Amendment dated June 30,1997 to Employment
Agreement between the Company and H. Arthur
Bellows, Jr. dated March 24, 1995.
10.18 Amendment dated June 30, 1997 to Employment
Agreement between the Company and Carl Ravitch
dated March 24, 1995.
10.19 Amendment dated June 30, 1997 to Employment
Agreement between the Company and Alan J.
Ritter dated September 13, 1995.
27.01 Financial Data Schedule
b. Reports on Form 8-K:
The Company did not file any reports on Form 8-K during
the quarterly period ended June 30, 1997.
- ------------------------
* There is no instrument defining the right of holders of long-term debt of
the Company or of any of its subsidiaries other than where the total amount
of securities authorized thereunder does not exceed 10% of the total assets
of the Company and its subsidiaries on a consolidated basis. In accordance
with paragraph (b)(4)(iii) of Item 601 of Regulation S-K, the Company
agrees to furnish to the Securities and Exchange Commission, upon request,
copies of any such instrument.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AUDITS & SURVEYS WORLDWIDE, INC.
AUGUST 11, 1997 By: /S/ H. ARTHUR BELLOWS, JR.
- --------------- ---------------------------
Date H. Arthur Bellows, Jr.
President
By: /S/ ALAN J. RITTER
---------------------------
Alan J. Ritter
Senior Vice President
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
10.14 Amendment dated March 25, 1997 to Employment Agreement between
the Company and Solomon Dutka dated March 24, 1995.
10.15 Amendment dated March 25, 1997 to Employment Agreement between
the Company and H. Arthur Bellows, Jr. dated March 24,1995.
10.16 Amendment dated March 25, 1997 to Employment Agreement between
the Company and Carl Ravitch dated March 24, 1995.
10.17 Amendment dated June 30,1997 to Employment Agreement between
the Company and H. Arthur Bellows, Jr. dated March 24, 1995.
10.18 Amendment dated June 30, 1997 to Employment Agreement between
the Company and Carl Ravitch dated March 24, 1995.
10.19 Amendment dated June 30, 1997 to Employment Agreement between
the Company and Alan J. Ritter dated September 13, 1995.
27.01 Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 CONSOLIDATED FINANCIAL STATEMENTS OF AUDITS & SURVEYS WORLDWIDE, INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000099703
<NAME> AUDITS & SURVEYS WORLDWIDE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 516
<SECURITIES> 0
<RECEIVABLES> 13,917
<ALLOWANCES> (28)
<INVENTORY> 1,722
<CURRENT-ASSETS> 17,483
<PP&E> 6,949
<DEPRECIATION> (3,558)
<TOTAL-ASSETS> 26,291
<CURRENT-LIABILITIES> 12,158
<BONDS> 2,142
0
0
<COMMON> 131
<OTHER-SE> 9,378
<TOTAL-LIABILITY-AND-EQUITY> 26,291
<SALES> 0
<TOTAL-REVENUES> 32,933
<CGS> 0
<TOTAL-COSTS> 16,022
<OTHER-EXPENSES> 15,032
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136
<INCOME-PRETAX> 1,743
<INCOME-TAX> 715
<INCOME-CONTINUING> 1,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,028
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
