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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended DECEMBER 31, 1999
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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 no.0-15152
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FIND/SVP, INC.
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(Exact name of Registrant as specified in its charter)
NEW YORK 13-2670985
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
625 AVENUE OF THE AMERICAS, NEW YORK, NY 10011
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 645-4500
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.0001 per share
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Title of Class
******************************
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
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1
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of March 1, 2000 the aggregate market value of the voting stock held by
non-affiliates of the registrant was $13,491,916.00.
As of March 1, 2000 there were 7,394,949 shares of Common Stock, par value
$.0001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Not applicable.
2
PART I
ITEM 1
BUSINESS
GENERAL
FIND/SVP, Inc. ("FIND/SVP" or the "Company") provides broad consulting,
advisory and business intelligence services substantially by telephone primarily
to executives and other decision-making employees. The Company's strategy is to
build a base of regular clients who will utilize the Company's people and
resources for their research, business intelligence and information needs.
The Company was formed under the laws of New York in 1969. In 1971, the
Company became affiliated with SVP International S.A. ("SVP International")
through a licensing agreement which gave the Company the right to the SVP name
and provided access to the resources of what is currently 13 additional SVP
affiliated companies located around the world.
Through its Quick Consulting and Research Service ("QCS"), FIND/SVP
provides retainer clients with access to the subject and technical expertise of
its staff as well as the resources of a large information center. Within each
retainer client's organization, specific individuals receive a Membership Card,
which entitles them to make requests via the telephone and the Internet for
consultation and research assistance. In response, the staff of QCS provides
customized answers in rapid turnaround time, generally within two business days
or less of the request. The QCS service is positioned to be an indispensable
daily partner for decision-makers by providing, on a retainer basis, a
cost-effective "quick consulting" service accessible by telephone or the
Internet. The service is designed to be a valuable resource to small and medium
sized corporations that do not maintain in-house information centers and as a
supplement to in-house resource centers of large corporations. At December 31,
1999, there were 2,006 QCS retainer clients and 12,959 Membership Cardholders.
The Company intends to seek to expand its base of QCS retainer clients, and to
offer these clients an expanded array of business intelligence, research and
advisory services.
In addition to QCS, the Company offers the market research services of
its Strategic Consulting and Research Group ("SCRG"), which is designed to
handle more extensive, in-depth custom market research and competitive
intelligence requests, as well as customer satisfaction and loyalty programs.
The QCS and SCRG businesses represent the core competencies of the Company,
which is to provide the expertise of its staff in an on-demand, consulting and
business advisory relationship with small, medium and large sized corporations.
The Company also produces The Information Advisor newsletter.
FIND/SVP's research resources include access to approximately 4,000
computer databases and subscription-paid web sites, approximately 8,000 of its
own files organized by subject and by company, current and back issues of
approximately 1,500 periodicals and journals and approximately 3,500 books and
reference works. Through a licensing agreement, the Company is associated with
the international SVP network of companies and correspondents providing similar
services. This enables FIND/SVP to obtain information through approximately
1,000 additional consultants in the SVP worldwide network.
3
SERVICES AND PRODUCTS
The Company's services and products offer business executives fully
integrated research, business intelligence and management advisory services in a
broad range of industries and disciplines. The Company provides services to help
clients acquire, interpret and use knowledge.
FIND/SVP's research resources at December 31, 1999 include a staff of
86 consultants and researchers in its QCS and SCRG divisions, a reference center
which contains approximately 8,000 of its own subject and company files, access
to approximately 4,000 computer databases, current and back issues of
approximately 1,500 titles, and approximately 3,500 books and reference works,
and a field investigation team with entree into public and private libraries in
the New York area. Through a licensing agreement, the Company is associated with
the international SVP network of companies and correspondents, which enables it
to obtain information worldwide. See "SVP Network; Licensing Agreement With SVP
International." The materials used in the generation of the Company's services
and products are updated and checked by staff members. The Company has its own
training program in which its employees participate.
SERVICES
QUICK CONSULTING AND RESEARCH SERVICE ("QCS"). QCS provides clients
with access to the staff and resources of a large information center, which
seeks to handle research inquiries and requests for business assistance in rapid
turnaround time. Through QCS, the Company is in the business of providing, on a
volume basis, customized answers to business questions on a wide variety of
topics. The service is offered only on a retainer basis. Retainer client
organizations pay in advance, either monthly, quarterly, semi-annually or
annually, a retainer fee. In return, the client organizations receive Membership
Cards for their designated executives or employees. The Membership Card entitles
each cardholder to use QCS and also offers preferential use of, and/or discounts
on, the Company's other services and products. The Company has several fixed and
adjustable fee retainer programs in effect. Out-of-pocket expenses incurred to
answer questions are invoiced in addition to retainer fees.
Retainer clients call FIND/SVP with their business issues and research
needs, give their card number and explain their request to consultants who are
divided into the following six practice groups and three support teams:
(a) THE CONSUMER PRODUCTS AND SERVICES GROUP is responsible for
research on retailing and apparel, home furnishings, cosmetics and
toiletries, food and beverages, media and entertainment, publishing,
sports and leisure, education, philanthropy, restaurants, food
services, household products, appliances and furniture;
(b) THE TECHNOLOGY, INFORMATION AND COMMUNICATIONS GROUP covers
computers, software, electronic media and office equipment, and
provides expert help with Internet research, hands-on training, on-site
seminars, competitive intelligence, Web marketing/trends and Internet
user demographics.
4
(c) THE HEALTHCARE AND PHARMACEUTICALS GROUP covers products and
services manufactured by and marketed to businesses in healthcare
fields, including pharmaceuticals, medical and diagnostic equipment,
biotechnology, health resources and clinical information;
(d) THE FINANCIAL AND BUSINESS SERVICES GROUP handles requests on
banking, insurance, mergers and acquisitions, real estate and
mortgages, the securities and investment industries, customer
satisfaction and corporate management theory, and provides credit
reports on specific companies and Securities and Exchange Commission
documents on public companies;
(e) THE INDUSTRIAL PRODUCTS AND SERVICES GROUP covers manufacturing,
energy, chemicals, plastics, pulp and paper, metals and mining,
transportation, environment, construction and agriculture;
(f) THE MANAGEMENT ADVISORY GROUP handles requests on legal research,
human resources research and accounting and tax issues;
(g) THE INTERNATIONAL TEAM addresses executive's needs for
international finance and trade, global corporate competitive
intelligence and worldwide management strategies;
(h) THE DOCUMENTS TEAM locates and obtains copies of articles,
documents, patents, books, pamphlets, catalogs, conference proceedings,
government reports and product samples;
(i) THE MARKETING TEAM covers direct marketing, advertising, sales
promotions and demographics; and
Client cardholders discuss their research needs with the
Company's consultants and may obtain assistance in formulating their requests.
After the request has been clarified, FIND/SVP's specialists find the needed
information using a combination of the Company's available resources. After
reviewing the findings, the consultants select what appears most relevant to the
client's need and report, with commentary, as needed. Documentation of the
findings can be sent by any one or a combination of the following methods:
facsimile, courier, messenger, mail or electronic mail. QCS allows customers to
benefit from a fast, convenient and confidential way to gather knowledge and use
the multitude of research resources available today. Cardholders may ask
questions on virtually any subject.
Those requests requiring business intelligence from overseas are
answered by one or more of the information centers in 13 SVP companies worldwide
or by using special SVP correspondents in selected countries where no official
SVP company exists.
QCS is designed to handle client questions requiring less than
approximately three hours of actual staff time. These are automatically covered
by the retainer fee. Requests requiring a more extensive search or a lengthy
written report are not covered by the QCS retainer program and are referred to
the Company's Strategic Consulting and Research Group to be handled separately.
QCS activity is tracked and controlled by a proprietary management
information system called QUESTRAC, which uses recently upgraded
state-of-the-art software technology. The program is based on the know-how
provided by SVP France, the founders of the SVP concept of quick business
advisory services by telephone. Input into the QUESTRAC system provides an
exclusive and confidential database of information about each client, and the
information requested and handled for clients.
5
At December 31, 1999, there were 2,006 retainer clients, a 0.9%
decrease from December 31, 1998, and 12,959 holders of the Membership Card, a
12.8% decrease from December 31, 1998. During 1999, monthly fees billed to
retainer clients (the retainer base) increased by 2.5% to $1,507,782.
Approximately 50% of the top Fortune 100 industrial companies are QCS retainer
clients. Revenues generated by QCS represented 82%, 74% and 64% of the Company's
total revenues for the years ended December 31, 1999, 1998 and 1997,
respectively.
STRATEGIC CONSULTING AND RESEARCH GROUP ("SCRG"). SCRG is designed to
handle more in-depth custom market research and competitive intelligence
assignments. The service is most often used by the Company's QCS retainer
clients as a supplement to that service. Common project requests include
customized market and industry studies, telephone surveys, competitive
intelligence data-gathering and analysis assignments, acquisition studies and
large information collection projects. Additionally, through the Customer
Satisfaction and Loyalty Group, SCRG provides customer satisfaction and loyalty
programs. Through SCRG, the Company provides research as well as interpretation
and analysis. All projects are quoted in advance and billed separately. Revenues
generated by SCRG represented 17%, 17% and 17% of the Company's total revenues
for each of the years ended December 31, 1999, 1998 and 1997.
NON-CONTINUING PRODUCTS AND SERVICES
On July 2, 1998, the Company completed the sale of substantially all of
the assets of FIND/SVP Published Products, Inc. ("Published Research") pursuant
to an Asset Purchase Agreement dated as of June 26, 1998. The Company recorded a
$20,000 gain related to this sale. The assets included, among other things, the
tangible and intangible assets, properties, rights and business of Published
Research relating to the following product lines: (I) FIND/SVP Market
Intelligence Reports; (II) Packaged Facts Market Intelligence Reports; (III)
Specialists in Business Information Market Intelligence Reports; (IV)
MarketLinks; (V) Ice Cream Report: The Newsletter for Ice Cream Executives; (VI)
How to Find Market Research Online; (VII) Analyzing Your Competition; (VIII)
Finding Business Research on the Web; and (IX) ShareFacts.
On November 4, 1997, the Company sold certain assets held in its
Emerging Technologies Research Group ("ETRG"), a division of Published Research.
The assets consisted of the Company's Multi-client Study business, its
Continuous Advisory service and its Interactive Consumer newsletter. The Company
retained the rights to its then published off-the-shelf studies produced from
data contained within previously issued multi-client studies.
Revenues generated from the divested activities represented 9% and 19%
of the Company's total revenues for the years ended December 31, 1998 and 1997,
respectively.
During the fourth quarter of 1997, the Company ceased the
consumer-oriented operations of its FIND/SVP Internet Services, Inc. subsidiary.
Accordingly, the Company recorded a charge of $500,000 in the fourth quarter of
1997 related to the closing of the subsidiary.
Revenues from FIND/SVP Internet Services, Inc. represented less than 1%
of the Company's revenues for 1997.
6
Based on the decisions to effectuate the sale and the discontinuance of
various product lines and services, the Company reduced its general and
administrative staff as of December 31, 1997. Accordingly, the Company recorded
a $155,000 restructuring charge as of December 31, 1997.
POTENTIAL RELATED SERVICES AND PRODUCTS
The Company plans to expand its services through continued internal
development during 2000. This includes various initiatives aimed at both
business-to-business and consumer users of the Internet. Additionally, the
Company will consider exploring possible alliances with and/or acquisitions of
consulting, research or information properties and companies whose primary
markets are the same as FIND/SVP's market and which would be accretive to the
Company's earnings. There are no commitments or understandings in this regard
and no assurance can be given that the Company will in fact conclude any
acquisitions or internally develop any related services. The foregoing plans are
subject to, among other things, the availability of funds for these purposes.
SVP NETWORK; LICENSING AGREEMENT WITH SVP INTERNATIONAL
Through licensing agreements with SVP ("S'il Vous Plait")
International, 14 companies (the "SVP companies"), including FIND/SVP, form an
international network of information centers. Since each SVP company is based in
a different country, the network has provided the means by which the Company can
obtain international information requested by its clients which it may not
maintain in its library or have access to if generated by or located in another
country. When an SVP company accesses the information center of another SVP
company it is charged a fee for the services provided thereby. Each SVP company
is linked to the SVP network primarily by virtue of its licensing agreement. In
1971, the Company entered into its licensing agreement with SVP International
(formerly SVP Conseil), which was amended in 1981, and obtained the U.S. rights,
in perpetuity, to the SVP name and know-how and access to the SVP International
network. Pursuant thereto, SVP International assisted in the creation,
implementation, development and operation of the Company. The Company has
agreed, pursuant to such licensing agreement, to use its best efforts to have a
person selected by SVP International elected to the Board of Directors of the
Company; pursuant to such provision, Brigitte de Gastines, General Manager of
SVP International, is also Chairperson of the Board for the Company. In
addition, Jean-Louis Bodmer, Vice President-Finance and New Technologies for SVP
Group and Eric Cachart, SVP Group's Vice President of Development and Client
Services, are directors of the Company. Historically, SVP International has
engaged in periodic telephonic conversations and meetings with the Company. By
virtue thereof, the Company has benefited from exchanges of knowledge with SVP
International with respect to any enhancements made to SVP International's
information retrieval or billing systems or other proprietary know-how.
During the first quarter of 1998, SVP International (including
affiliates) increased its ownership in the Company to approximately 37% of the
then outstanding common shares, excluding outstanding warrants, from 18.7% of
the outstanding common shares, excluding outstanding warrants. Concurrent with
the increased ownership, SVP International increased their management
involvement in and physical presence at the Company during 1998, and it is
expected that this will continue into the future. (See "Directors and Executive
Officers of the Registrant - Directors and Officers")
7
The license agreement provides that SVP International will not compete
with the Company in the United States or enter into any agreement or arrangement
with respect to services similar to those offered by the Company with any entity
which operates or proposes to operate such services in the United States. The
Company, in return, agreed to pay SVP International royalties of $18,000 per
year, plus 2% of the amount of FIND/SVP's gross revenues for each such year,
excluding publishing revenues, derived from certain of its services in excess of
$2,000,000 but less than $4,000,000 and 1% of the amount of such non-publishing
gross revenues in excess of $4,000,000 but less than $10,000,000, and 1.2% of
the gross profit from all publications included in FIND/SVP's gross revenue less
than $10,000,000 for such year. Royalty expense to SVP International totaled
$119,000, $126,000 and $131,000 in 1999, 1998 and 1997, respectively.
MARKETS AND CUSTOMERS
The market for FIND/SVP's services and products is comprised primarily
of business executives in a variety of functions, including top management and
marketing, planning, marketing research, sales, information/library, legal,
accounting, tax and new products. FIND/SVP's primary market, in terms of client
organizations, consists of medium to small sized companies. Larger corporations
are, however, among the Company's clients. In certain cases, the service is sold
to more than one department or division of a large corporation. The Company's
appeal to medium to small sized corporations is primarily based on the fact that
these companies do not ordinarily maintain their own research staff and resource
libraries and when they do, they are generally not comprehensive. Large
corporations, on the other hand, often maintain in-house resource centers.
Consequently, these corporations may perceive the Company's QCS service as
unnecessary. The Company believes, however, that in-house corporate libraries
are generally not as comprehensive. Therefore, QCS may be perceived as a
valuable supplemental resource. In addition, in-house centers are good prospects
for the Company's other services. Overall, the factors that will affect the
growth of the Company's potential market and its ability to penetrate it
include: (1) the market's perception of the need for and value of consulting,
business intelligence and research services; (2) the trends in the use of
internal information centers and databases; and (3) the Company's ability to
extend its personal selling efforts throughout the country.
SALES AND MARKETING
The Company's primary marketing focus is to expand its QCS retainer
client base. In addition to generating revenues from the QCS services, the
retainer client base serves as a ready-made marketplace for SCRG and other
potential services of the Company. QCS is marketed through a combination of
advertising, direct mail, exhibits, sales promotion activities and the Company's
web site. Qualified leads are followed up by FIND/SVP's sales force. These leads
are supplemented by referrals and cold-call selling efforts. The cost of the
Company's advertising and public relations efforts is modest.
COMPETITION
The Company faces competition from three distinct sources: (1) other
research and information services, (2) in-house corporate research centers, and
(3) institutions that sell information directly to end-users.
The Company is aware of several other smaller fee-based on-demand
business information services in the United States. The Company believes that of
these companies it is the largest in terms of revenues and staff size. The
Company believes that the competition may be more significant from organizations
such as Arthur D.
8
Little, Stanford Research Institute and The Conference Board, which have
research capabilities with call-in-service for reference type questions. To
date, however, the call-in-service feature has not been emphasized by these
companies. Although the Company is not aware of direct competitive companies
with larger staffs and revenues, there is no assurance that as the information
industry expands, more competitive companies will not enter the market. In
addition, there is no assurance that a competitive company will not develop a
superior product or service. The Company believes, however, that by reason of
its experience in the industry, its association with the SVP network and its
intent to closely monitor the consulting industry, it will be able to compete
effectively with any potential competitors.
In-house corporate information and research centers present perhaps the
most significant source of competition for the Company today. Large
corporations, in an effort to stay on top of the vast amount of information
available, began to develop in increasing numbers, in-house libraries and
information centers for their employees. While the Company believes that its own
information center serves the added functions of analysis and generation of
information and is larger and better staffed than a majority of these corporate
resource centers, there is no assurance that a significant number of these large
companies will choose to utilize the Company's services and products.
The advent of on-line databases, the Internet and CD-ROM products has
increased the ability of companies to perform information searches and other
research for themselves. Consequently, to the extent companies perceive they can
directly access information from the Internet, on-line databases and acquire
CD-ROM products, FIND/SVP competes with information producers that sell to
end-users. The Company believes, however, that its consultants deliver a
value-added service based on their technical expertise and their ability to
search more information products more quickly than most end users, thereby
delivering a more thorough and economical service. There is no assurance,
however, that companies which develop extensive resource centers will not
accordingly staff them with equally productive personnel.
EMPLOYEES
As of December 31, 1999, the Company had 160 full-time employees,
including 5 executive officers, 36 marketing and sales employees, 86 consultants
and research employees, and 33 administrative and general personnel.
The Company's ability to develop, market and sell its services and to
establish and maintain its competitive position will depend, in part, on its
ability to attract and retain qualified personnel. While the Company believes
that it has been successful to date in attracting such personnel, there can be
no assurance that it will continue to do so in the future. The Company is not a
party to any collective bargaining agreements with its employees. It considers
its relations with its employees to be good.
ITEM 2
PROPERTIES
At December 31, 1999, the Company has a lease on approximately 32,000
square feet of office space at 625 Avenue of the Americas, New York, New York,
which became the main offices of the Company in 1987. The lease is subject to
standard escalation clauses, and expires in June 2005. Basic annual rent
expense, determined on the straight-line basis over the term of the lease, is
approximately $694,000.
9
The Company has additional leased office space for approximately 30,000
square feet at 641 Avenue of the Americas, New York, New York. Such lease
arrangements are subject to standard escalation clauses, and expire in June
2005. Basic annual rent expense, determined on the straight-line basis over the
term of the lease, is approximately $650,000. Of this space, approximately
10,000 square feet is being sublet to a third party as of December 31, 1999.
10
ITEM 3
LEGAL PROCEEDINGS
None.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock, par value $.0001 per share ("Common
Stock"), is traded on the NASDAQ Small Cap Market under the symbol "FSVP". The
following table sets forth the high and low closing sale prices for the Common
Stock for the periods indicated.
PRICE RANGE HIGH LOW
- ----------- ---- ---
1999
- ----
COMMON STOCK
- ------------
1st Quarter 1 25/32 3/4
2nd Quarter 1 19/32
3rd Quarter 1 9/16 23/32
4th Quarter 2 2/32 3/4
1998
- ----
COMMON STOCK
- ------------
1st Quarter 1 3/16 11/16
2nd Quarter 1 3/8 29/32
3rd Quarter 1 7/16 13/16
4th Quarter 1 1/8 19/32
On December 31, 1999, there were approximately 890 holders of record of
the Common Stock. Such numbers do not include shares held in "street name."
In the first quarter of 1998, by letter dated January 21, 1999, and by
letter dated November 16, 1999, the Company received notification from the
NASDAQ Stock Market, Inc. ("NASDAQ") that the Company was not in compliance with
NASDAQ's $1.00 minimum bid price requirement; the shares of the Common Stock
having closed below the minimum bid price for 30 consecutive business days. To
regain compliance with this standard the Common Stock was required to have a
closing bid price at or above $1.00 for ten consecutive trading days within the
90-calendar day period following the advent of non-compliance. With respect to
all notifications, the Common Stock subsequently met the required minimum bid
price for ten consecutive trading days, and the Company's Common Stock is
currently in compliance with the NASDAQ minimum bid requirement. Had compliance
not been achieved, NASDAQ could have issued a delisting letter.
The Company's failure to meet NASDAQ's maintenance criteria in the
future may result in the discontinuance of the inclusion of its securities in
NASDAQ. In such event, trading, if any, in the securities may then continue to
be conducted in the non-NASDAQ over-the-counter market in what are commonly
referred to as the electronic bulletin board and the "pink sheets". As a result,
an investor may find it more difficult to dispose of or to obtain accurate
quotations as to the market value of the securities. In addition, the
12
Company would be subject to a Rule promulgated by the Securities and Exchange
Commission that, if the Company fails to meet criteria set forth in such Rule,
imposes various practice requirements on broker-dealers who sell securities
governed by the Rule to persons other than established customers and accredited
investors. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transactions prior to sale. Consequently, the
Rule may have an adverse effect on the ability of brokers-dealers to sell the
securities, which may affect the ability of shareholders to sell the securities
in the secondary market.
DIVIDEND HISTORY AND POLICY
The Company has never paid cash dividends on its Common Stock and
anticipates that, for the foreseeable future, it will continue to follow a
policy of retaining earnings to finance the expansion and development of its
business. The Company's debt agreements restrict the payment of dividends.
13
ITEM 6
SELECTED FINANCIAL DATA
The following financial data set forth below is derived from the
consolidated financial statements of the Company.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31
-----------------------
(in thousands, except per share amounts)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Revenues $22,738 $28,175 $32,027 $30,525 $28,606
Operating Income (Loss) 348 1,329 (3,136) (824) 1,050
Net Income (Loss) 883 756 (2,852) (719) 476
Net Income (Loss) Per Share:
Basic .12 .11 (.43) (.11) .08
Diluted .12 .11 (.43) (.11) .07
Weighted Average Number of Shares:
Basic 7,121 7,094 6,593 6,434 6,217
Diluted 7,213 7,100 6,593 6,434 6,672
Cash Dividends Paid Per
Common Share - - - - -
BALANCE SHEET DATA
DECEMBER 31
------------
(in thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Working Capital (Current assets $3,199 $2,569 $1,016 $3,930 $3,854
less current liabilities)
Total Assets 11,278 11,899 12,481 12,946 11,445
Long-Term Notes Payable
excluding current amounts 3,039 3,523 3,801 3,826 2,896
Shareholders' Equity 3,889 2,988 1,218 4,059 4,659
14
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
FIND/SVP, Inc. provides a broad consulting, advisory and business
intelligence service to executives and other decision-making employees of client
companies, primarily in the United States. The Company currently operates
primarily in one business segment, providing consulting and business advisory
services including: the Quick Consulting and Research Service ("QCS") which
provides retainer clients with access to the expertise of the Company's staff
and information resources; and the Strategic Consulting and Research Group
("SCRG") which provides more extensive, in-depth custom market research and
competitive intelligence information, as well as customer satisfaction and
loyalty programs. Prior to the third quarter of 1998, the Company had one
additional significant operating segment, Published Research Products. The
Company considers its QCS and SCRG service businesses, which operate as
"consulting and business advisory" businesses, to be its core competency.
The Company had operating income of $348,000 for the year ended
December 31, 1999. The net income for the year ended December 31, 1999 was
$883,000 versus $756,000 for the year ended December 31, 1998.
Revenues for 1999 were $22,700,000 and revenues for 1998 were
$28,200,000. On a comparable basis, 1998 revenues were $25,500,000 after
deducting revenues of $2,700,000 related to the sale of the Published Research
business unit. The decline in comparable revenues was a result of a decline in
the Company's retainer base (recurring monthly income) in late 1998 and early
1999.
Net income in 1999 was positively affected by a pre-tax gain of
$1,200,000 (approximately $672,000 after tax) resulting from a collaboration
agreement between FIND/SVP and Idealab!, a leading creator and operator of
Internet businesses, to develop find.com, a new Internet site.
Selling, general and administrative expenses were $10,800,000 in 1999,
a decrease of $1,500,000 from 1998. Direct costs in 1999 were 50.8% of revenue
as compared to 50.6% for the year ended December 31,1998. Additionally, selling,
general and administrative expenses were 47.7% of revenue for 1999 as compared
to 43.5% for the year ended December 31, 1998. Selling, general and
administrative expenses as a percentage of revenue increased due to increased
costs and the Company's emphasis on increasing retainer revenue. Both selling,
general and administrative expenses, as well as total direct costs, decreased in
1999 from 1998 as a function of lower than expected revenue levels, coupled with
a decrease due to the sale of the Published Research unit and the reduction in
staff that occurred during 1998.
A $1,000,000 capital stock investment from SVP, a major shareholder of
the Company, received during the first quarter of 1998, coupled with cash flow
provided by operating activities, enabled the Company to pay off its outstanding
balance under the Commercial Revolving Promissory Note during the
15
first quarter of 1998. As of December 31, 1999, the balance outstanding remains
at zero. The Company ended 1999 with a cash balance of $2,096,000.
During the year ended December 31, 1998, the Company reduced operating
expenses, primarily due to the Published Research activities. Accordingly, there
was a reduction in direct costs as a percentage of revenues to 50.6% for the
year ended December 31, 1998, as compared to 57.5% for the year ended December
31, 1997. Additionally, selling, general and administrative expenses were 43.5%
of revenues for the year ended December 31, 1998, versus 47.0% for the year
ended December 31, 1997.
SEGMENT REPORTING
The Company operated in one segment during 1999. Segment data for 1998
and 1997, which is useful in understanding results for such years, is as
follows:
- --------------------------------------------------------------------------------
(in thousands) YEARS ENDED DECEMBER 31
-----------------------
1998 1997
---- ----
REVENUES
- --------
Consulting and Business Advisory $ 25,457 $ 25,959
Published Research Products 2,718 6,018
All other -- 50
----------------------------
$ 28,175 $ 32,027
============================
OPERATING INCOME (LOSS)
- -----------------------
Consulting and Business Advisory (1) $ 1,313 $ (165)
Published Research Products 16 (2,295)
All other -- (676)
----------------------------
Segment operating income 1,329 (3,136)
Corporate and other (2) (368) (612)
----------------------------
Income (loss) before provision
(benefit) for income taxes $ 961 $ (3,748)
============================
DEPRECIATION AND AMORTIZATION
- -----------------------------
Consulting and Business Advisory $ 1,002 $ 885
Published Research Products 96 238
All other 46 68
----------------------------
$ 1,144 $ 1,191
============================
TOTAL ASSETS
- ------------
Consulting and Business Advisory $ 11,194 $ 10,595
Published Research Products 705 1,886
All other -- --
----------------------------
$ 11,899 $ 12,481
============================
CAPITAL EXPENDITURES
- --------------------
Consulting and Business Advisory $ 618 $ 1,897
Published Research Products -- 42
All other -- --
============================
$ 618 $ 1,939
- - ============================
(1) Operating income for the years ended December 31, 1998 and 1997 include a
restructuring charge for severance and related costs of $321,000 and $155,000,
respectively.
16
- --------------------------------------------------------------------------------
(2) Consists of interest income, other income, gain on sale of net assets,
interest expense and other expense.
- --------------------------------------------------------------------------------
PRODUCT AND SERVICE REVENUES
The Company's revenues decreased by $5,437,000, or 19.3%, from
$28,175,000 in 1998 to $22,738,000 in 1999 and decreased by $3,852,000, or
12.0%, from $32,027,000 in 1997 to $28,175,000 in 1998. The decreases were
primarily due to the sale of Published Research Products completed during the
third quarter of 1998, coupled with a decline in revenues in QCS and SCRG during
1999 as described below.
QCS revenues decreased by $2,137,000, or 10.3%, from $20,713,000 in
1998 to $18,576,000 in 1999 and grew by $197,000, or 1.0%, from $20,516,000 in
1997 to $20,713,000 in 1998. The decrease from 1998 to 1999 was the result of a
0.9% decline in the number of retainer clients and a 12.8% decline in the number
of retainer cardholders. The increase from 1997 to 1998 was due to an increase
in the average retainer fee paid per client, partially offset by a 10.7%
reduction in the number of clients and an 8.4% reduction in the retainer base
(monthly fees billed to clients). The reduction in the retainer base was
primarily due to an increase in the number of rate reductions granted to clients
based on their recent usage history, coupled with a slow-down in new retainer
sales during 1998, as compared to recent years. The slow down in sales was due
primarily to staff turnover in the Business Development area that was
experienced throughout 1998. The reduction in the retainer base began during the
third quarter of 1998, and this was the first time in the Company's history that
there had been a reduction in the retainer base during a full calendar year. The
decline continued through the first quarter of 1999 and, on a dollar value
basis, was reversed in the second quarter of 1999. The Company experienced a
growth in the dollar value of the retainer base in both the third and fourth
quarters of 1999, and for the full year ended December 31, 1999.
As a result, the monthly fees billed to retainer clients (the retainer
base) increased from the beginning of 1999 to the end of 1999 by 2.5% to
$1,507,782. However, until the retainer base is brought back to previous levels
attained in 1998, retainer revenue in QCS will be lower. In 1999, QCS revenue
was lower due to client cancellations exceeding new client acquisitions.
SCRG revenues decreased by $856,000, or 18.1%, from $4,743,000 in 1998
to $3,887,000 in 1999 and by $700,000, or 12.9%, from $5,443,000 in 1997 to
$4,743,000 in 1998. The decrease from 1998 to 1999 was a continuation of the
impact felt by staff turnover in the second half of 1998. The decrease from 1997
to 1998 was due to a significant fall-off in revenue in the third and fourth
quarters of 1998, as compared to the like quarters in 1997, primarily due to
staff turnover which affected the marketing efforts of SCRG.
During the fourth quarter of 1998, staff turnover in SCRG slowed and
since then has moderated. As a result, the Company experienced a decline in
revenues during the first two quarters of 1999, as compared to the like quarters
of 1998. The Customer Satisfaction and Loyalty Division accounted for 22.7%,
28.9% and 15.7% of SCRG's revenue for 1999, 1998 and 1997, respectively.
The Company earned $91,000 and $39,000 in royalties in 1999 and 1998,
respectively, as a result of the sale of the Published Research unit.
17
DIRECT COSTS
Direct costs decreased by $2,721,000, or 19.1%, from $14,263,000 in
1998 to $11,542,000 in 1999 and decreased by $4,139,000, or 22.5%, from
$18,402,000 in 1997 to $14,263,000 in 1998. Direct costs represented 50.8%,
50.6% and 57.5% of revenues, respectively, in 1999, 1998 and 1997. The decreases
were primarily due to the aforementioned sale of Published Research Products,
coupled with a general reduction in direct operating expenses. The general
reduction in direct operating expenses was primarily the result of a reduced
headcount and a decrease in the expenses incurred on behalf of clients.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased by $1,415,000,
or 11.5%, from $12,262,000, or 43.5% of revenues, in 1998 to $10,847,000, or
47.7% of revenues, in 1999 and decreased by $2,797,000, or 18.6%, from
$15,059,000, or 47.0% of revenues, in 1997 to $12,262,000, or 43.5% of revenues,
in 1998. The decrease from 1998 to 1999 was primarily due to a reduction in
labor costs and reduced sales commissions during 1999, partially offset by an
increased emphasis on marketing. The decrease from 1997 to 1998 was primarily
due to reduction in administrative labor and reduced sales labor, primarily due
to turnover, coupled with reduced sales commissions during 1998.
IMPAIRMENT LOSS
During the fourth quarter of 1997, the Company decided to sell
Published Research Products. As a result, the Company reported the carrying
value of the assets held for sale at the lower of cost or their estimated net
realizable values, and an impairment loss of $1,047,000 was recorded in December
1997. The sale of these assets was completed during the third quarter of 1998.
The aforementioned non-cash charge included write-downs of inventory of
$517,000, fixed assets of $405,000, goodwill of $102,000 and deferred charges of
$23,000.
RESTRUCTURING CHARGE
On March 27, 1998, the Company reduced its full-time labor force in its
core business by 20 positions. As a result, the Company recorded a restructuring
charge of $321,000 during the quarter ended March 31, 1998. The charge consisted
mainly of severance payments, which were fully paid by February 15, 1999,
outplacement services and legal costs associated with the elimination of the
positions. As of December 31, 1999, all costs related to this charge had been
paid.
In conjunction with the Company's decision to re-focus its efforts on
its core competencies, the Company reduced its general and administrative staff
in December 1997. Accordingly, the Company recorded a $155,000 restructuring
charge, primarily for severance costs, during the fourth quarter of 1997, all of
which was paid in 1998.
Due to lower than expected revenues and profits in Published Research
Products during the third quarter of 1996, and due to the anticipation of a more
aggressive growth strategy which integrated the products and services of the
Company, the Company reorganized its operating units and changed its method of
marketing and cross-selling its various services. As of December 31, 1999, all
costs related to this charge had been paid.
18
OPERATING INCOME (LOSS)
The Company's operating income was $348,000 in 1999, compared to an
operating income of $1,329,000 in 1998, a decrease of $981,000. The decrease was
primarily related to the sale of Published Research Products, coupled with the
decline in revenue from its QCS and SCRG activities.
The Company's operating income was $1,329,000 in 1998, compared to an
operating loss of $3,136,000 in 1997, an improvement of $4,465,000. The increase
was due primarily to decreased direct costs and SG&A expenses, coupled with a
$2,311,000 improvement in Published Research Products due primarily to the
non-recurring impairment loss of $1,047,000 recorded in 1997.
INTEREST INCOME AND EXPENSE; OTHER ITEMS
In 1999, the Company earned $88,000 in interest income, which increased
from $85,000 in 1998 and $13,000 in 1997. The increase in 1999 was a result of
higher cash balances throughout 1999, coupled with interest earned on notes
receivable.
Interest expense in 1999 was $464,000, which was a decrease from
$522,000 in 1998, and from $597,000 in 1997. The decrease in interest expense
for 1999 compared to 1998 was primarily due to the reduction in bank borrowings.
On December 30, 1999, the Company entered into an agreement with
idealab! and Find.com, Inc. whereby the Company assigned the domain name
"find.com" and licensed the use of certain rights to the trademarks "find.com"
and "find" to Find.com, Inc. idealab! and Find.com, Inc. are not otherwise
related to the Company. Under the terms of the agreement, the Company received
consideration in the form of cash and preferred shares amounting to
approximately $1,200,000, net of related expenses. The Company is also entitled
to certain future royalties. The preferred shares are classified as
available-for-sale marketable securities at December 31, 1999. No royalty income
was earned during 1999.
On January 20, 1998, the Company entered into a settlement agreement
regarding a shareholder lawsuit which began during 1997, pursuant to which the
suit was dismissed with prejudice. As part of the settlement, the Company
purchased 274,400 shares of the Common Stock from the plaintiff for $1.25 per
share, totaling $343,000. The purchase price contained a premium of $0.50 per
share over the closing trade price of the Common Stock on the date of
settlement, or $137,000. As a result of the above, the Company recorded treasury
stock of $206,000 and expense of $137,000. The Company used proceeds from its
insurance company of $495,000 to purchase the shares and to pay plaintiff and
Company legal fees in the amount of $110,000 and $42,000, respectively.
Accordingly, the Company recorded other income and other expense of $289,000,
respectively, related to this matter, with the remaining balance of $206,000
offset against the aforementioned treasury stock repurchase amount, thus
reducing the net treasury stock transaction to zero.
19
INCOME TAXES
The $289,000 income tax provision for the year ended December 31, 1999
represents 24.7% of pre-tax income. Income tax expense for 1999 was favorably
reduced due to the reversal of a $280,000 valuation reserve placed upon deferred
tax assets in prior years.
The $205,000 tax provision recognized for 1998 represents 21.3% of the
1998 pre-tax income. Income tax expense for 1998 was favorably reduced due to
the reversal of $239,000 of the valuation reserve placed upon deferred tax
assets in the prior year.
The $896,000 tax benefit recognized for 1997 represents 23.9% of the
1997 loss before benefit for income taxes. The 1997 benefit includes a net
operating loss carryback for federal purposes, a deferred tax benefit from a net
operating loss carryforward for federal, state and local taxes and a net
deferred tax benefit for temporary items, partially offset by establishing a
valuation allowance of $519,000, and expired tax credits.
Based on the Company's history of prior operating earnings relating to
its consulting and business advisory businesses, management has determined that
a valuation allowance of $280,000 and $519,000 was necessary at December 31,
1998 and 1997, respectively, due to the uncertainty of future earnings to
realize the entire net deferred tax asset. Of the deferred tax asset as of
December 31, 1998, $322,000 was classified as current.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations, borrowings, and prepaid retainer
fees provided by clients. Cash balances were $2,096,000 and $2,307,000 at
December 31, 1999 and 1998, respectively. The Company's working capital position
(current assets, less current liabilities) at December 31, 1999 was $3,199,000,
as compared to $2,569,000 at December 31, 1998.
The Company believes that its cash generated from operations, together
with its existing cash balances, will be sufficient to meet its operating cash
needs and expected capital expenditures for the near term. To supplement
possible short-term cash needs, the Company has a $1,000,000 line of credit at
the prime commercial lending rate plus one-half percent. The line is renewable
annually, and was put in place on December 30, 1999. No amounts were borrowed
under the line of credit as of December 31, 1999.
Cash provided by operating activities was $1,093,000, $2,166,000 and
$236,000 in the years ended December 31, 1999, 1998 and 1997, respectively.
Cash provided by (used in) investing activities was ($472,000),
$737,000 and ($1,889,000) in the years ended December 31, 1999, 1998 and 1997,
respectively. Capital expenditures for the migration of the Company's
10-year-old management information system to a new computer system platform were
a significant component of the amounts invested in all three years. This new
system improves the consultants' ability to communicate with clients, access the
internet, and to integrate the Company's products, as well as to expand the
Company's enterprise network. Total capital expenditures were $672,000,
$618,000, and $1,939,000 in the years ended December 31, 1999, 1998 and 1997,
respectively. In 1998, another significant factor was the receipt of $1,250,000
in cash received upon the sale of assets. During the year ending December 31,
2000, the
20
Company expects to spend approximately $650,000 for capital items, the major
portions of which will be used to complete the migration of the information
systems to the new platform, and for leasehold improvements related to
mechanical heating and cooling systems at one of its locations.
Cash (used in) provided by financing activities was ($832,000),
($735,000), and $1,158,000 in the years ended December 31, 1999, 1998 and 1997,
respectively. In 1999, the most significant item related to the early repayment
of two bank borrowings aggregating $850,000, which were otherwise due in
installments in the years 2000 and 2001. In connection with the repayment of
such bank borrowings, the bank released two $1,000,000 standby letters of credit
that had been provided by a shareholder, SVP, S.A. In 1998, significant
financing activities included the Company's repayment of bank borrowings of
$1,749,000 and the proceeds obtained from the issuance of common shares of
$1,000,000. The share proceeds related to an equity purchase by SVP S.A., a
subsidiary of Amalia S.A. After the transaction, Amalia was the beneficial owner
of approximately 40.7% of the Company's common shares. In 1997, significant
financing activities included bank borrowings of $1,719,000 and repayments of
bank borrowings of $516,000.
In January and February 2000, 216,945 warrants were exercised. Under
the terms of the related agreements, $488,126 of face value of the Senior
Subordinated Note due October 31, 2001 was surrendered as payment.
In accordance with the terms of the Senior Subordinated Notes, the
payment of portions of accrued interest may be deferred. Accrued deferred
interest of $76,000 and $216,000 at December 31, 1999 and 1998, respectively,
was accrued and deferred under such terms. Such amounts compound and accrue
interest at the 12% rate of such Notes.
The Company is currently negotiating with several financial
institutions regarding the possible refinancing of a portion of its long-term
notes payable with the intention of reducing future interest expense.
INFLATION
The Company has in the past been able to increase the price of its
products and services sufficiently to offset the effects of inflation on wages
and other expenses, and anticipates that it will be able to do so in the future.
"YEAR 2000" ISSUE
The Year 2000 ("Y2K") issue is the result of computer programs that
were written using only two digits, rather than four, to represent a year, which
may result in errors or miscalculations. No problems were encountered as of
December 31,1999 or subsequent thereto.
The Company had developed a remediation plan involving the following
three overlapping phases: (1) creation of an inventory of all applications and
information technology equipment, non-information technology systems and vendor
relationships; (2) evaluation of the inventoried items for Y2K compliance,
determination of the remediation method and the resources required, and the
development of an implementation plan and (3) execution of the implementation
plan, including testing the inventoried items in a Y2K environment.
The Company completed all phases, and all hardware, software and
systems are Y2K compliant.
21
As part of its remediation plan, the Company requested and received
representations from certain financial institutions and third party vendors that
indicated their progress towards Y2K compliance. This survey did not indicate
any Y2K compliance issues.
The Company addressed these Y2K issues using internal staff members. The
Company incurred approximately $40,000 in expenses related to remediation
software and hardware. All costs were expensed as incurred and were funded
through operations. The costs incurred through December 31, 1999 did not have a
material affect on the Company's financial position or results of operations.
The Company considered its most likely worst-case scenario to be the
failure of third party vendors to remediate their Y2K issues in a timely manner.
The Company relies on various vendors to deliver a broad range of services. The
Company's inability to receive certain services from current vendors would
affect its ability to provide services to its clients. The Company would be able
to replace those vendors that would not be able to perform due to Y2K
deficiencies.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities", was issued.
SFAS No. 133 established accounting and reporting standards for derivative
instruments and for hedging activities. The Company will adopt SFAS No. 133 on
January 1, 2001. At the current time the Company does not utilize derivative
instruments, and accordingly it is anticipated that the adoption of SFAS No. 133
will not affect the Company's consolidated financial position and results of
operations.
FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
This Annual Report on Form 10-K (and any other reports issued by the
Company from time to time) contains certain forward-looking statements made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Act of 1995. Such forward-looking statements, including statements regarding the
Company's dependence on regulatory approvals, its future cash flows, sales,
gross margins and operating costs, the effect of conditions in the industry and
the economy in general, and legal proceedings, are based on current expectations
that involve numerous risks and uncertainties. Actual results could differ
materially from those anticipated in such forward-looking statements as a result
of various known and unknown factors, including, without limitation, future
economic, competitive, regulatory, and market conditions, future business
decisions, and those factors discussed under Management's Discussion and
Analysis of Financial Condition and Results of Operations. Words such as
"believes", "anticipates", "expects", "intends", "may", and similar expressions
are intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. The Company undertakes no obligation to
revise and of these forward-looking statements. Subsequent written and oral
forward looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by cautionary statements in
this paragraph and elsewhere in this Form 10-K, and in other reports filed by
the Company with the Securities and Exchange Commission.
22
ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The financial position of the Company is subject to market risk
associated with interest rate movements on outstanding debt. The Company has
debt obligations with both fixed and variable terms. The carrying value of the
Company's variable rate debt obligations approximates fair value as the market
rate is based on prime. An increase in the underlying interest rates would
result in a corresponding increase in interest expense, based on the then
outstanding borrowings.
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this
report on pages F-1 through F-29.
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On April 22, 1999, the Company dismissed KMPG LLP ("KPMG") as its
independent accountants. The decision to change independent accountants was
approved by the Board of Directors upon the recommendation of the Audit
Committee.
During the two most recent fiscal years and through April 22, 1999,
there had been no disagreements with KMPG on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure or
any reportable events.
On May 4, 1999, the Company engaged Deloitte & Touche LLP ("D&T") as
its new certifying accountant. Management has not previously consulted with D&T
on any accounting, auditing or financial reporting matters.
23
PART III
ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
DIRECTORS AND OFFICERS
On October 5, 1998, the Board of Directors of the Company established
an Office of Managing Directors ("OMD") (a) responsible for (I) the conduct of
the ordinary business affairs and operations of the Company and (II) defining
operating policies in alignment with SVP International to take advantage of its
know-how and technological efficiencies, (b) comprised of four members, three of
whom shall be elected by the Board of Directors, upon the advice of the
Chairperson of the Board of Directors, and designated Senior Officers with the
title of Managing Directors, and the Chief Executive Officer, and (c) reporting
to the Board of Directors. Each Managing Director must be a member of the Board
of Directors or hold another executive position with the Company.
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Andrew P. Garvin (1) 54 President, Chief Executive Officer and Director
Brigitte de Gastines 56 Managing Director and Chairperson of the Board of Directors
Howard S. Breslow 60 Director
Frederick H. Fruitman 49 Director
Jean-Louis Bodmer 58 Managing Director and Director
Eric Cachart 43 Managing Director and Director
Stephan B. Sigaud (1) 43 Vice President - Client Services
Kenneth A. Ash (1) 55 Vice President - International Strategic Research
Peter Carley (1) 37 Vice President - Human Resources
- -----------------------
(1) Member of an Operating Management Group ("OMG") responsible for
applying the Company's overall policies and strategies and for
proposing initiatives and supplemental strategies for the growth of the
Company.
24
Each director is elected for a period of one year at the Company's
annual meeting of shareholders and serves until his successor is duly elected by
shareholders. Officers are elected by and serve at the will of the Board of
Directors.
Mr. Garvin is a founder of the Company and has served as its Chief
Executive Officer since 1972 and as its President since 1978. Mr. Garvin has
been a director of the Company since its inception and treasurer until 1997.
From 1979 to 1982, Mr. Garvin was a member of the Board of Directors of the
Information Industry Association and served as Chairman of the 1979 National
Information Conference and Exposition. Mr. Garvin is the author of THE ART OF
BEING WELL INFORMED, an information resource handbook for executives. Mr. Garvin
received a B.A. degree in political science from Yale University and an M.S.
degree in journalism from the Columbia Graduate School of Journalism.
Ms. de Gastines was elected a director of the Company in accordance
with the Company's licensing agreement with SVP International. See "Item 1.
Business - SVP Network; Licensing Agreement with SVP International." She has
been a director of the Company since 1982 and Chairperson of the Board since
October 1998. She has served as the General Manager of SVP International since
1985 and SVP S.A. since 1976.
Mr. Breslow has been a director of the Company since 1986. He has been
a practicing attorney in New York for more than 25 years and a member of the law
firm of Breslow & Walker, LLP, New York, New York for more than 20 years.
Breslow & Walker, LLP is currently the Company's general counsel. Mr. Breslow
currently serves as a director of Cryomedical Sciences, Inc., a publicly held
company engaged in the research, development and sale of products for use in low
temperature medicine, Vikonics Inc., a publicly held company engaged in the
design and sale of computer-based security systems, Lucille Farms, Inc., a
publicly held company engaged in the manufacturing and marketing of cheese
products, and Excel Technologies, Inc., a publicly held company engaged in the
development and sale of laser products.
Mr. Fruitman has been a director of the Company since 1989. Since 1990,
Mr. Fruitman has been a Managing Director of Loeb Partners Corporation, an
investment banking firm. Mr. Fruitman is a director of Micro Warehouse, Inc., a
publicly held company which markets computer products.
Mr. Bodmer has served as General Manager of SVP France since 1974.
Other positions which he currently holds are Chief Executive Director of SVP,
S.A., President and Chief Executive Officer of SVP Participation, President of
SVP Belgium, and President of SVP United Kingdom.
Mr. Cachart is the Associate General Manager of SVP, S.A. and has
served as President of SVP Multi-info since 1995. He was named President of SVP
Network in 1998. Prior to 1995 he was a journalist and news commentator for
French television networks.
Mr. Sigaud has been the Company's Vice President of Client Services
since October 1998, and was Vice President and Managing Director of the
Company's Customer Satisfaction and Loyalty Group from May 1994 to October 1998.
From 1989 to 1994 Mr. Sigaud was the owner and President of IDSI, Inc., a
consulting firm specializing in Customer Satisfaction Measurement for companies
in the industrial sector. From 1986 to 1989 he functioned as Executive Vice
President for BMES, Inc., a business-to-business marketing research firm. He was
employed from 1982 to 1986 in the Recruiting Department of Renault in France.
Prior thereto he was in International Sales and Marketing and worked as Business
Development Manager for an engineering firm in East Africa and as Trade Attache
in the French Trade Office in Madagascar. Mr. Sigaud holds a B.S. in Math
25
and Physics from Marseilles University and an MBA in Marketing from ESSEC,
the leading business school in France.
Mr. Ash joined FIND/SVP in March 1992 as Vice President & Managing
Director of the Strategic Consulting & Research Group and became Vice President
International Strategic Research on October 5, 1998. From 1985 to 1992, Mr. Ash
directed his own consulting firm specializing in marketing and acquisition
engagements. In 1991 and 1992, Mr. Ash served as President and CEO of CallTrack
Systems, a start-up company offering a network-based, long distance call
accounting system geared to small and medium-sized organizations. Mr. Ash served
as Vice President of Marketing of Satellite Television Corporation, a COMSAT
subsidiary and major communications start-up venture between 1983 and 1985. From
1973 to 1983, Mr. Ash held progressively senior account management positions at
J. Walter Thompson and Ogilvy & Mather advertising agencies. Mr. Ash served as a
U.S. Navy Officer from 1969 to 1972, earned an MBA from the Wharton School of
the University of Pennsylvania in 1969 and a BA from Princeton University in
1967.
Mr. Carley has been the Company's Vice President of Human Resources
from July 1998 to March 2000, and was Director of Human Resources from December
1997 to July 1998. He joined the company as Manager of Human Resources in
September of 1997. Prior to joining FIND/SVP, he was employed by The Washington
Post Company from February 1996 until September of 1997, where he was most
recently a Director, Human Resources for MLJ, a telecommunications engineering
consulting company. Mr. Carley also worked in training and development,
recruiting, employee relations, and other Human Resources roles at Cost Plus
World Market, a California-based retail firm. He has a Bachelor of Arts degree
from San Francisco State University.
26
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's officers, directors and beneficial owners of more than
10% of any class of its equity securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934 ("Reporting Persons") are required under
that Act to file reports of ownership and changes in beneficial ownership of the
Company's equity securities with the Securities and Exchange Commission. Copies
of those reports must also be furnished to the Company. Based solely on a review
of the copies of reports furnished to the Company pursuant to that Act, the
Company believes that during fiscal year ended December 31, 1999, all filing
requirements applicable to Reporting Persons were complied with.
27
ITEM 11
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company during each of the Company's last three years
to (I) the Company's Chief Executive Officer, and (II) each of the Company's
executive officers who received salary and bonus payments in excess of $100,000
during the year ended December 31, 1999 (collectively the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ---------------------------------- -----------
SECURITIES
NAMES AND OTHER RESTRICTED UNDERLYING LTIP ALL
--------- ------ ----------- ---------- ---- ---
PRINCIPAL SALARY BONUS ANNUAL STOCK OPTIONS PAYOUT OTHER
---------- ------ ----- ------ ----- ------- ------ -----
POSITIONS YEAR ($) ($) COMP. AWARDS ($) (#) (1) ($) COMP.
--------- ---- --- --- ----- ---------- ------- --- -----
ANDREW P. GARVIN 1999 267,679 - - - - - -
PRESIDENT, CHIEF 1998 264,171 50,000 - - - - -
EXECUTIVE OFFICER 1997 253,867 50,000 - - - - -
AND DIRECTOR
VICTOR L. CISARIO 1999 152,885 50,000 - - - - -
VICE PRESIDENT, 1998 118,333 8,500 - - 60,000 - -
CHIEF FINANCIAL 1997 109,144 7,660 - - 5,000 - -
OFFICER, SECRETARY,
TREASURER (2)
STEPHAN B. SIGAUD 1999 175,000 18,611 - - - - -
VICE PRESIDENT - 1998 133,958 200 - - 50,000 - -
CLIENT SERVICES 1997 114,227 39,160 - - - - -
KENNETH A. ASH 1999 150,000 20,000 - - - - -
VICE PRESIDENT - 1998 143,750 83,647 - - 60,000 - -
INTERNATIONAL STRATEGIC 1997 125,000 50,000 - - - - -
RESEARCH
PETER CARLEY 1999 99,719 10,600 - - - - -
VICE PRESIDENT - 1998 - - 55,000 - -
HUMAN RESOURCES 1997 - - - - -
- ------------------------
(1) Options to acquire Common Stock.
(2) Employment terminated on December 31, 1999.
28
OPTION GRANTS DURING 1999
No stock options were granted to the Named Executive Officers during
1999.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
The following table provides information related to options exercised
by each of the Named Executive Officers during the year ended December 31, 1999
and the number and value of options held at fiscal year end. The Company does
not have any outstanding stock appreciation rights.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
---------------------- -------------------------
SHARES
ACQUIRED ON VALUE
EXERCISE REALIZED
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
ANDREW P. GARVIN - - 99,000 170,000 - -
VICTOR L. CISARIO 14,000 10,500 13,000 45,000 4,680.00 52,382.50
STEPHAN B. SIGAUD - - 14,000 36,000 17,920.00 46,080.00
KENNETH A. ASH - - 18,000 42,000 21,321.25 51,181.88
PETER CARLEY 1,000 1,219 15,000 39,000 18,731.25 48,513.75
- -------------------------
(1) The closing sale price of the Common Stock as reported by NASDAQ on December
31, 1999 was $2.03. Value is calculated on the difference between the option
exercise price of in-the-money options and $2.03 multiplied by the number of
shares of Common Stock underlying the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On January 25, 1999, the Company formed a Compensation Committee
currently consisting of Jean-Louis Bodmer, Andrew P. Garvin, Howard S. Breslow
and Frederick H. Fruitman. The purpose of the Compensation Committee is to
review, structure and set the Company's Executive Compensation and to align
management's interest with the success of the Company. The Company has no
nominating or other committees performing similar functions. There were no
interlocking relationships between the Company and other entities that might
affect the determination of the compensation of the executive officers of the
Company.
EMPLOYMENT AND RELATED AGREEMENTS
On January 1, 1996, the Company entered into an Employment Agreement
with Andrew P. Garvin commencing on January 1, 1996 and terminating on December
31, 2001 (the "Employment Agreement"). Such Employment Agreement was amended and
restated on December 12, 1996. The Employment Agreement provides for a base
salary of $250,000 which will be adjusted each January 1 for a cost of living
increase based
29
on the Consumer Price Index for New York City for the twelve month period
immediately preceding such January 1 date. Mr. Garvin will also be entitled to
additional increases in base salary as may be determined from time to time by
the Board of Directors or any compensation committee appointed by the Board of
Directors. Mr. Garvin received a $12,500 signing bonus upon execution of the
Employment Agreement. In addition, Mr. Garvin will be entitled to receive
performance bonuses equal to 10% per annum of the pre-tax profits of the Company
in excess of $1,000,000 for each of the years ended December 31, 1996, 1997,
1998, 1999, 2000, and 2001. The Employment Agreement limits the bonus to
$250,000 in any year, and states that Mr. Garvin is entitled to receive a cash
bonus of $50,000 in each of January 1997 and January 1998.
The Employment Agreement provides that (I) if Mr. Garvin voluntarily
leaves the employ of the Company on account of the Company being acquired and
its principal office being moved to a location which is greater than 50 miles
from New York City; and (II) if Mr. Garvin voluntarily leaves the employ of the
Company on account of a Change in Control, then, in each such case, he shall be
entitled to receive the compensation described in the immediately preceding
paragraph for the balance of the term; provided, however, that if such
termination occurs at a time when there is less than one year left in the term,
the compensation shall continue for a period of two years from the date of
termination on the same basis that the employee received compensation during the
last year of the term. Change of control is defined in the Employment Agreement
to include the acquisition by a party of 30% or more of the outstanding shares
of Common Stock of the Company or a change in the majority of the Incumbent
Board of Directors (as defined in the Employment Agreement). In the event that
the Company terminates Mr. Garvin's employment for cause, and a court of law or
other tribunal ultimately determines that such termination was without cause,
then he shall be entitled to receive double the amount of compensation described
above until the end of the term. Mr. Garvin has agreed to a non-competition
covenant for a period of two years after the term of the Employment Agreement.
During October 1998, Mr. Garvin's contract was amended to provide that
any time after 1999 Mr. Garvin may elect to voluntarily leave the employ of the
Company and receive the balance of his contract for the remaining term of his
employment contract. The term of the contract runs through 2001. Mr. Garvin's
salary for 1999 is $266,592. Additionally, concurrent with the amendment to his
contract, Mr. Garvin relinquished 75,000 options previously granted him in
connection with his employment contract. The vesting and pricing of said options
was contingent upon the Company meeting certain earnings levels over the life of
his employment contract. To date the earnings levels were not met, and
accordingly, the exercise price of those options had not yet been set.
The Company has entered into a deferred compensation agreement with Mr.
Garvin, which provides for a schedule of payments to him or his designated
beneficiary(ies). The agreement entered into in 1984 provides that in the event
during the course of employment Mr. Garvin (I) dies, (II) becomes totally
disabled or (III) elects to retire after June 30, 1994 and prior to age 65, he
or, in the event of death, his designated beneficiaries, shall receive monthly
payments ranging from $1,250 to $1,800 for a period of ten years from the date
of death, disability or retirement. In the event Mr. Garvin retires at age 65 or
over, Mr. Garvin shall receive $4,750 per month for ten years from the date of
his retirement.
The Company entered into an additional Deferred Compensation Agreement
with Mr. Garvin in 1990. Pursuant thereto, in the event during the course of
employment Mr. Garvin (I) dies, (II) becomes totally disabled or (III) elects to
retire after July 25, 1992 and prior to age 65, he or, in the event of death,
his designated beneficiary(ies), shall receive monthly payments ranging from
$618.81 to $2,351. These payments are to continue for a period of ten years from
the date of death, disability or retirement. In the event he retires at age
30
65 or over, Mr. Garvin shall receive $2,475.24 per month for ten years from the
date of his retirement. The benefits under the two agreements are cumulative.
Peter J. Fiorillo resigned as a member of the Board and as the
Company's Chief Operating Officer and Chief Financial Officer, effective
September 30, 1998. In connection with his severance agreement, coupled with the
signing of a release and agreement not to compete dated October 5, 1998, and the
immediate return of his outstanding options, Mr. Fiorillo will be receiving his
then current compensation, including benefits, for the next two years.
Accordingly, the Company has accrued $475,000 for severance and related costs to
selling, general and administrative expenses at September 30, 1998.
Severance arrangements for members of the Operating Management Group
(i.e. Messrs. Sigaud, Ash and Carley) were authorized by the Board of Directors
on January 25, 1999. Severance agreements were entered into with Mssrs. Sigaud
and Ash providing for (a) a normal severance benefit of nine (9) months, which
would be increased to one (1) year after the employee has served as a member of
the OMG for a continuous period of two (2) years, in the event the employee's
services are terminated by the Company without cause, and (b) a severance
benefit of one (1) year in the event the separation from service is due to (I) a
change-in-control, and (II) the employee suffers, within one (1) year
thereafter, either (A) a discontinuation of duties, or (B) an office change of
at least 50 miles, or (C) a reduction in compensation, or (D) a termination of
employment other than for cause.
DIRECTORS' COMPENSATION
On January 25, 1999, the Board of Directors approved the payment of
$1,500 per meeting for the outside members of the Board. On April 22, 1999, the
Board agreed to pay outside directors $500 for each committee meeting attended.
During 1999, Mr. Breslow and Mr. Fruitman each received compensation in the
total amount of $10,500.
The Stock Option Plan of the Company was amended in June 1995 to
provide for the automatic grant to outside directors of five-year non-incentive
options to purchase 2,500 shares of Common Stock on the first business day of
each new year beginning in 1996, the exercise price being the fair market value
on the date of the grant.
On April 22, 1999, the Board voted to grant each outside director
additional five-year, non-incentive stock options to purchase 7,500 shares of
Common Stock on the first business day of each year, commencing with the first
business day of 2000, the exercise price being the fair market value on the date
of the grant.
31
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth, as of December 31, 1999, certain information
with respect to the beneficial ownership of the Common Stock by (I) each person
known by the Company to be the beneficial owner of more than 5% of its
outstanding Common Stock, (II) each of the directors of the Company, (III) each
of the Named Executive Officers, (IV) and by all current executive officers and
directors as a group.
NAME AND ADDRESS NUMBER OF SHARES
BENEFICIAL OWNER OWNED(1) PERCENT
---------------- -------- -------
Andrew P. Garvin
625 Avenue of the Americas
New York, NY 10011 (2) 1,040,254 14.0%
Amalia S.A.
70, rue des Rosiers
F-93585 Saint-Ouen, Cedex
FRANCE (3) 3,075,085 40.7%
Brigitte de Gastines (4) 17,500 Less than 1%
Howard S. Breslow (5)(6) 36,320 Less than 1%
Frederick H. Fruitman (6) 65,679 Less than 1%
Jean-Louis Bodmer (4) 7,500 Less than 1%
Kenneth A. Ash (7) 80,000 1.1%
Peter M. Carley (8) 56,000 Less than 1%
Victor L. Cisario (9) 79,400 1.0%
Stephan B. Sigaud (10) 50,000 Less than 1%
Furman Selz SBIC, L.P.
230 Park Avenue
New York, NY 10169 (11) 900,000 11.2%
All Current Executive Officers
and Directors as a
Group (9 persons) (12) 1,428,253 18.6%
32
(1) Unless otherwise indicated below, all shares are shares of Common Stock
owned beneficially and of record.
(2) Includes 269,000 shares issuable under outstanding options.
(3) Includes the 422,222 shares issuable under outstanding warrants held by
SVP, S.A., the 2,158,100 shares of Common Stock owned by SVP, S.A. and
the 494,763 shares of Common Stock owned by SVP International, which
are subsidiaries of Amalia S.A. Brigitte de Gastines owns in excess of
99% of the stock of Amalia S.A. In addition, Ms. de Gastines is
President, General Manager and a director of SVP, S.A., and General
Manager of SVP International. The shares owned by Amalia S.A. are not
shown in the table as being owned by Ms. de Gastines.
(4) Includes 7,500 shares issuable under outstanding options.
(5) Includes all of the 18,820 shares of Common Stock owned by record of
Breslow & Walker, LLP, a law firm in which Mr. Breslow is a partner.
(6) Includes 17,500 shares issuable under outstanding options.
(7) Includes 60,000 shares issuable under outstanding options.
(8) Includes 54,000 shares issuable under outstanding options.
(9) Includes 58,000 shares issuable under outstanding options.
(10) Includes 50,000 shares issuable under outstanding options.
(11) Includes all of the 900,000 shares issuable under outstanding Warrants.
(12) Includes 541,000 shares issuable under outstanding options.
33
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1971, the Company has been a licensee of SVP International.
Pursuant to this license agreement, the Company pays royalties to SVP
International for the use of the SVP name and participation in the SVP
International network. For a description of the relationship of Ms. de Gastines,
Mr. Bodmer and Mr. Cachart to SVP International see "Item 10. Directors and
Executive Officers of the Registrant." The accrued royalties payable as of
December 31, 1999 to SVP International were approximately $240,000.
On January 15, 1998, the Company entered into an agreement with SVP,
S.A., an affiliate of SVP International, pursuant to which SVP, S.A. purchased
800,000 shares of Common Stock at $1.25 per share for an aggregate of
$1,000,000. The transaction was completed in two parts. The Company issued
600,000 shares of Common Stock and a $250,000 Convertible Note in January 15,
1998, pending the availability of shares for issuance. The Note converted into
200,000 shares of Common Stock on February 20, 1998, when those shares became
available for issuance. With this transaction, SVP International and its
affiliates own approximately 37% of then outstanding shares of Common Stock,
excluding outstanding warrants.
Howard S. Breslow, a director of the Company, is a member of Breslow &
Walker, LLP, general counsel to the Company. During 1999, Breslow & Walker, LLP
received legal fees of $50,535.
34
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following Financial Statements are filed as part of this
10-K:
Independent Auditors' Reports.
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Consolidated Statements of Operations for the years ended
December 1999, 1998 and 1997.
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
(2) SCHEDULE
The following Financial Statement schedule is filed as part of
this 10-K:
Schedule II - Valuation and Qualifying Accounts
Other Financial Statement schedules are omitted because they
are not applicable or because the information required is
provided in the Consolidated Financial Statements or Notes
thereto included herein.
(3) EXHIBITS
EXHIBIT
NUMBER DOCUMENT
------ --------
3(a) Copy of restated Certificate of Incorporation a
amended(1), and amendment thereto.
(b) Copy of By-Laws, as amended.(3)
4(a) Copy of specimen of Common Stock Certificate.(1)
35
10(a) Copy of License Agreement, dated October 11,
1971, between the Company and SVP International
(formerly SVP Conseil) and an amendment thereto,
dated March 23, 1981.(1)
(b) Copy of 1986 Stock Option Plan.(1)
(c) Copy of Deferred Compensation and Salary
Continuation Agreement, dated June 30, 1984,
between the Company and Andrew P. Garvin .(1)
(d) Copy of the lease related to premises at 625
Avenue of the Americas, NY, NY.(2) and amendment
related thereto.(6)
(e) Copy of Target Benefit Plan of the Company.(4)
(f) Copy of Deferred Compensation and Salary
Continuation Agreement, dated July 25, 1990,
between the Company and Andrew P. Garvin. (5)
(g) Copy of Lease dated July 19, 1994 related to
premises on 3rd floor at 641 Avenue of the
Americas, NY, N.Y. (8)
(h) Copy of lease dated March 15, 1995 related to
premises on 4th floor at 641 Avenue of the
Americas, NY, N.Y. (8)
(i) Copy of Commercial Revolving Loan, Term Loan and
Security Agreement dated April 27, 1995 between
State Street Bank and Trust Company and the
Company. (9)
(j) Copy of 401(k) and Profit Sharing Plan of the
Company.(10)
(k) Copy of Employment Agreement, amended and
restated as of December 12, 1996, between the
Company and Andrew P. Garvin.(13)
(l) Copy of the Note and Warrant Purchase Agreement
with Furman Selz SBIC, L.P., dated October 31,
1996. (12)
36
(m) Copy of the Note and Warrant Purchase Agreement
with SVP, S.A. dated November 30, 1996. (13)
(n) FIND/SVP, Inc. 1996 Stock Option Plan. (14)
(o) Copy of ETRG Sale Agreement. (15)
(p) Copy of Commercial Revolving Loan, dated October
22, 1997, between State Street Bank and Trust,
Inc. (the "Bank") and the Company. (15)
(q) Copy of Second Modification Agreement, as of
September 30, 1997, between the Bank and the
Company. (15)
(r) January 20, 1998 Agreement between Asset Value
Fund and the Company. (16)
(s) Copy of the Third Modification Agreement as of
December 31, 1997, between the Bank and the
Company. (16)
(t) Copy of Fourth Modification Agreement, as of
January 15, 1998, between the Bank and the
Company. (16)
(u) Copy of the Fifth Modification Agreement as of
March 27, 1998 between the Bank and the Company.
(17)
(v) Copy of the Sixth Modification Agreement as of
April 3, 1998 between the Bank and the Company.
(17)
(w) Copy of the Sale Agreement for FIND/SVP Published
Products, Inc.'s assets (18)
(x) Copy of the Stock Purchase Agreement between SVP,
S.A. and the Company dated January 15, 1998. (19)
(y) Copy of Peter J. Fiorillo's Severance Agreement.
(20)
(z) Copy of the idealab! Agreement dated December 30,
1999.
(aa) Copy of the Chase Manhattan Bank Loan Agreement
dated December 30, 1999.
21 List of Subsidiaries. (11)
23 Independent Auditors' Consents.
27 Financial Data Schedule.
37
(1) Incorporated by reference to the Company's Registration Statement on
Form S-18 (Reg. No. 33-8634-NY) which became effective with the
Securities and Exchange Commission on October 31, 1986.
(2) Incorporated by reference to the Company's Form 8-K filed with the
Securities and Exchange Commission on February 2, 1987.
(3) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1987.
(4) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1989.
(5) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1990.
(6) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1992.
(7) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1993.
(8) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1994.
(9) Incorporated by reference to the Company's Form 10-Q filed for the
Quarter ended March 31, 1995.
(10) Incorporated by reference to the Company's Form S-8 filed on March 29,
1996.
(11) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1995.
(12) Incorporated by reference to the Company's Form 8-K, filed on November
13, 1996, and amended by Form 8-K/A No. 1 on November 21, 1996.
(13) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1996.
(14) Incorporated by reference to the Company's Form S-8, filed on February
27, 1997.
(15) Incorporated by reference to the Company's Form 10-Q, filed for the
quarter ended September 30, 1997.
38
(16) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1997.
(17) Incorporated by reference to the Company's Form 10-Q filed for the
quarter ended March 31, 1998.
(18) Incorporated by reference to the Company's Form 8-K, filed on July 17,
1998.
(19) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1998.
(20) Incorporated by reference to the Company's Form 10-K filed for the year
ended December 31, 1998.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed in the last quarter of the period
covered by this Form 10-K.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FIND/SVP, INC.
Date: March 30, 2000 BY: /s/ ANDREW P. GARVIN
--------------------
Andrew P. Garvin, President and Chief
Executive Officer
Principal Executive Officer)
Date: March 30, 2000 BY: /s/ FRED S. GOLDEN
------------------
Fred S. Golden
(Principal Financial Officer
and Principal Accounting Officer)
Pursuant to the requirement(s) of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 30, 2000 /s/ ANDREW P. GARVIN
---------------------
Andrew P. Garvin, Director
Date: March 30, 2000
------------------------------
Brigitte de Gastines, Director
Date: March 30, 2000 /s/ HOWARD S. BRESLOW
---------------------
Howard S. Breslow, Director
Date: March 30, 2000 /s/ FREDERICK H. FRUITMAN
-------------------------
Frederick H. Fruitman, Director
Date: March 30, 2000 /s/ ERIC CACHART
----------------------
Eric Cachart, Director
Date: March 30, 2000 /s/ JEAN-LOUIS BODMER
---------------------------
Jean-Louis Bodmer, Director
40
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FIND/SVP, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
PAGE
----
Independent Auditors' Reports F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-4
Consolidated Statements of Operations
for the years ended December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Cash Flows
for the years ended December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8
Schedule:
Independent Auditors' Report on Supplemental Schedule F-28
Schedule II - Valuation and Qualifying Accounts F-29
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Find/SVP, Inc.
We have audited the accompanying consolidated balance sheet of Find/SVP, Inc.
and subsidiaries (the Company) as of December 31, 1999, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such 1999 financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1999, and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Stamford, Connecticut
March 24, 2000
F-2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
FIND/SVP, Inc.:
We have audited the accompanying consolidated balance sheet of FIND/SVP, Inc.
and subsidiaries as of December 31, 1998, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
ended December 31, 1998 and 1997. In connection with our audits of the
consolidated financial statements, we also have audited the accompanying
financial statement schedule for the years ended December 31, 1998 and 1997.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FIND/SVP, Inc. and
subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the years ended December 31, 1998 and 1997, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth herein.
KPMG
New York, New York
February 22, 1999
F-3
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Balance SheetsDecember 31
(in thousands)
ASSETS 1999 1998
---- ----
Current assets:
Cash and cash equivalents $ 2,096 $ 2,307
Marketable securities 500 --
Accounts receivable, less allowance for doubtful
accounts of $101,000 in 1999 and $104,000 in 1998 1,941 2,188
Note receivable 138 200
Deferred tax assets 114 322
Prepaid expenses and other current assets 323 466
--------- --------
Total current assets 5,112 5,483
Equipment and leasehold improvements, at cost, less
accumulated depreciation and amortization 3,995 4,250
Other assets:
Cash surrender value of life insurance 633 569
Accrued rent receivable 416 230
Deferred tax assets 403 440
Note receivable 275 413
Other assets 444 514
--------- --------
$ 11,278 $ 11,899
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable $ -- $ 500
Trade accounts payable 409 497
Accrued expenses and other 1,430 1,719
Accrued interest 74 198
--------- --------
Total current liabilities 1,913 2,914
--------- --------
Unearned retainer income 1,929 1,917
Notes payable, including accrued deferred interest 3,039 3,523
Accrued expenses -- 169
Deferred compensation 267 193
Accrued rent payable 241 195
Commitments and contingencies
Shareholders' equity:
Common stock, $.0001 par value. Authorized 20,000,000
shares; issued and outstanding 7,136,919 shares in
1999; issued and outstanding 7,114,169 shares in 1998 1 1
Capital in excess of par value 4,904 4,886
Accumulated deficit (1,016) (1,899)
--------- --------
Total shareholders' equity 3,889 2,988
--------- --------
$ 11,278 $ 11,899
========= ========
See accompanying notes to consolidated financial statements.
F-4
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31
(in thousands, except share and per share data)
1999 1998 1997
---- ---- ----
Revenues $ 22,738 $ 28,175 $ 32,027
----------- ----------- -----------
Operating expenses:
Direct costs 11,543 14,263 18,402
Selling, general and administrative
expenses 10,847 12,262 15,059
Impairment loss -- -- 1,047
Asset disposal -- -- 500
Restructuring charge -- 321 155
----------- ----------- -----------
Operating income (loss) 348 1,329 (3,136)
Interest income 88 85 13
Other income 1,200 364 --
Gain (loss) on sale of net assets -- 20 (28)
Interest expense (464) (522) (597)
Other expense -- (315) --
----------- ----------- -----------
Income (loss) before provision
(benefit) for income taxes 1,172 961 (3,748)
Provision (benefit) for income taxes 289 205 (896)
----------- ----------- -----------
Net income (loss) $ 883 $ 756 $ (2,852)
=========== =========== ===========
Earnings (loss) per common share:
Basic $ .12 $ .11 $ (.43)
=========== =========== ===========
Diluted $ .12 $ .11 $ (.43)
=========== =========== ===========
Weighted average number of common shares outstanding:
Basic 7,121,242 7,094,273 6,592,773
=========== =========== ===========
Diluted 7,213,270 7,100,070 6,592,773
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-5
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended December 31
(in thousands, except share amounts)
COMMON STOCK CAPITAL IN ACCUMULATED TREASURY STOCK TOTAL
----------------- EXCESS OF EARNINGS --------------------- SHAREHOLDERS'
SHARES AMOUNT PAR VALUE (DEFICIT) SHARES AMOUNT EQUITY
------ ------ --------- ---------- ------ ------ ------
Balance at January 1, 1997 6,548,184 $ 1 $ 3,861 $ 197 -- $ -- $ 4,059
Net loss -- -- -- (2,852) -- -- (2,852)
Purchase of treasury stock -- -- -- -- 72,500 (88) (88)
Exercise of stock options and warrants 74,985 -- 57 -- -- -- 57
Retirement of treasury shares (72,500) -- (88) -- (72,500) 88 --
Common stock issued for services 25,000 -- 37 -- -- -- 37
Sale of warrants in connection with
Series A Senior Subordinated Notes -- -- 5 -- -- -- 5
----------- ---------- ---------- ----------- -------- -------- ----------
Balance at December 31, 1997 6,575,669 1 3,872 (2,655) -- -- 1,218
----------- ---------- ---------- ----------- -------- -------- ----------
Net income -- -- -- 756 -- -- 756
Purchase of treasury stock -- -- -- -- (274,400) -- (456)
Exercise of stock options and warrants 12,900 -- 14 -- -- -- 14
Retirement of treasury shares (74,400) -- -- -- 74,400 -- 206
Common stock issued 600,000 -- 1,000 -- 200,000 -- 1,250
----------- ---------- ---------- ----------- -------- -------- ----------
Balance at December 31, 1998 7,114,169 1 4,886 (1,899) -- -- 2,988
----------- ---------- ---------- ----------- -------- --------- ----------
Net income -- -- -- 883 -- -- 883
Exercise of stock options and warrants 22,750 -- 18 -- -- -- 18
----------- ---------- ---------- ----------- -------- --------- ----------
Balance at December 31, 1999 7,136,919 $ 1 $ 4,904 $ (1,016) -- $ -- $ 3,889
=========== ========== ========== =========== ======== ========== ==========
See accompanying notes to consolidated financial statements.
F-6
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31
(in thousands)
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 883 $ 756 $(2,852)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,105 1,144 1,191
Non-cash portion of impairment loss -- -- 1,047
Non-cash portion of asset disposal -- -- 408
Provision for losses on accounts receivable 90 164 254
(Gain) loss on sale of net assets -- (20) 28
Increase in deferred compensation 74 20 21
Increase (decrease) in unearned retainer income 12 (106) 533
Increase in marketable securities (500) -- --
Increase in cash surrender value of life insurance (64) (132) (55)
Decrease (increase) in deferred income taxes 245 205 (668)
Decrease in assets held for sale -- 99 --
Changes in assets and liabilities, net of non-cash
effect of asset sale:
Decrease (increase) in accounts receivable 157 1,042 (799)
Decrease in prepaid and refundable income taxes -- 299 250
Decrease in inventory -- -- 413
Decrease (increase) in prepaid expenses and
other current assets 143 (138) 167
Increase in accrued rent receivable (186) (186) (44)
Increase in other assets (102) (93) (92)
(Decrease) increase in accounts payable, accrued
expenses and accrued interest (810) (927) 475
Increase (decrease) in accrued rent payable 46 39 (41)
------- ------- -------
Net cash provided by operating activities 1,093 2,166 236
------- ------- -------
Cash flows from investing activities:
Capital expenditures (672) (618) (1,939)
Surrender of life insurance -- 42 --
Repayment of notes receivable 200 63 50
Proceeds from sale of net assets -- 1,250 --
------- ------- -------
Net cash (used in) provided by investing
activities (472) 737 (1,889)
------- ------- -------
Cash flows from financing activities:
Principal borrowings under notes payable -- -- 1,719
Principal payments under notes payable (850) (1,749) (516)
Proceeds from issuance of convertible note-related party -- 250 --
Proceeds from exercise of stock options 18 14 57
Proceeds from sale of warrants in connection with Series
Senior Subordinated Notes -- -- 5
Proceeds from issuance of common stock -- 750 --
Payments to acquire treasury stock -- (206) (88)
Proceeds from insurance company, net of expenses -- 206 --
Increase in deferred financing fees -- -- (19)
------- ------- -------
Net cash (used in) provided by financing
activities (832) (735) 1,158
------- ------- -------
Net (decrease) increase in cash and
cash equivalents (211) 2,168 (495)
Cash and cash equivalents at beginning of year 2,307 139 634
------- ------- -------
Cash and cash equivalents at end of year $ 2,096 $ 2,307 $ 139
======= ======= =======
See accompanying notes to consolidated financial statements.
F-7
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION AND BASIS OF PRESENTATION
Find/SVP, Inc. and its wholly owned subsidiaries (the "Company")
provide a broad consulting, advisory and business intelligence
service to executives and other decision-making employees of
client companies, primarily in the United States. The Company
currently operates in one business segment, providing consulting
and business advisory services including: the Quick Consulting and
Research Service ("QCS") which provides retainer clients with
access to the expertise of the Company's staff and information
resources; and the Strategic Consulting and Research Group
("SCRG") which provides more extensive, in-depth custom market
research and competitive intelligence information, as well as
customer satisfaction and loyalty programs. Prior to the third
quarter of 1998, the Company had one additional operating segment,
Published Research Products. The Company considers its QCS and
SCRG service businesses, which operate as "consulting and business
advisory" businesses, to be its core competencies.
As such, during July 1998, the Company completed the sale of
substantially all of the assets of its FIND/SVP Published
Products, Inc. subsidiary ("Published Research"). In consideration
of the sale the Company received $1,250,000 in cash during 1998, a
promissory note bearing interest at 8% per annum in the principal
amount of $550,000 and the purchaser assumed certain liabilities
in the amount of $85,000. The Company recorded a gain of $20,000
from this transaction. During 1997, the Company recorded an
impairment loss related to the aforementioned assets of
$1,047,000. The revenues from Published Research accounted for
approximately 9% and 19% of the Company's total revenues during
1998 and 1997, respectively.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company. All significant intercompany balances and transactions
have been eliminated in consolidation.
(C) EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost.
Depreciation of equipment is computed by the straight-line method
over the estimated useful lives of the assets, which are five
years for electronic equipment and ten years for the Company's
proprietary management information system. Computer software is
primarily depreciated over five years. Leasehold improvements are
amortized by the straight-line method over the shorter of the term
of the lease or the estimated life of the asset.
F-8
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
(D) DEFERRED CHARGES AND GOODWILL
Deferred charges primarily comprise the cost of acquired library
information files and electronic databases, which are amortized to
expense over the estimated period of benefit of three years using
the straight-line method.
Goodwill arising from various acquisitions represents the excess
of purchase price over fair value of assets and liabilities
acquired and is being amortized on a straight-line basis over 15
to 40 years.
(E) DEFERRED FINANCING FEES
Deferred financing fees primarily relate to costs incurred with
respect to the issuance of the Senior Subordinated Notes ("Senior
Notes") and are being amortized on a straight-line basis over the
life of the Senior Notes. The related amortization is included in
interest expense.
(F) INCOME TAXES
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating losses
and tax credit carryforwards. Deferred tax assets and liabilities
are measured using currently enacted tax rates. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date. Realization of the net deferred tax assets is dependent on
future reversals of existing taxable temporary differences and
adequate future taxable income, exclusive of reversing temporary
differences and carryforwards. Although realization is not
assured, management believes that it is more likely than not that
the net deferred tax assets will be realized.
(G) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during the year. Diluted earnings (loss) per share is
computed using a diluted weighted average number of common shares
outstanding during the year. Such dilution is computed using the
treasury stock method for the assumed conversion of stock options
and warrants whose exercise price was less than the average market
price of the common shares during the respective period, and
certain additional dilutive effects of exercised, terminated and
cancelled stock options. In 1997 there was no such dilutive
effect.
F-9
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
Options and warrants to purchase 1,883,789, 2,530,225 and
2,723,077 common shares during the years ended December 31, 1999,
1998 and 1997, respectively, were antidilutive and were therefore
excluded from the computation of diluted earnings per share
because the exercise price of such options and warrants was
greater than the average market price of common shares during the
respective period.
(H) REVENUE RECOGNITION
Revenues from annual retainer fees are recognized ratably over the
contractual period. Other revenues are recognized as earned.
Revenues include certain out-of-pocket and other expenses billed
to clients which aggregated approximately $2,186,000, $2,875,000
and $3,191,000 in 1999, 1998 and 1997, respectively.
(I) CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes all highly liquid investments
with original maturities of three months or less.
(J) MARKETABLE SECURITIES
The Company classifies its debt and marketable equity securities
in one of three categories: trading, available-for-sale, or
held-to-maturity. Trading securities are bought and held
principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities in which the
Company has the ability and intent to hold the security until
maturity. All other securities not included in trading or
held-to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair
value. Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from
earnings and are reported as a separate component of shareholders'
equity until realized. In the years ended December 31, 1999, 1998
and 1997, there were no such holding gains or losses. Realized
gains and losses from the sale of available-for-sale securities
are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
Transfers of securities between categories are recorded at fair
value at the date of transfer.
A decline in the market value of any available-for-sale security
below cost that is deemed other than temporary is charged to
earnings and results in the establishment of a new cost basis for
the security.
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating the
fair value of financial instruments:
F-10
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
The carrying values reported in the balance sheets for cash,
marketable securities, accounts receivable, prepaid expenses and
other current assets, accounts payable and accrued expenses
approximate fair values.
The fair value of notes payable, which approximates its carrying
value, is estimated based on the current rates offered to the
Company for debt of the same remaining maturities.
(L) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
undiscounted future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
(M) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging
Activities", was issued. SFAS No. 133 established accounting and
reporting standards for derivative instruments and for hedging
activities. The Company will adopt SFAS No. 133 on January 1,
2001. At the current time the Company does not utilize derivative
instruments, and accordingly it is anticipated that the adoption
of SFAS No. 133 will not affect the Company's consolidated
financial position and results of operations.
(N) USE OF ESTIMATES
Management makes estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of
contingent assets and liabilities and the reported amounts of
revenue and expenses to prepare these consolidated financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(O) RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with
current year presentation.
F-11
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
At December 31, 1999 and 1998, equipment and leasehold improvements
consist of the following:
- --------------------------------------------------------------------------------
1999 1998
---- ----
Furniture, fixtures and equipment, including
computer software $8,598,000 $8,171,000
Leasehold improvements 1,796,000 1,551,000
----------------- ----------------
10,394,000 9,722,000
Less: accumulated depreciation and amortization 6,399,000 5,472,000
----------------- ----------------
$3,995,000 $4,250,000
================= ================
- --------------------------------------------------------------------------------
(3) OTHER ASSETS
At December 31, 1999 and 1998, other assets consist of the following:
- --------------------------------------------------------------------------------
1999 1998
---- ----
Deferred charges $151,000 $165,000
Security deposits 142,000 142,000
Goodwill, net 96,000 106,000
Deferred financing fees, net 55,000 101,000
----------------- ----------------
$444,000 $514,000
================= ================
- --------------------------------------------------------------------------------
(4) LEASES
The Company has an operating lease agreement for its principal offices,
which expires in 2005. As a result of certain lease renegotiations,
rental expense is scheduled to decline over the term of the lease. Rental
expense under this lease is recorded on a straight-line basis. Scheduled
payments through December 31, 1999 and 1998 exceeded rental expense
recorded on this lease through such date by $416,000 and $230,000,
respectively.
The Company has two operating leases for additional office space that
expire in 2005. Rental expense is scheduled to increase over the term of
the lease. Rental expenses on these leases are recorded on a
straight-line basis. Accordingly, rent recorded through December 31, 1999
and 1998 exceeded scheduled payments by $241,000 and $195,000,
respectively. In 1998, the Company gave up its rights to part of its
leased space for which the Company received a payment of $75,000 from its
landlord, which was included in other income in 1998. As of December 31,
1999, the Company has $163,000 of cash on deposit that has been pledged
as security against Letters of Credit issued as security in connection
with these leases.
F-12
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4), CONTINUED
The Company's leases of office space include standard escalation clauses.
Rental expenses under leases for office space and certain equipment
accounted for as operating leases were $1,676,000, $1,749,000 and
$1,903,000 in 1999, 1998 and 1997, respectively.
The future minimum lease payments under noncancellable operating leases
as of December 31, 1999 were as follows:
- --------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31 OPERATING LEASES
------------------------ ----------------
2000 $1,477,000
2001 1,487,000
2002 1,247,000
2003 1,007,000
2004 1,007,000
Thereafter 503,000
-----------------
Total minimum lease payments $6,728,000
=================
- --------------------------------------------------------------------------------
(5) NOTES PAYABLE
Notes payable as of December 31, 1999 and 1998 consist of the following:
- --------------------------------------------------------------------------------
1999 1998
---- ----
Bank borrowings $ -- $ 850,000
Borrowings under debt agreements with investors:
$2,025,000 Series A Senior Subordinated
Note, net of unamortized discount of $7,000
and $11,000 as of December 31, 1999 and
1998, respectively, due October 31, 2001 2,018,000 2,014,000
$475,000 Series A Senior Subordinated
Note - SVP, S.A., net of unamortized
discount of $2,000 and $3,000 as of
December 31, 1999 and 1998, respectively, due
November 30, 2001 473,000 472,000
$475,000 Series A Senior Subordinated
Note - SVP, S.A., net of unamortized
discount of $3,000 and $4,000 as of
December 31, 1999 and 1998, respectively, due
August 25, 2002 472,000 471,000
---------- ----------
Total notes payable 2,963,000 3,807,000
---------- ----------
Less current installments -- 500,000
---------- ----------
Plus accrued deferred interest 76,000 216,000
---------- ----------
Notes payable, excluding current
installments $3,039,000 $3,523,000
========== ==========
F-13
- --------------------------------------------------------------------------------
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5), CONTINUED
(A) DEBT AGREEMENTS WITH BANK
The Company's bank borrowings were fully paid during the first
quarter of 1999.
At December 31, 1998, $850,000 was outstanding under two loans at
an average interest rate of 8.75%.
The Company has a $1,000,000 line of credit at the prime
commercial lending rate plus 0.5%. The line is renewable annually,
and was put in place on December 30, 1999. No amounts were
borrowed under the line of credit as of December 31, 1999.
(B) DEBT AGREEMENTS WITH INVESTORS
Borrowings under the debt agreements with investors accrue
interest at an annual rate of 12% on the unpaid principal balance.
Interest payments are made periodically, and the agreements allow
for the automatic deferral of some of the interest. Any interest
that is deferred, compounds and accrues interest at 12%. As of
December 31, 1999, there was approximately $150,000 of accrued but
unpaid interest of which $76,000 was deferred in accordance with
said provisions. As of December 31, 1998, there was approximately
$363,000 of accrued but unpaid interest, of which $216,000 was
deferred.
The aggregate principal maturities of long-term debt for the next five
years, including deferred interest and after full amortization of
discounts, are as follows:
- --------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31,
- ------------------------
2000 $ --
2001 2,547,000
2002 504,000
-----------
$ 3,051,000
===========
- --------------------------------------------------------------------------------
(6) SHAREHOLDERS' EQUITY
(A) SALE OF COMMON STOCK
In 1998, SVP S.A. ("SVP"), a subsidiary of Amalia S.A., purchased
$1,000,000 of the Company's common stock at $1.25 per share. At
December 31, 1999 and 1998, Amalia S. A. was the beneficial owner
of approximately 40.7% and 40.8%, respectively, of the Company's
common shares.
F-14
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6), CONTINUED
(B) COMMON STOCK WARRANTS
At December 31, 1996, warrants to purchase 1,261,111 shares of the
Company's common stock were outstanding at an exercise price of
$2.25 per share. During the year ended December 31, 1997, warrants
to purchase 211,111 shares of the Company's common stock at an
exercise price of $2.25 per share were acquired by SVP. Such
warrants remained outstanding through December 31, 1999.
All warrants may be exercised by payment to the Company in cash,
or by surrender to the Company of the equivalent face value amount
of Senior Subordinated Notes.
In January and February 2000, 216,945 of such warrants were
exercised. Under the terms of the agreement, $488,126 of face
value of the Senior Subordinated Note due October 31, 2001 was
surrendered as payment.
(C) STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "Plan"), as amended in
1998, authorizes grants of options to purchase up to 1,150,000
shares of common stock, issuable to employees, directors and
consultants of the Company, at prices at least equal to fair
market value at the date of grant (110% of the fair market value
for holders of 10% or more of the outstanding shares of common
stock).
The options to be granted under the Plan will be designated as
incentive stock options or non-incentive stock options by the
Stock Option Committee. Options granted under the Plan are
exercisable during a period of no more than ten years from the
date of the grant (five years for options granted to holders of
10% or more of the outstanding shares of common stock). All
options outstanding at December 31, 1999 expire within the next
five years if not exercised. Options that are cancelled or expire
during the term of the Plan are eligible to be re-issued under the
Plan and, therefore, are considered available for grant.
There were 212,200 options outstanding under the 1986 Stock Option
Plan as of December 31, 1999, and there were no options available
for grant under this plan at December 31, 1999.
F-15
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6), CONTINUED
Activity under the stock option plans is summarized as follows:
- --------------------------------------------------------------------------------
WEIGHTED
--------
AVAILABLE AVERAGE
---------- -------
FOR OPTIONS EXERCISE
--- ------- ---------
GRANT GRANTED PRICE
----- ------- -----
January 1, 1997 238,150 1,252,963 $ 1.74
Granted (140,000) 140,000 1.32
Exercised -- (76,985) 0.77
Cancelled and terminated 139,265 (139,265) 1.58
No longer available under 1986 Plan (109,315) -- --
--------- --------- --------
December 31, 1997 128,100 1,176,713 1.78
Additional authorized 500,000
Granted (366,500) 366,500 0.84
Exercised -- (12,900) 1.12
Cancelled and terminated 540,550 (540,550) 1.46
No longer available under 1986 Plan (235,000) -- --
--------- --------- --------
December 31, 1998 567,150 989,763 1.31
Granted (247,500) 247,500 0.80
Exercised -- (22,750) 0.77
Cancelled and terminated 338,613 (338,613) 1.09
No longer available under 1986 Plan (171,963) -- --
--------- --------- --------
December 31, 1999 486,300 875,900 $ 1.12
========= ========= ========
Exercisable at December 31, 1999 327,075 $ 1.40
========= ========
- --------------------------------------------------------------------------------
As of December 31, 1999, there were 875,900 options outstanding,
exercisable at $0.65625 to $2.25, with a weighted average
remaining contractual life of 3.19 years. As of December 31, 1999,
there were 327,075 exercisable options, exercisable at $0.65625 to
$2.25, with a weighted average remaining contractual life of 3.09
years.
On June 30, 1998 the Stock Option Committee of the Board of
Directors voted in favor of a plan to re-price certain outstanding
options held by employees on that date. There was a total of
89,550 options with original issue dates between 1994 and 1998
that were re-priced. The original exercise price of said options
ranged from $1.21 to $2.25 and the weighted-average exercise price
of those options was $1.78. The options were re-priced at $1.0625,
the fair market value on June 30, 1998. All other aspects of the
options were not changed. The weighted average exercise prices
noted above reflect this repricing.
F-16
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6), CONTINUED
Included in the options granted as of January 1, 1997 are 300,000
options the Company granted to the President of the Company.
Contingent upon meeting certain earnings levels over the life of
his employment agreement, these options will vest on the
certification date of the targeted earnings levels. The exercise
price of these options will be equal to the fair market value of
the common stock on the vesting date or 110% of such fair market
value if the President is a holder of 10% or more of the
outstanding shares of common stock on such date. During 1999 and
1998, the President relinquished a total of 150,000 of these
options.
The Company applies APB Opinion No. 25 in accounting for its Plan
and, accordingly, no compensation cost has been recognized for its
stock options in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net income (loss) would
have been reduced (increased) to the pro forma amounts indicated
below:
- --------------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
Net income (loss) As reported $883,000 $759,000 $(2,852,000)
Proforma 821,000 697,000 (2,931,000)
----------------------------------
Earnings (loss) per share Basic
As reported 0.12 0.11 (0.43)
Proforma 0.12 0.10 (0.44)
----------------------------------
Diluted
As reported 0.12 0.11 (0.43)
Proforma 0.11 0.10 (0.44)
----------------------------------
- --------------------------------------------------------------------------------
The per share weighted-average fair value of stock options granted
during 1999, 1998 and 1997 was $0.43, $0.33 and $0.57,
respectively, on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average
assumptions: 1999 - expected dividend yield of 0%, risk-free
interest rate of 6%, volatility of 75.6% and an expected life of 3
years; 1998 - expected dividend yield of 0%, risk-free interest
rate of 6%, volatility of 48.8% and an expected life of 3 years;
1997 - expected dividend yield of 0%, risk-free interest rate of
6.5%, volatility of 56.4% and an expected life of 3 years.
Volatility is calculated over the five preceding years for 1999,
1998 and 1997, respectively.
(D) COMMON STOCK ISSUED FOR SERVICES
In 1997, the Company issued 25,000 shares of common stock with a
value of $37,000 to a third party for services rendered.
F-17
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6), CONTINUED
(E) PREFERRED STOCK
The Company has authorized and unissued preferred stock consisting
of 2,000,000 shares at $.0001 par value.
(7) SVP INTERNATIONAL - RELATED PARTY
The Company has an agreement with SVP International, a subsidiary of
Amalia S.A. The agreement provides that SVP International will aid and
advise the Company in the operation of an information service and permit
access to other global SVP information centers, and the use of the SVP
trademark and logo. The agreement shall continue in perpetuity, unless
amended by the parties. The Company pays royalties to SVP International
computed using a formula based on percentages of service and product
revenues, subject to certain limitations.
Royalty expense under the agreement was $119,000, $126,000 and $131,000
in the years ended December 31, 1999, 1998 and 1997, respectively.
Amounts due to SVP International, included in accrued expenses, were
approximately $240,000 and $142,000 at December 31, 1999 and 1998,
respectively. In 1998, SVP International charged the Company $50,000 for
management services rendered. This amount was included in accrued
expenses as of December 31, 1998.
The Company receives and renders information services to other members of
the SVP network. Charges for such services are made at rates similar to
those used for the Company's other clients.
(8) INCOME TAXES
The provision (benefit) for income taxes consists of the following:
- --------------------------------------------------------------------------------
1999 1998 1997
-------- -------- -----------
Current:
Federal $ -- $ -- $ (228,000)
State and local 20,000 -- --
-----------------------------------------
20,000 -- (228,000)
Deferred:
Federal 524,000 342,000 (983,000)
State and local 25,000 102,000 (204,000)
-----------------------------------------
549,000 444,000 (1,187,000)
Change in valuation allowance (280,000) (239,000) 519,000
-----------------------------------------
269,000 205,000 (668,000)
-----------------------------------------
$289,000 $205,000 $ (896,000)
=========================================
- --------------------------------------------------------------------------------
F-18
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8), CONTINUED
Income tax (benefit) expense differs from the amount computed by
multiplying the statutory rate of 34% to income before income taxes due
to the following:
- --------------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
Income tax (benefit) expense at statutory rate $ 398,000 $ 327,000 $(1,274,000)
Increase (reduction) in income taxes resulting
from:
Change in valuation allowance (280,000) (239,000) 519,000
State and local taxes, net of federal
income tax benefit 118,000 97,000 (204,000)
Nontaxable income (18,000) (30,000) (34,000)
Nondeductible expenses 31,000 31,000 18,000
Expiring tax credits -- -- 93,000
Other 40,000 19,000 (14,000)
-------------------------------------------------
$ 289,000 $ 205,000 $ (896,000)
=================================================
- --------------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets, net of deferred tax liabilities at
December 31, 1999 and 1998 are presented below:
- --------------------------------------------------------------------------------
1999 1998
--------- ----------
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts $ 44,000 $ 46,000
Leasehold improvements, principally due
to differences in amortization 256,000 221,000
Deferred compensation, principally due
to accrual for financial reporting purposes 117,000 85,000
Federal net operating loss carryforward 129,000 440,000
State and local net operating loss carryforward 182,000 303,000
Restructuring charge 26,000 38,000
Severance charges 46,000 158,000
Deferred tax liability:
Equipment, principally due to differences in
depreciation (282,000) (248,000)
Goodwill, principally due to difference in
amortization (1,000) (1,000)
--------------------------
517,000 1,042,000
Valuation allowance -- (280,000)
--------------------------
Net deferred tax asset $ 517,000 $ 762,000
==========================
F-19
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8), CONTINUED
Management of the Company has determined, based on the Company's history
of prior years' operating earnings relating to its research-for-hire
businesses, that a valuation allowance of $280,000 as of December 31,
1998 was necessary due to the uncertainty of future earnings to realize
the net deferred tax asset. Based upon the 1999 operating results, the
valuation allowance was reversed as of December 31, 1999. Of the net
deferred tax asset, $114,000 and $322,000 as of December 31, 1999 and
December 31, 1998, respectively, has been classified as current.
(9) EMPLOYEE BENEFITS AND DEFERRED COMPENSATION
(A) EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) and profit sharing plan under which
eligible participants may elect to defer eligible compensation up
to governmental limitations. The Company contributes 20% of the
employees' contributions up to 1% of their annual compensation and
may contribute additional profit sharing amounts at the discretion
of the Company. Expense was $61,000, $57,000 and $75,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
During 1997 the Company ceased funding its Target Benefit Pension
Plan, and is in the process of terminating the plan. As such, all
participants were declared 100% vested on January 1, 1997.
(B) DEFERRED COMPENSATION
The Company has deferred compensation agreements with two
individuals, with benefits commencing upon retirement, death or
disability. Deferred compensation expense under these agreements
was approximately $74,000, $20,000 and $21,000 in 1999, 1998 and
1997, respectively.
(C) EMPLOYMENT AGREEMENTS
The Company has an employment agreement (the "Agreement") with the
President of the Company, which expires in December 2001. The
Agreement contains certain severance provisions entitling the
President to receive compensation upon termination without cause,
or voluntary termination upon certain conditions, which includes
the acquisition by a party of 30% or more of the outstanding
shares of common stock of the Company or a change in the majority
of incumbent Board members, and certain other occurrences. If
termination occurs at a time when there is less than one year left
in the Agreement, compensation will continue for a two-year period
from the date of termination. The President waived his rights
related to the change of control provision in this Agreement as it
relates to the purchase of shares by SVP during 1998.
F-20
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9), CONTINUED
During 1998, the Board amended the contract with the Company's
President to provide that at any time after the end of calendar
year 1999, the President may elect to voluntarily leave the employ
of the Company and receive the balance of his contract for the
remaining term on his employment contract. The term of the
contract runs through 2001.
Effective September 30, 1998, the Company accepted the resignation
of an Executive Officer. In connection with his severance
agreement, coupled with the signing of a release and agreement not
to compete dated October 5, 1998, and the cancellation of his
outstanding options, the Executive Officer will receive
compensation and benefits through September 2000. An accrual of
$475,000 was recorded in the year ended December 31, 1998 for this
obligation.
Severance arrangements for members of the Operating Management
Group ("OMG") were authorized by the Board of Directors on January
25, 1999. In the event of certain changes of control, severance
agreements with members of the OMG would be triggered. Such
agreements were signed by two members of the OMG and provide for
(a) a normal severance benefit for nine (9) months, which would be
increased to one (1) year after the employee has served as a
member of the OMG for a continuous period of two (2) years, in the
event the employee's services are terminated without cause, and
(b) a severance benefit of one (1) year in the event the
separation from service is due to (i) a change in control, and
(ii) the employee suffers, within one (1) year thereafter, either
(A) a discontinuation of duties, or (B) an office change of at
least 50 miles, or (C) a reduction in compensation, or (D) a
termination of employment other than for cause.
(10) SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid for interest and income taxes during the years ended December
31, 1999, 1998 and 1997 was as follows:
- --------------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
Interest $ 644,000 $ 292,000 $ 383,000
==============================================
Income taxes $ 60,000 $ -- $ 3,000
==============================================
- --------------------------------------------------------------------------------
The Company had the following non-cash financing activities:
In connection with the Company's sale of Published Research assets during
1998, the Company received a $550,000 four-year note.
F-21
In March 1998, a $250,000 convertible note with a related party was
converted into common stock.
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10), CONTINUED
In connection with the Company's sale of the Emerging Technologies
Research Group's assets during 1997, the Company received a $125,000
two-year note.
During 1997, the Company issued 25,000 shares of common stock with a
value of $37,000 to a third party for services rendered.
During 1997, the Company recorded the cashless exercise of 8,000 options
at $0.63 in exchange for 2,000 shares of common stock at prices ranging
from $1.125 to $1.25. Such shares were held for a period of at least six
months before the respective exchange. The value of these transactions
was $2,000.
(11) ACCRUED EXPENSES
Accrued expenses at December 31, 1999 and 1998 consisted of the
following:
- --------------------------------------------------------------------------------
1999 1998
---------- ----------
Accrued bonuses and employee benefits $ 441,000 $ 477,000
Accrued severance and retirement 176,000 694,000
Accrued expenses incurred on behalf of clients 75,000 117,000
Accrued SVP royalty 240,000 142,000
Other accrued expenses 498,000 458,000
------------------------
$1,430,000 $1,888,000
========================
- --------------------------------------------------------------------------------
F-22
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) OTHER INCOME AND OTHER EXPENSE
Other income and other expense consist of the following:
- --------------------------------------------------------------------------------
1999 1998
---- ----
Domain name assignment and trademark
license agreement $ 1,200,000 $ --
Other income related to settlement with Asset Value 364,000
and lease renegotiation --
Other expense related to settlement with Asset Value
and lease renegotiation -- (315,000)
--------------------------------
$ 1,200,000 $ 49,000
================================
- --------------------------------------------------------------------------------
On December 30, 1999, the Company entered into an agreement with idealab!
and Find.com, Inc. whereby the Company assigned the domain name
"find.com" and licensed the use of certain rights to the trademarks
"find.com" and "find" to Find.com, Inc. idealab! and Find.com, Inc. are
not otherwise related to the Company. Under the terms of the agreement,
the Company received consideration in the form of cash and preferred
shares amounting to approximately $1,200,000, net of related expenses.
The Company is also entitled to certain future royalties. The preferred
shares are classified as available-for-sale marketable securities in the
accompanying Balance Sheets. No royalty income was earned in the year
ended December 31, 1999.
(13) LITIGATION
On May 30, 1997, Asset Value Fund Limited Partnership ("Asset Value"), a
shareholder in the Company, commenced an action in the United States
District Court for the Southern District of New York entitled Asset Value
Fund Limited Partnership v. FIND/SVP, Inc. and Andrew P. Garvin, Civil
Action No. 97 Civ. 3977 (LAK). The complaint alleged that between October
1995 and August 1996 the Company and its president made certain oral
misstatements to Paul Koether, the principal of Asset Value, concerning
the financial condition of the Company and that those misstatements
induced Asset Value to buy more shares of the Company and to refrain from
selling the shares it already held. The complaint alleged that those
misstatements give rise to causes of action for violation of Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder,
and for fraud, breach of fiduciary duty and negligent misrepresentation.
The complaint demanded compensatory damages in excess of $1.5 million and
punitive damages in excess of $5 million, as well as costs and attorneys'
fees.
F-23
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13), CONTINUED
On August 13, 1997, the Company was served with an amended complaint
which alleged that between January 1996 and August 1996, the Company and
its president made certain misstatements concerning the financial
condition of the Company and that those misstatements induced Asset Value
to buy more shares of the Company and to refrain from selling the shares
it already held. The amended complaint alleged that those misstatements
give rise to causes of action for violation of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder and for common
law fraud. The complaint demanded compensatory and punitive damages in an
amount to be determined at trial, as well as costs and attorneys' fees.
On September 29, 1997, the Company and Mr. Garvin moved to dismiss the
amended complaint.
On December 3, 1997, Asset Value commenced an action in the Supreme Court
of the State of New York, County of New York entitled Asset Value Fund
Limited Partnership v. Brigitte De Gastines and Jean-Louis Bodmer, Index
No. 606165/97. The defendants are two of the Company's directors. The
complaint sought to remove the defendants as directors under New York
Business Corporation Law 706(d) because of their alleged failure to
attend meetings of the board and because they considered and approved
financing transactions by the Company involving Amalia, S.A. and/or SVP,
S.A which allegedly constituted self-dealing by the defendants. On
December 30, 1997, the defendants removed this action to the United
States District Court for the Southern District of New York.
On January 20, 1998, Asset Value and the Company entered into a
settlement agreement pursuant to which Asset Value dismissed with
prejudice the two pending actions described above. Furthermore, Asset
Value agreed that for five years neither Asset Value nor Paul Koether
will purchase, either directly or indirectly, any shares of stock in the
Company, or own or control, either directly or indirectly, any shares of
stock in the Company. As part of the settlement, the Company purchased
274,400 shares of the Company's common stock from the plaintiff for $1.25
per share, totaling $343,000. The purchase price contained a premium of
$0.50 per share over the closing trade price of the Company's common
stock on the date of settlement, or $137,000. As a result of the above,
the Company recorded treasury stock of $206,000 and expense of $137,000.
The Company used proceeds from its insurance company of $495,000 to
purchase the shares and to pay plaintiff and Company legal fees in the
amount of $110,000 and $42,000, respectively. Accordingly, the Company
recorded other income and other expense of $289,000, respectively, in the
year ended December 31, 1998, related to this matter, with the remaining
balance of $206,000 offset against the aforementioned treasury stock
repurchase amount, thus reducing the net treasury stock to zero.
(14) IMPAIRMENT LOSS AND ASSET DISPOSAL
During the fourth quarter of 1997, the Company decided to sell the
majority of assets held in its Published Research subsidiary. As a result
of the Company's decision, an impairment loss of $1,047,000 was recorded
in December 1997. During 1998 the Company sold such assets. The
aforementioned charge included write-downs of inventory of $517,000,
fixed
F-24
assets of $405,000, goodwill of $102,000 and deferred charges of $23,000.
There are no cash implications relating to this charge.
F-25
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14), CONTINUED
In July 1998, the Company completed the sale of substantially all of the
assets of its Published Research subsidiary and recorded a $20,000 gain.
The Company received $1,250,000 in cash, a Promissory Note (the "Note")
in the amount of $550,000 and the purchaser assumed certain liabilities
in the amount of $85,000. The Note bears interest at a rate of 8% per
annum and is payable in four equal annual installments of principal and
interest beginning in June 1999. The Company holds a subordinate security
interest in the sold assets, and has the personal guarantee of a
principal of the purchaser.
During the fourth quarter of 1997, the Company sold certain assets held
in its Emerging Technology Research Group. The Company recorded a $28,000
loss related to this sale. The Company received a $125,000 note with
interest at an annual rate of 10% and received a 5% royalty for a
two-year period on sales generated by the assets sold.
During the fourth quarter of 1997, the Company ceased the consumer
oriented operation of its FIND/SVP Internet Services, Inc. subsidiary.
Accordingly, the Company recorded a charge of $500,000 in the fourth
quarter of 1997 related to the closing of the subsidiary. The charge
included $35,000 of severance, all of which was paid by March 31, 1998.
The remainder of the charge included the write-off of certain assets of
$408,000, $16,000 of shut-down costs paid in the first quarter of 1998,
and rent expense of $41,000 for the first quarter of 1998 as the Company
intended to sublease the space or be relieved of its obligation for
10,000 square feet of office space by the landlord during the second
quarter of 1998. During the second quarter of 1998 the Company received
payment of $75,000 from the landlord in return for the forfeiture of the
lease. The Company also had rental expenses of $26,400 during the second
quarter of 1998, prior to the agreement with the landlord. The $75,000
was recorded as Other Income and the $26,400 was recorded as Other
Expense in 1998.
(15) RESTRUCTURING CHARGES
On March 27, 1998, the Company reduced its full-time labor force in its
core business by 20 positions. As a result the Company recorded a
restructuring charge of $321,000 during the quarter ended March 31, 1998.
The charge consisted mainly of severance payments, outplacement services
and legal costs associated with the elimination of the positions, all of
which was paid as of December 31, 1999.
In conjunction with the Company's decision to re-focus its efforts on its
core competencies, the Company reduced its general and administrative
staff on December 31, 1997. Accordingly, the Company recorded a $155,000
restructuring charge, primarily for severance costs, during the fourth
quarter of 1997, all of which was paid in 1998.
F-26
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT REPORTING
During 1999, the Company operated in one business segment, providing
consulting and business advisory services through its quick consulting
and research service activities and its strategic consulting and research
activities. The Company operates primarily in the United States. Prior to
the divestiture in the third quarter of 1998, the Company had an
additional segment, Published Research Products. The Company considers
its consulting and business advisory services to be its core competency.
Since in 1999 the Company operated in only one segment, no segment
information is presented for that year.
- --------------------------------------------------------------------------------
(in thousands)
YEARS ENDED DECEMBER 31
-----------------------
1998 1997
---- ----
REVENUES
- --------
Consulting and Business Advisory $ 25,457 $ 25,959
Published Research Products 2,718 6,018
All other -- 50
-------------------------
$ 28,175 $ 32,027
=========================
OPERATING INCOME (LOSS)
- -----------------------
Consulting and Business Advisory (1) $ 1,313 $ (165)
Published Research Products 16 (2,295)
All other -- (676)
-------------------------
Segment operating income 1,329 (3,136)
Corporate and other (2) (368) (612)
-------------------------
Income (loss) before provision (benefit)
for income taxes
$ 961 $ (3,748)
=========================
DEPRECIATION AND AMORTIZATION
- -----------------------------
Consulting and Business Advisory $ 1,002 $ 885
Published Research Products 96 238
All other 46 68
-------------------------
$ 1,144 $ 1,191
=========================
TOTAL ASSETS
- ------------
Consulting and Business Advisory $ 11,194 $ 10,594
Published Research Products 705 1,887
All other -- --
-------------------------
$ 11,899 $ 12,481
=========================
CAPITAL EXPENDITURES
- --------------------
Consulting and Business Advisory $ 618 $ 1,897
Published Research Products -- 42
All other -- --
-------------------------
$ 618 $ 1,939
=========================
(1) Operating income for the years ended December 31, 1998 and 1997 include a
restructuring charge for severance and related costs of $321,000 and $155,000,
respectively.
(2) Consists of interest income, other income, gain on sale of net assets,
interest expense and other expense.
- --------------------------------------------------------------------------------
F-27
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULE
To the Board of Directors and Shareholders of Find/SVP, Inc.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements as of and for the year ended December 31, 1999, taken as a
whole. The data shown on the suppplemental schedule on page F-29 for the year
ended December 31, 1999 is presented for the purpose of additional analysis and
is not a required part of the basic financial statements. This schedule is the
responsibility of the Company's management. Such data has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
Deloitte & Touche LLP
Stamford, Connecticut
March 24, 2000
F-28
SCHEDULE II
-----------
FIND/SVP, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1999, 1998 and 1997
(in thousands of dollars)
BALANCE AT ADDITIONS
BEGINNING CHARGED TO DEDUC- BALANCE AT
CLASSIFICATION OF YEAR EARNINGS TIONS (1) END OF YEAR
------- -------- --------- -----------
Year ended December 31, 1999:
Allowance for doubtful accounts $ 104 90 93 101
=== === === ===
Year ended December 31, 1998:
Allowance for doubtful accounts $ 118 164 178 104
=== === === ===
Year ended December 31, 1997:
Allowance for doubtful accounts $ 103 254 239 118
=== === === ===
Note: (1) Amounts written off, net of recoveries.
F-29