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, 2004
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, 2004 | |
| Common Stock | 109,718,731 |
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION.
| ITEM 1. | FINANCIAL STATEMENTS. |
EXULT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
| December 31, 2003 |
March 31, 2004 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 135,026 | $ | 110,503 | ||||
| Short-term investments |
60,781 | 77,880 | ||||||
| Accounts receivable, net |
58,720 | 58,671 | ||||||
| Prepaid expenses and other current assets |
26,973 | 28,544 | ||||||
| Assets held for sale |
100 | — | ||||||
| Total Current Assets |
281,600 | 275,598 | ||||||
| Fixed Assets and Direct Contract Costs, net |
69,010 | 71,402 | ||||||
| Intangible Assets, net |
60,213 | 57,577 | ||||||
| Other Assets, net |
19,401 | 18,519 | ||||||
| Total Assets |
$ | 430,224 | $ | 423,096 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 24,331 | $ | 20,784 | ||||
| Accrued and other liabilities |
31,458 | 39,714 | ||||||
| Deferred revenue |
696 | 6,958 | ||||||
| Current portion of long-term obligations |
2,444 | 12,633 | ||||||
| Total Current Liabilities |
58,929 | 80,089 | ||||||
| Convertible Senior Notes |
106,713 | 106,771 | ||||||
| Other Long-Term Obligations, net of current portion |
12,168 | 885 | ||||||
| Total Long-Term Liabilities |
118,881 | 107,656 | ||||||
| Commitments and Contingencies (Note 7) Subsequent Events (Note 9) |
||||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock, $0.0001 par value; Authorized—15,000 shares; Issued and outstanding—none at December 31, 2003 and March 31, 2004 |
— | — | ||||||
| Common stock, $0.0001 par value; Authorized—500,000 shares; Issued and outstanding—108,711 at December 31, 2003 and 109,719 at March 31, 2004 |
11 | 11 | ||||||
| Additional paid-in capital |
430,583 | 434,016 | ||||||
| Deferred compensation |
(1,789 | ) | (3,196 | ) | ||||
| Accumulated Other Comprehensive Income: |
||||||||
| Foreign currency translation adjustments |
4,018 | 4,471 | ||||||
| Unrealized gains on investments, net |
99 | 114 | ||||||
| Accumulated deficit |
(180,508 | ) | (200,065 | ) | ||||
| Total Stockholders’ Equity |
252,414 | 235,351 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 430,224 | $ | 423,096 | ||||
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, |
||||||||
| 2003 |
2004 |
|||||||
| Revenue |
$ | 112,166 | $ | 97,794 | ||||
| Cost of Revenue |
102,297 | 106,254 | ||||||
| Gross Profit (Loss) |
9,869 | (8,460 | ) | |||||
| Selling, General and Administrative Expense |
6,685 | 9,390 | ||||||
| Income (Loss) from Operations |
3,184 | (17,850 | ) | |||||
| Investment and Interest Income (Expense), net |
849 | (361 | ) | |||||
| Income (Loss) from Continuing Operations before Provision for Income Taxes |
4,033 | (18,211 | ) | |||||
| Provision for Income Taxes |
— | 118 | ||||||
| Income (Loss) from Continuing Operations |
4,033 | (18,329 | ) | |||||
| Loss from Discontinued Operations |
(121 | ) | (1,228 | ) | ||||
| Net income (Loss) |
$ | 3,912 | $ | (19,557 | ) | |||
| Net Income (Loss) per Common Share—Basic |
||||||||
| Income (Loss) from Continuing Operations |
$ | 0.04 | $ | (0.17 | ) | |||
| Loss from Discontinued Operations |
$ | (0.00 | ) | $ | (0.01 | ) | ||
| Net Income (Loss) |
$ | 0.04 | $ | (0.18 | ) | |||
| Net Income (Loss) per Common Share—Diluted |
||||||||
| Income (Loss) from Continuing Operations |
$ | 0.04 | $ | (0.17 | ) | |||
| Loss from Discontinued Operations |
$ | (0.01 | ) | $ | (0.01 | ) | ||
| Net Income (Loss) |
$ | 0.03 | $ | (0.18 | ) | |||
| Weighted Average Number of Common Shares Outstanding: |
||||||||
| Basic |
106,378 | 108,703 | ||||||
| Diluted |
113,891 | 108,703 | ||||||
EXULT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2004 |
|||||||
| Net Income (Loss) |
$ | 3,912 | $ | (19,557 | ) | |||
| Other Comprehensive Income (Loss): |
||||||||
| Foreign currency translation adjustment |
(333 | ) | 453 | |||||
| Unrealized gain (loss) on investments, net |
(79 | ) | 31 | |||||
| Reclassification adjustment for realized gains on investments, net, in Net Income (Loss) |
(438 | ) | (16 | ) | ||||
| Total other comprehensive income (loss) |
(850 | ) | 468 | |||||
| Net Comprehensive Income (Loss) |
$ | 3,062 | $ | (19,089 | ) | |||
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, |
||||||||
| 2003 |
2004 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net Income (Loss) |
$ | 3,912 | $ | (19,557 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities— |
||||||||
| Depreciation and amortization |
6,114 | 8,696 | ||||||
| Write off of assets held for sale |
— | 100 | ||||||
| Discount accretion on long-term obligations |
— | 277 | ||||||
| Net realized gains, net |
— | 204 | ||||||
| Changes in operating assets and liabilities— |
||||||||
| Accounts receivable, net |
(13,014 | ) | (515 | ) | ||||
| Prepaid expenses and other current assets |
147 | (1,571 | ) | |||||
| Accounts payable |
4,894 | (3,547 | ) | |||||
| Accrued and other liabilities |
7,447 | 14,190 | ||||||
| Net operating cash flows from continuing operations |
9,500 | (1,723 | ) | |||||
| Net operating cash flows from discontinued operations |
4 | 894 | ||||||
| Net cash provided by (used in) operating activities |
9,504 | (829 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Expenditures for Fixed Asset Purchases and Direct Contract Costs |
(5,334 | ) | (9,079 | ) | ||||
| Expenditures for Intangible Assets |
(1,000 | ) | (35 | ) | ||||
| Purchases of Investments |
(29,370 | ) | (40,481 | ) | ||||
| Proceeds from Investments |
41,302 | 23,259 | ||||||
| Change in Other Assets |
(738 | ) | 1,733 | |||||
| Net investing cash flows from continuing operations |
4,860 | (24,603 | ) | |||||
| Net investing cash flows from discontinued operations |
— | (936 | ) | |||||
| Net cash provided by (used in) investing activities |
4,860 | (25,539 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from Exercise of Stock Options |
436 | 1,714 | ||||||
| Payments on Long-Term Obligations |
(1,040 | ) | (1,313 | ) | ||||
| Net cash provided by (used in) financing activities |
(604 | ) | 401 | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(257 | ) | 1,444 | |||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
13,503 | (24,523 | ) | |||||
| Cash and Cash Equivalents, beginning of period |
42,846 | 135,026 | ||||||
| Cash and Cash Equivalents, end of period |
$ | 56,349 | $ | 110,503 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Cash Paid During the Period for: |
||||||||
| Interest |
$ | 60 | $ | 222 | ||||
| Income taxes |
$ | 92 | ||||||