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 September 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 November 11, 1997 was:
CLASS NUMBER OF SHARES
----- ----------------
Common Stock, $0.01 par value 13,108,435
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets-
September 30, 1997 and December 31, 1996 3-4
Condensed Consolidated Statements of Income-
Three Months and Nine Months ended September 30, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows-
Nine Months ended September 30, 1997 and 1996 6
Condensed Consolidated Statement of Stockholders' Equity-
September 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 6. Exhibits and Reports on Form 8-K. 11
Signatures 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
SEPT. 30, 1997 DEC. 31,1996
------- -------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,072 3,827
Accounts receivable:
Billed 9,558 9,161
Unbilled 7,085 2,714
Refundable income taxes 120 --
Prepaid expenses and inventories 1,696 1,259
Other current assets 847 529
Net assets held for sale -- 300
------- -------
Total current assets 20,378 17,790
------- -------
PROPERTY AND EQUIPMENT, NET 3,433 2,962
RECEIVABLE FROM SALE OF ASSETS -- 500
PREPAID PENSION COSTS 1,090 1,090
DEFERRED INCOME TAX ASSET 2,729 2,906
OTHER ASSETS 1,672 1,725
------- -------
TOTAL ASSETS $29,302 $26,973
======= =======
</TABLE>
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>
SEPT. 30, 1997 DEC. 31,1996
------- -------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank debt $ 2,500 $ --
Accounts payable and accrued expenses 5,190 4,483
Accrued payroll and bonuses 1,517 2,505
Dividends payable -- 655
Customer billings in excess of revenues earned 5,210 5,234
Income taxes payable -- 417
Current portion of long-term debt 615 555
Current portion of capital lease obligations 72 88
-------- --------
Total current liabilities 15,104 13,937
-------- --------
LONG-TERM DEBT-Net of current portion 1,857 1,943
CAPITAL LEASE OBLIGATIONS-Net of current portion 119 153
DEFERRED INCOME TAX LIABILITY 464 464
OTHER LIABILITIES 1,970 2,009
-------- --------
Total liabilities 19,514 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; 13,108,435 shares issued at
September 30, 1997 and 13,099,103 shares issued
at December 31, 1996 131 131
Additional paid-in capital 4,402 4,369
Retained earnings 5,350 3,948
Cumulative foreign currency translation adjustment (95) 19
-------- --------
Total stockholders' equity 9,788 8,467
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,302 $ 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 SEPT. 30, NINE MONTHS ENDED SEPT. 30,
---------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 16,970 $ 14,697 $ 49,903 $ 44,997
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs 8,320 6,643 24,342 21,091
Selling, general and
administrative expense 7,387 6,447 21,424 18,778
Incentive bonuses 453 514 1,405 1,727
Interest expense 104 68 240 245
Other expense (income) - net 73 (88) 116 (314)
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES 16,337 13,584 47,527 41,527
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 633 1,113 2,376 3,470
PROVISION FOR
INCOME TAXES 259 501 974 1,566
------------ ------------ ------------ ------------
NET INCOME $ 374 $ 612 $ 1,402 $ 1,904
============ ============ ============ ============
NET INCOME PER SHARE $ .03 $ .05 $ .11 $ .15
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 13,106,551 13,099,103 13,103,095 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>
NINE MONTHS ENDED SEPT.30
-------------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income 1,402 $ 1,904
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 765 541
Deferred income taxes 177 68
Amortization of deferred charges 288 19
Accrued rent 144 (13)
Changes in operating assets and liabilities:
Accounts receivable (4,768) 888
Prepaid expenses and inventories (436) (267)
Other current assets (18) (143)
Other assets 263 275
Income taxes payable (537) 1,128
Accounts payable and accrued expenses 707 (767)
Accrued payroll and bonuses (989) 381
Customer billings in excess of revenues earned (23) (1,016)
Other (181) (89)
------- -------
Net cash (used in) provided by operating activities (3,206) 2,909
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (806) (418)
Payment of merger costs -- (124)
Proceeds from sale of assets -- 650
------- -------
Net cash (used in) provided by investing activities (806) 108
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings 2,500 1,931
Dividends to stockholders (655) --
Principal payments of debt (457) (3,799)
Principal payments of capital lease obligations (50) (35)
Issuance of common stock and directors' options 33 7
------- -------
Net cash provided by (used in) financing activities 1,371 (1,896)
------- -------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH (114) 36
------- -------
NET (DECREASE) INCREASE IN CASH (2,755) 1,157
CASH, BEGINNING OF PERIOD 3,827 936
------- -------
CASH, END OF PERIOD $ 1,072 $ 2,093
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:Interest $ 234 $ 319
======= =======
Income taxes $ 1,302 $ 366
======= =======
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
ADDITIONAL CURRENCY
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 -- -- -- 1,402 -- 1,402
Shares issued upon
exercise of employee
stock options 9,332 -- 18 -- -- 18
Directors' options -- -- 15 -- -- 15
Foreign Currency
Translation Adjustment -- -- -- -- (114) (114)
---------- ----------- ----------- ----------- ----------- -----------
BALANCE
SEPTEMBER 30, 1997 13,108,435 $ 131 $ 4,402 $ 5,350 $ (95) $ 9,788
========== =========== =========== =========== =========== ===========
</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 nine month periods ended
September 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 third quarter of 1997 increased 15.5% to $16.9 million compared
with $14.7 million in the third quarter of 1996. Revenues for the first nine
months of 1997 increased $4.9 million (10.9%) to $49.9 million compared with
$45.0 million in the first nine months of 1996. The increases in revenues for
the third quarter and for the nine month period of 1997 were principally
attributable to higher revenues from international and domestic consumer
tracking studies and several syndicated media research services.
Direct costs, as a percentage of revenues, were 49.0% in the third quarter and
48.8% in the first nine months of 1997 compared with 45.2% and 46.9%,
respectively, in the same periods of 1996. The period to period changes in
direct costs, as a percentage of revenue, reflect 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 $.9 million
(14.6%) in the third quarter and $2.6 million (14.1%) in the first nine months
of 1997. Approximately 77% and 73% of the SG&A increases in the third quarter
and nine month period, respectively, 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 U.S. as well as at Audits & Surveys Europe, Ltd. 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 approximately 12% lower in the third
quarter and 19% lower in the first nine 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 third quarter and first nine 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 third quarter and first nine months of 1997 have been
provided at approximately 41% of reported pretax income compared with 45%
provided in the third quarter and first nine 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 September 30, 1997, the Company had working capital of $5.3 million and a
current ratio of 1.35 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 $3,206,000 consisting primarily of net
income of $1,402,000 plus non-cash expenses of $1,374,000 offset primarily by
increases in accounts receivable of $4,768,000 and decreases in income taxes
payable of $537,000 and accrued payroll and bonuses of $989,000.
Net cash used in investing activities was $806,000 resulting from the purchases
of equipment.
Net cash provided by financing activities was $1,371,000 consisting primarily of
net proceeds from short term bank borrowings of $2,500,000 offset by payments of
dividends to stockholders of $655,000 and repayments of bank borrowings and
other debt of $507,000.
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 6. EXHIBITS AND REPORTS ON FORM 8-K.*
a. Exhibits:
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 September 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.
<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.
NOVEMBER 12, 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
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
27.01 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,072
<SECURITIES> 0
<RECEIVABLES> 16,671
<ALLOWANCES> (28)
<INVENTORY> 1,696
<CURRENT-ASSETS> 20,378
<PP&E> 7,026
<DEPRECIATION> (3,593)
<TOTAL-ASSETS> 29,302
<CURRENT-LIABILITIES> 15,104
<BONDS> 1,976
0
0
<COMMON> 131
<OTHER-SE> 9,657
<TOTAL-LIABILITY-AND-EQUITY> 29,302
<SALES> 0
<TOTAL-REVENUES> 49,903
<CGS> 0
<TOTAL-COSTS> 24,342
<OTHER-EXPENSES> 22,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240
<INCOME-PRETAX> 2,376
<INCOME-TAX> 974
<INCOME-CONTINUING> 1,402
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,402
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
