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 March 31, 1998
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 May 11, 1998 was:
Class Number of Shares
----- ----------------
Common Stock, $0.01 par value 13,111,470
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
March 31, 1998 and December 31, 1997 3-4
Condensed Consolidated Statements of Operations-
Three Months ended March 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows-
Three Months ended March 31, 1998 and 1997 6
Condensed Consolidated Statement of Stockholders' Equity-
March 31, 1998 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)
MAR. 31, 1998 DEC. 31,1997
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 706 $ 1,524
Accounts receivable:
Billed 8,139 9,274
Unbilled 6,863 6,114
Prepaid expenses and inventories 1,335 1,317
Deferred income taxes 479 479
Other current assets 322 563
------- -------
Total current assets 17,844 19,271
------- -------
PROPERTY AND EQUIPMENT, NET 3,779 3,579
PREPAID PENSION COSTS 1,142 1,142
DEFERRED INCOME TAXES 2,348 2,406
OTHER ASSETS 2,090 2,057
------- -------
TOTAL ASSETS $27,203 $28,455
======= =======
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>
MAR. 31, 1998 DEC. 31,1997
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable bank $ 2,900 $ 1,500
Accounts payable and accrued expenses 4,992 6,148
Accrued payroll and bonuses 659 2,197
Customer billings in excess of revenues earned 4,376 3,897
Income taxes payable -- 133
Current portion of long-term debt 619 617
Current portion of capital lease obligations 93 80
-------- --------
Total current liabilities 13,639 14,572
-------- --------
LONG-TERM DEBT-Net of current portion 1,546 1,702
CAPITAL LEASE OBLIGATIONS - Net of current portion 196 230
OTHER LIABILITIES 1,924 2,043
-------- --------
Total liabilities 17,305 18,547
-------- --------
MINORITY INTEREST 128 102
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; 13,111,470 shares issued at
March 31, 1998 and 13,111,137 shares issued
at December 31, 1997 131 131
Additional paid-in capital 4,414 4,413
Retained earnings 5,328 5,366
Accumulated other comprehensive income (103) (104)
-------- --------
Total stockholders' equity 9,770 9,806
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,203 $ 28,455
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands except for per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES $ 13,743 $ 16,922
------------ ------------
COSTS AND EXPENSES:
Direct costs 6,682 8,580
Selling, general and administrative expenses 7,210 6,888
Incentive bonuses 48 400
Interest expense 76 64
Other (income) - net (25) (53)
Minority interests in consolidated subsidiaries (74) --
------------ ------------
TOTAL COSTS AND EXPENSES 13,917 15,879
------------ ------------
(LOSS) INCOME BEFORE
(CREDIT) PROVISION FOR INCOME TAXES (174) 1,043
(CREDIT) PROVISION FOR INCOME TAXES (136) 428
------------ ------------
NET (LOSS) INCOME $ (38) $ 615
============ ============
BASIC EARNINGS PER COMMON SHARE $ -- $ .05
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,111,137 13,099,103
============ ============
DILUTED EARNINGS PER COMMON SHARE $ -- $ .05
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING AND DILUTIVE
STOCK OPTIONS 13,111,137 13,311,485
============ ============
</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>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------- -------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) income $ (38) $ 615
Adjustments to reconcile net income to net cash
(used in) operating activities:
Depreciation and amortization 285 244
Deferred income taxes 58 --
Amortization of deferred charges 82 93
Accrued rent (25) 33
Changes in operating assets and liabilities:
Accounts receivable 386 (1,217)
Prepaid expenses and inventories (18) (323)
Other current assets 241 122
Other assets 3 (22)
Income taxes payable (133) (148)
Accounts payable and accrued expenses (1,156) (62)
Accrued payroll and bonuses (1,538) (1,711)
Customer billings in excess of revenues earned 479 (953)
Other (68) (84)
------- -------
Net cash used in operating activities (1,442) (3,413)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (485) (173)
Investment in joint venture (119) --
------- -------
Net cash used in investing activities (604) (173)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings 1,400 1,500
Dividends to stockholders -- (655)
Principal payments of debt (153) (146)
Principal payments of capital lease obligations (21) (13)
Issuance of common stock and directors' options 1 5
------- -------
Net cash provided by financing activities 1,227 691
------- -------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 1 8
------- -------
NET DECREASE IN CASH (818) (2,887)
CASH, BEGINNING OF PERIOD 1,524 3,827
------- -------
CASH, END OF PERIOD $ 706 $ 940
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for: Interest $ 84 $ 26
======= =======
Income taxes $ 347 $ 563
======= =======
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>
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL INCOME
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1997 13,111,137 $ 131 $ 4,413 $ 5,366 $ (104) $ 9,806 --
Net loss -- -- -- (38) -- (38) $ (38)
Exercise of stock options 333 -- 1 -- -- 1 --
Foreign Currency
Translation Adjustment -- -- -- -- 1 1 1
----------
Comprehensive Income -- -- -- -- -- -- $ (37)
==========
BALANCE
MARCH 31, 1998 13,111,470 $ 131 $ 4,414 $ 5,328 $ (103) $ 9,770
========== ========== ========== ========== ========== ==========
</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 Audits & Surveys Worldwide, Inc. (the "Company"), and
its majority owned subsidiaries, Audits & Surveys Europe, Ltd. and
ASW-KMR Magazine Metrics, L.L.C., and certain other currently inactive
entities. All significant intercompany transactions and balances have
been eliminated.
The 1998 and 1997 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, 1997. The results of operations for the
three-month period ended March 31, 1998 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
Comparison of the Results of Operations for the Quarter ended March 31, 1998
- --------------------------------------------------------------------------------
with the quarter ended March 31, 1997
- -------------------------------------
Revenues for the first quarter of 1998 decreased $3.2 million (18.8%) to $13.7
million compared with $16.9 million in the first quarter of 1997. The net
decrease in revenues was principally attributable to a client's decision to
conduct a major international consumer tracking study on an alternate year basis
rather than annually. Substantially all of the revenues from this study were
reported in the first quarter of 1997.
Direct costs decreased $1.9 million (22.1%) in the first quarter of 1998
compared with 1997, primarily as a result of the decrease in revenues. As a
percentage of revenues, direct costs were 48.6% in 1998 compared with 50.7% in
1997. The decrease in direct costs as a percentage of revenues resulted from
changes in the overall mix of research studies in the first quarter of 1998
compared with the same period of 1997.
Selling, general and administrative (SG&A) expenses increased $.3 million (4.7%)
in the first quarter of 1998. Approximately 20% of the increase was in payroll
and related costs and resulted primarily from normal salary adjustments. The
remainder of the increase in SG&A expenses was spread over various expenses such
as rent, utilities, depreciation, professional and consulting fees and additions
to the allowance for doubtful accounts.
The lower provision for incentive bonuses in the first quarter of 1998 compared
with the same period of 1997 resulted from the decrease in operating income on
which the incentive bonuses are calculated.
Income taxes for the first quarter of 1998 reflect a tax credit of 78% of the
reported pretax loss compared with a tax provision in the first quarter of 1997
at 41% of reported pretax income. The 1998 tax credit includes a credit of
$65,000 in accumulated tax over-provisions of prior years which are no longer
required.
Financial Condition and Liquidity
- ---------------------------------
At March 31, 1998, the Company had working capital of $4.2 million and a current
ratio of 1.31 to 1 compared with working capital of $4.7 million and a current
ratio of 1.32 to 1 at December 31, 1997.
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. The Company maintains
a $4,000,000 secured line of credit with its bank which expires on June 5, 1998.
The Company believes it will be successful in renewing such line of credit.
9
<PAGE>
Net cash used in operating activities was $1,442,000, consisting primarily of
the net loss of $38,000 adjusted for non-cash expenses of $400,000, increases in
customer billings in excess of revenue earned of $479,000 and decreases in
accounts receivable of $386,000 offset primarily by decreases in accounts
payable and accrued expenses of $1,156,000 and accrued payroll and bonuses of
$1,538,000.
Net cash used in investing activities was $604,000 resulting from the purchase
of property and equipment of $485,000 and investments in joint ventures of
$119,000.
Net cash provided by financing activities was $1,227,000 consisting primarily of
proceeds from short term bank borrowings of $1,400,000 offset by repayments of
bank borrowings and other debt of $174,000.
The Company believes that its credit arrangements with its bank combined with
its capital base and funds expected to be 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.
NEW ACCOUNTING PRINCIPLES
During 1997, the Financial Accounting Standards Board issued the following
accounting standards: Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS No. 130), Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131) and Statement of Financial Accounting
Standards No. 132 "Employers Disclosures about Pension and other Post Retirement
Benefit Plans" (SFAS No. 132). The Company does not expect any material effect
from adoption of SFAS No. 131 and 132. The Company has adopted SFAS No, 130 in
the current quarter and has reported comprehensive income as a component of
equity.
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. As such, final results
could differ from estimates or expectations due to factors such as incomplete or
preliminary information or changes in government regulation and policies. For
any of these factors, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, as amended.
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 has not filed any reports on Form 8-K during the
quarterly period ended March 31, 1998.
- ------------------------
* 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.
11
<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.
MAY 14, 1998 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
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1998 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> MAR-31-1998
<CASH> 706
<SECURITIES> 0
<RECEIVABLES> 15,183
<ALLOWANCES> (181)
<INVENTORY> 1,335
<CURRENT-ASSETS> 17,844
<PP&E> 7,607
<DEPRECIATION> (3,828)
<TOTAL-ASSETS> 27,203
<CURRENT-LIABILITIES> 13,639
<BONDS> 1,742
<COMMON> 131
0
0
<OTHER-SE> 9,639
<TOTAL-LIABILITY-AND-EQUITY> 27,203
<SALES> 0
<TOTAL-REVENUES> 13,743
<CGS> 0
<TOTAL-COSTS> 6,682
<OTHER-EXPENSES> 7,138
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> (174)
<INCOME-TAX> (136)
<INCOME-CONTINUING> (38)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
