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 March 31, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
Commission file number 0-30035
EXULT, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware |
8742 |
33-0831076 | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Number) |
(I.R.S. Employer Identification No.) |
121 Innovation Drive, Suite 200
Irvine, California 92612
(949) 856-8800
(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at March 31, 2003 | |
| Common Stock |
106,558,849 |
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
EXULT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands except per share amounts)
(unaudited)
| December 31, 2002 |
March 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ |
42,846 |
|
$ |
56,349 |
| ||
| Short-term investments |
|
85,206 |
|
|
72,757 |
| ||
| Accounts receivable, net |
|
28,587 |
|
|
41,844 |
| ||
| Prepaid expenses and other current assets (including amounts receivable from officer and employees) |
|
26,350 |
|
|
26,278 |
| ||
| Total Current Assets |
|
182,989 |
|
|
197,228 |
| ||
| Fixed Assets and Direct Contract Costs, net |
|
54,105 |
|
|
54,660 |
| ||
| Intangible Assets, net |
|
37,564 |
|
|
37,525 |
| ||
| Other Assets, net |
|
19,738 |
|
|
20,394 |
| ||
| Total Assets |
$ |
294,396 |
|
$ |
309,807 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ |
17,683 |
|
$ |
22,577 |
| ||
| Accrued liabilities and other |
|
31,759 |
|
|
39,528 |
| ||
| Current portion of long-term obligations |
|
2,862 |
|
|
2,767 |
| ||
| Total Current Liabilities |
|
52,304 |
|
|
64,872 |
| ||
| Long-Term Obligations, net of current portion |
|
12,794 |
|
|
11,849 |
| ||
| Commitments and Contingencies |
||||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock, $0.0001 par value; Authorized — 15,000 shares; Issued and outstanding — none at December 31, 2002 and March 31, 2003 |
|
— |
|
|
— |
| ||
| Common stock, $0.0001 par value; Authorized — 500,000 shares; Issued and outstanding — 106,202 at December 31, 2002 and 106,559 at March 31, 2003 |
|
11 |
|
|
11 |
| ||
| Additional paid-in capital |
|
424,505 |
|
|
424,941 |
| ||
| Deferred compensation |
|
(1,928 |
) |
|
(1,638 |
) | ||
| Accumulated other comprehensive income: |
||||||||
| Cumulative translation adjustments |
|
1,285 |
|
|
952 |
| ||
| Unrealized gain on investments |
|
891 |
|
|
374 |
| ||
| Accumulated deficit |
|
(195,466 |
) |
|
(191,554 |
) | ||
| Total Stockholders’ Equity |
|
229,298 |
|
|
233,086 |
| ||
| Total Liabilities and Stockholders’ Equity |
$ |
294,396 |
|
$ |
309,807 |
| ||
See accompanying notes to unaudited condensed consolidated financial statements.
1
EXULT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(amounts in thousands except per share amounts)
(unaudited)
| Three Months Ended March 31, | |||||||
| 2002 |
2003 | ||||||
| Revenue |
$ |
95,017 |
|
$ |
114,136 | ||
| Cost of Revenue |
|
93,867 |
|
|
102,785 | ||
| Gross profit |
|
1,150 |
|
|
11,351 | ||
| Selling, General and Administrative Expense |
|
8,415 |
|
|
8,288 | ||
| Income (loss) from operations |
|
(7,265 |
) |
|
3,063 | ||
| Investment and Interest Income, net |
|
641 |
|
|
849 | ||
| Income (loss) before provision for income taxes |
|
(6,624 |
) |
|
3,912 | ||
| Provision for Income Taxes |
|
— |
|
|
— | ||
| Net income (loss) |
$ |
(6,624 |
) |
$ |
3,912 | ||
| Net Income (Loss) per Common Share: |
|||||||
| Basic |
$ |
(0.06 |
) |
$ |
0.04 | ||
| Diluted |
$ |
(0.06 |
) |
$ |
0.03 | ||
| Weighted Average Number of Common Shares Outstanding: |
|||||||
| Basic |
|
104,592 |
|
|
106,378 | ||
| Diluted |
|
104,592 |
|
|
113,891 | ||
EXULT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2002 |
2003 |
|||||||
| Net Income (Loss) |
$ |
(6,624 |
) |
$ |
3,912 |
| ||
| Other Comprehensive Loss: |
||||||||
| Foreign currency translation adjustment |
|
(559 |
) |
|
(333 |
) | ||
| Unrealized loss on investments |
|
— |
|
|
(79 |
) | ||
| Reclassification adjustment for gains realized in net income |
|
— |
|
|
(438 |
) | ||
| Total other comprehensive loss |
|
(559 |
) |
|
(850 |
) | ||
| Net Comprehensive Income (Loss) |
$ |
(7,183 |
) |
$ |
3,062 |
| ||
See accompanying notes to unaudited condensed consolidated financial statements.
2
EXULT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2002 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net Income (Loss) |
$ |
(6,624 |
) |
$ |
3,912 |
| ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities — |
||||||||
| Depreciation and amortization |
|
4,760 |
|
|
6,114 |
| ||
| Changes in operating assets and liabilities — |
||||||||
| Accounts receivable, net |
|
(3,881 |
) |
|
(13,257 |
) | ||
| Prepaid expenses and other current assets |
|
(8,263 |
) |
|
72 |
| ||
| Accounts payable |
|
4,506 |
|
|
4,894 |
| ||
| Accrued liabilities and other |
|
(6,733 |
) |
|
7,769 |
| ||
| Net cash provided by (used in) operating activities |
|
(16,235 |
) |
|
9,504 |
| ||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Expenditures for Fixed Asset Purchases and Direct Contract Costs |
|
(5,049 |
) |
|
(5,334 |
) | ||
| Expenditures for Client Contract Related Intangible Assets |
|
(13,600 |
) |
|
(1,000 |
) | ||
| Purchases of Investments |
|
(145,358 |
) |
|
(29,370 |
) | ||
| Proceeds from Investments |
|
85,207 |
|
|
41,302 |
| ||
| Change in Other Assets |
|
(590 |
) |
|
(738 |
) | ||
| Net cash provided by (used in) investing activities |
|
(79,390 |
) |
|
4,860 |
| ||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from Issuance of Common Stock |
|
1,643 |
|
|
436 |
| ||
| Payments on Long-Term Obligations |
|
(474 |
) |
|
(1,040 |
) | ||
| Net cash provided by (used in) financing activities |
|
1,169 |
|
|
(604 |
) | ||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH |
|
(462 |
) |
|
(257 |
) | ||
| Net Increase (Decrease) in Cash and Cash Equivalents |
|
(94,918 |
) |
|
13,503 |
| ||
| Cash and Cash Equivalents, beginning of period |
|
144,357 |
|
|
42,846 |
| ||
| Cash and Cash Equivalents, end of period |
$ |
49,439 |
|
$ |
56,349 |
| ||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||