AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 2001
REGISTRATION NO. 333-52330
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
TMP WORLDWIDE INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7311 13-3906555
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
--------------------------
622 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 351-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
ANDREW J. MCKELVEY
CHAIRMAN OF THE BOARD AND CEO
TMP WORLDWIDE INC.
622 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 351-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
GREGG BERMAN, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ----------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE*
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE
Common Stock, $.001 par value per share..... 6,897,533 $67.50 $465,583,478 $122,915(2)
* The registrant hereby files this Post-Effective Amendment No. 1 to
Registration Statement on Form S-1 to amend such registration statement and
pursuant to Rule 429 amends its registration statement on Form S-1 (File No.
333-41996). A total of 3,319,736 shares were originally registered on such
registration statement for which the registrant paid a registration fee
equal to $68,392.
(1) The price estimated in accordance with Rule 457(c) under the Securities Act
of 1933, as amended, solely for the purpose of calculating the registration
fee and is $67.50, the average of the high and low prices of the Common
Stock of TMP Worldwide Inc. as reported by The Nasdaq Stock Market on
December 18, 2000.
(2) Previously paid.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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* Explanatory Note:
This post-effective amendment relates to a previously filed registration
statement which was declared effective. This post-effective amendment updates
certain information which was contained in the registration statement. It does
not register additional shares.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
TMP WORLDWIDE INC.
6,036,391 SHARES OF COMMON STOCK
------------------------
The stockholders of TMP Worldwide Inc. ("TMP" or the "Company") listed in
this prospectus are offering and selling an aggregate of 6,036,391 shares of
TMP's common stock under this prospectus. These selling stockholders obtained
their shares of TMP stock in connection with TMP's acquisitions of companies
owned by these selling stockholders. TMP will not receive any part of the
proceeds from the sale by the selling stockholders.
------------------------
The selling stockholders may offer their TMP stock through public or private
transactions, on or off the United States exchanges, at prevailing market prices
or at privately negotiated prices.
TMP Worldwide Inc.'s common stock trades on the Nasdaq National Market under
the ticker symbol "TMPW." On April 6, 2001, the closing sale price of one share
of TMP's stock was $35.50.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE SHARES BEING SOLD WITH THIS
PROSPECTUS.
---------------------
THE TMP STOCK OFFERED OR SOLD UNDER THIS PROSPECTUS HAS NOT BEEN APPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAVE THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is April , 2001.
TABLE OF CONTENTS
PAGE
--------
Our Company................................................. 3
Summary Selected Consolidated Financial Information......... 8
Special Note Regarding Forward-Looking Information.......... 10
Risk Factors................................................ 10
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Price Range of Common Stock................................. 17
Selected Consolidated Financial Information................. 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 34
Management.................................................. 44
Certain Transactions........................................ 50
Principal Stockholders...................................... 51
Selling Stockholders........................................ 53
Description of Capital Stock................................ 67
Plan of Distribution........................................ 69
Legal Opinion............................................... 70
Experts..................................................... 70
Index to Financial Statements............................... F-1
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and we file reports, proxy statements and other information with the
SEC. Such reports, proxy statements and other information filed by us may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the SEC's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of the
SEC at Room 1024. Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, material filed by us can be inspected at
the offices of the NASDAQ National Market at 1735 K Street, N.W., Washington,
D.C. 20006-1506.
We have filed with the SEC a Registration Statement on Form S-1 under the
Securities Act of 1933 with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedule filed as a part thereof, as permitted by
the rules and regulations of the SEC. For further information with respect to
TMP and the Common Stock, reference is hereby made to such Registration
Statement, including the exhibits and schedule filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
other documents referred to herein are not necessarily complete and where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made for a full statement of the provisions
thereof. The Registration Statement, including the exhibits filed as a part
thereof, may be inspected without charge at the public reference facilities
maintained by the SEC as set forth in the preceding paragraph. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our
SEC filings are also available to the public from our website at www.tmp.com or
at the SEC's website at http:// www.sec.gov.
2
OUR COMPANY
INCLUDED IN THIS PROSPECTUS ARE SELECTED FINANCIAL DATA, MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND CONSOLIDATED
FINANCIAL STATEMENTS. THE FINANCIAL DATA GIVES EFFECT TO THE 2000 MERGERS AS
DISCUSSED BELOW.
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, "GROSS
BILLINGS" REFERS TO BILLINGS FOR ADVERTISING PLACED ON THE INTERNET, ON OUR
CAREER WEB SITES, IN NEWSPAPERS AND IN TELEPHONE DIRECTORIES BY OUR CLIENTS, AND
ASSOCIATED FEES FOR RELATED SERVICES AND FEES FOR SEARCH AND SELECTION AND
TEMPORARY CONTRACTING SERVICES. WE EARN COMMISSIONS BASED ON A PERCENTAGE OF THE
BILLING FOR MEDIA ADVERTISING PURCHASED IN TRADITIONAL MEDIA AS WELL AS ON THIRD
PARTY WEB SITES AT A RATE ESTABLISHED BY THE RELATED PUBLISHER AND ASSOCIATED
FEES FOR RELATED SERVICES. AS A RESULT, THE TRENDS IN OUR GROSS BILLINGS
DIRECTLY AFFECT OUR COMMISSIONS AND FEES.
During the period of January 1, 2000 through December 31, 2000, the Company
consummated mergers with the following companies (the "2000 Mergers") in
transactions that provided for the exchange of all of the outstanding stock of
each entity for a total of 10,721,054 shares of TMP common stock:
NUMBER OF
ENTITY BUSINESS SEGMENT ACQUISITION DATE SHARES ISSUED
- ------ ---------------------------- ---------------- -------------
HW Group PLC................... eResourcing February 16,
2000 715,769
Microsurf, Inc................. Monstermoving.com February 16,
2000 684,462
Burlington Wells, Inc.......... eResourcing February 29,
2000 52,190
Illsley Bourbonnais............ Executive Search March 1, 2000 246,702
System One Services, Inc....... eResourcing April 3, 2000 1,022,257
GTR Advertising................ Advertising & Communications April 4, 2000 54,041
Virtual Relocation.com, Inc.... Monstermoving.com May 9, 2000 947,916
Business Technologies Ltd...... Monster.com May 17, 2000 205,703
Simpatix, Inc.................. Monster.com May 31, 2000 155,480
Rollo Associates, Inc.......... Executive Search May 31, 2000 110,860
Web Technology Partners, Monster.com
Inc.......................... May 31, 2000 623,892
Rich, Gardner & Associates, Advertising & Communications
Ltd.......................... August 31, 2000 43,535
Stratascape, Inc............... eResourcing August 31, 2000 311,978
Cashback2.com, Inc............. Monstermoving.com November 1, 2000 90,750
Jobtrak Corporation............ Monster.com November 7, 2000 3,333,060
SPEC Group Holdings, Inc....... eResourcing December 6, 2000 357,782
People.com Consultants, Inc.... eResourcing December 8, 2000 1,764,677
The transactions for the above acquired entities were accounted for as
poolings of interests. As a result, the financial position, and statements of
income (loss), comprehensive income (loss) and cash flows are presented as if
the combining companies had been consolidated for all periods presented. In
addition, the consolidated statements of stockholders' equity reflect TMP's
accounts as if the additional common stock issued in connection with each of the
aforementioned combinations had been issued for all periods when each of the
related companies had issued shares and for the amounts that reflect the
exchange ratios of the 2000 Mergers. The consolidated balance sheets of the
Company as of December 31, 2000 and 1999 have been combined with those of the
2000 Mergers, all as of December 31, 2000 and 1999, except for the following:
Illsley Bourbonnais, for which the balance sheet as of January 31, 2000 has been
combined with that of TMP as of December 31, 1999 and Business
Technologies Ltd. ("BTL"), for which the balance sheet as of July 31, 1999 is
combined with that of TMP as of December 31, 1999.
The consolidated statements of income (loss) combine the results of TMP for
each year in the three year period ended December 31, 2000 with those of the
2000 Mergers all for the same periods except for
3
the following: Illsley Bourbonnais, for which the statements of income (loss)
for the years ended January 31, 2000 and 1999 are included in the statements of
income (loss) for the years ended December 31, 1999 and 1998, respectively; BTL,
for which the statements of income (loss) for the years ended July 31, 1999 and
1998 are included in the statements of income (loss) for the years ended
December 31, 1999 and 1998, respectively; and HW Group PLC ("HW"), for which the
statement of income (loss) for the year ended March 31, 1999 is included in the
statement of income (loss) for the year ended December 31, 1998.
The results of Illsley Bourbonnais for the month ended January 31, 2000 are
included in both the consolidated statements of income (loss) for the years
ended December 31, 2000 and 1999. Therefore, the following amounts have been
included in both periods: (a) commissions and fees of $1.0 million and (b) net
income of $285 thousand, with no impact on net income (loss) per share.
Additionally, due to immateriality, the results of BTL for the period August 1,
1999 through December 31, 1999 of $314 thousand, in commissions and fees and
$50 thousand, in net income have not been included in the consolidated statement
of income (loss) for the year ended December 31, 1999 because the results of BTL
for the fiscal year ended July 31, 1999 were combined with our consolidated
statement of income (loss) for the year ended December 31, 1999. In addition,
the results of HW, for the three months ended March 31, 1999 are included in the
consolidated statements of income (loss) in both years ended December 31, 1999
and 1998, and the effects on both periods on (a) commissions and fees was
$11.1 million, (b) net income was $1.9 million and (c) diluted earnings per
share was $0.02.
ALL AMOUNTS REFERRED TO BELOW REFLECT THE AMOUNTS DISCLOSED IN OUR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AND OUR CONSOLIDATED FINANCIAL STATEMENTS INCLUDED HEREIN UNLESS
OTHERWISE INDICATED. "WE," "US" AND "OUR," WHEN USED IN THIS PROSPECTUS, REFER
TO TMP WORLDWIDE INC. AND ITS SUBSIDIARIES.
We have built Monster-Registered Trademark-.com (http://www.monster.com)
into the Internet's leading career destination portal. Through
Monstermoving.com(sm) we are capitalizing on the relationship between
recruitment and relocation. Monstermoving.com(sm) features information that
addresses the entire moving process and provides the ability to research a
prospective move online. We are also one of the world's largest recruitment
advertising agencies (through our Advertising & Communications division), one of
the world's largest selection and temporary contracting firms (through our
eResourcing division), and a premier global executive search firm. In addition
to offering these career solutions, we are the world's largest yellow page
advertising agency, (through our Directional Marketing division). We have more
than 60,000 clients, including over 90 of the Fortune 100 and over 480 of the
Fortune 500 companies.
Job seekers look to manage their careers through us by posting their resumes
on Monster.com, by searching Monster.com's database of over 485,000 paid job
postings, either directly or through the use of customized job search agents,
and by utilizing our extensive career resources. In addition, employers who are
our clients, look to us to help them find the right employee, whether they are
searching for an entry level candidate or a CEO, which we refer to as our
"Intern to CEO" strategy. We believe the Internet offers a substantial
opportunity for us to grow our revenue. We believe our growth will primarily
come from strengthening our leadership position in the online recruitment
market, which is estimated by Forrester Research to grow from $1.2 billion in
2000 to $7.2 billion in 2005, with additional revenue growth opportunities from
the executive search market, which is expected to grow from $7.1 billion in 2001
to $15.0 billion in 2005 and the temporary contracting market, which is expected
to reach $160 billion in 2001. Our strategies to address this opportunity are
to:
- continue to promote the Monster.com brand through online and traditional
advertising, aggressive marketing programs and select alliances or
affiliations
4
- leverage our more than 5,300 client service, marketing and creative
personnel to expand Monster.com and
- continue to pursue strategic acquisitions.
OUR SERVICES
MONSTER.COM. Monster.com (http://www.monster.com), the flagship brand of
our Internet properties, is the nucleus of our "Intern to CEO" strategy and the
leader in the online recruitment market. To demonstrate this, in February 2001:
- Neilson I/PRO reported that Monster.com attracted more than 23.6 million
visitors who spent an average of over 15.9 minutes per visit.
- Media Metrix reported that 6.6% of the U.S. Internet population visited
Monster.com and that an average of 28.6 unique pages were viewed by each
visitor.
- Based on Media Metrix statistics, Monster.com reported a power ranking of
188.8 (reach of 6.6 multiplied by average page views of 28.6), compared to
36.3 for its closest competitor and 129.8 for all 9 of its competitors
combined.
We believe that the power ranking is significant because, by taking into
account reach and page views, it indicates the products' recognition by and
usefulness to job seekers. As a result, through Monster.com, our clients have
access to over 8.6 million unique resumes in a database that is growing by an
average of more than 25,000 resumes daily. To attract job seekers to
Monster.com, we continue to refine and refresh the site by introducing
value-added features. For example, we have 6.4 million job search agents, which
allow our job seekers to express their specific job preferences and receive
e-mail notification of job matches, and 13.6 million My Monster job seeker
accounts, which allow job seekers to manage their careers online. We believe our
clients have recognized the value of online recruitment, as evidenced by the
more than 485,000 paid job postings currently on Monster.com. We have also
recently introduced ChiefMonster.com, an exclusive marketplace within
Monster.com, that pre-screens applicants for senior-level executive positions
(VP and above) and allows approved executives to have access to the website.
Once approved, these executives can explore a comprehensive selection of
high-quality senior-level opportunities online, set up a sophisticated personal
profile, search opportunities and take advantage of uniquely targeted career
strategy content pertaining to the latest industry and salary trends.
We continually look for ways to drive and retain site traffic. To that end,
in December 1999, we entered into a content and marketing agreement with America
Online, Inc. ("AOL") whereby, for the payment of $100 million, Monster.com is
the exclusive provider for four years in the United States and Canada of career
search services to over 27 million AOL users across seven AOL brands: AOL, AOL
Canada, Compuserve, ICQ, AOL.com, Nestscape and Digital City. We believe that
this agreement will continue to increase traffic and attract new users to
Monster.com. We also have customized Monster.com, in both local language and
content, in 14 countries outside the United States. Currently, such local
versions of Monster.com operate in the United Kingdom, Australia, Canada, the
Netherlands, Belgium, New Zealand, Singapore, Hong Kong, France, Germany,
Ireland, Spain, Luxembourg, India and Italy. For the year ended December 31,
2000, Monster.com generated approximately $364.0 million in gross billings and
$362.0 million in commissions and fees.
MONSTERMOVING.COM. Monstermoving(sm).com (http://www.monstermoving.com) is
one of the world's largest and most effective online marketplaces for relocation
information and services and moving-related decision support tools. Its strategy
is to change the way people move by leveraging the power of the Internet to
provide the relocation resources needed to successfully manage all stages of the
relocation process. In addition, Monstermoving.com offers access to a
comprehensive array of moving-related
5
services and relocation tools, designed to reduce the time, cost and stress
associated with moving. For the year ended December 31, 2000, commissions and
fees from Monstermoving(sm).com were $10.9 million.
Our total Interactive gross billings and Interactive commissions and fees
for the year ended December 31, 2000 were $485.9 million and $435.2 million,
respectively, reflecting the inclusion from Monster.com, Monstermoving.com and
the Interactive related services of our Advertising & Communications Division,
our eResourcing clients, as well as from our Directional Marketing clients,
which were $31.8 million, $21.7 million and $8.8 million, respectively.
ADVERTISING & COMMUNICATIONS (FORMERLY REFERRED TO AS RECRUITMENT
ADVERTISING). We prospect talent for our clients through traditional recruiting
programs that sell, market and brand employers to job seekers searching for
entry level to management positions. We provide a broad range of recruitment
advertising and retention services including:
- planning and producing recruitment advertising campaigns,
- media research, planning and buying in both traditional media and on the
Internet,
- planning and executing on-campus recruitment programs,
- designing, developing and delivering effective project management
solutions improving the speed and efficiency of the hiring process, and
- developing employee communications strategies allowing employees to
actively participate in the employer's corporate vision.
ERESOURCING (FORMERLY REFERRED TO AS SELECTION & TEMPORARY
CONTRACTING). The mid-market selection business fills a critical niche in our
"Intern to CEO" strategy by finding for our clients those professionals, below
the CEO level, who typically earn between $50,000 and $150,000 and possessing
the set of skills outlined by our clients. We believe that Monster.com is an
excellent resource for serving this market and we are building a large database
of mid-market resumes. We have also identified a suite of products geared toward
this market which seek to predict whether a candidate will be successful in a
given role. Temporary contracting supplements our selection services. We place
employees, ranging from executives to clerical workers, in temporary situations
for as little as one day to over 12 months. Contractors can be used for
emergency support or to complement the skills of a client's own staff. Temporary
contracting can also be linked to our selection services with the client using a
"try before you buy" strategy.
EXECUTIVE SEARCH. We offer an advanced and comprehensive range of executive
search services aimed at finding the appropriate executive for our clients. Our
executive search service identifies senior executives who typically earn in
excess of $250,000 annually. We entered the executive search field in 1998
because recruitment and online advertising traditionally did not target the
senior executive candidate. We have recently launched ChiefMonster.com, an
extension of the Monster brand, that pre-screens applicants for senior-level
executive positions and allows approved executives to access the website. We
believe that the posting of opportunities on ChiefMonster.com streamlines the
advertising process, shortens the hiring cycle and reduces the expenses
associated with executive recruitment.
DIRECTIONAL MARKETING (FORMERLY REFERRED TO AS YELLOW PAGE ADVERTISING). We
develop directional marketing programs for national accounts, which are clients
who sell products or services in multiple markets. According to the Yellow Page
Publishers Association, the national accounts segment of the U.S. yellow page
advertising market was approximately $2.0 billion in 2000. During the period of
1990 through 2000, the market grew at a compound annual rate of approximately
6.0%. Yellow page advertising is a complex process involving the creation of
effective imagery and message, and the development of media plans which evaluate
approximately 6,000 yellow page directories, of which our larger accounts
utilize over 3,000. Coordinating the placement of advertisements in this number
of directories requires an extensive effort at
6
the local level, and our directional marketing sales, marketing and customer
service staff of approximately 990 people provides an important competitive
advantage in marketing and executing yellow page advertising programs.
We take a proactive approach to yellow page advertising by undertaking
original research on the efficacy of the medium, and by working to quantify the
effectiveness of individual advertising campaigns. We also have a rigorous
quality assurance program designed to ensure client satisfaction. We believe
that this program has enabled us to maintain a yellow page client retention
rate, year to year, in excess of 95%.
For the years ended December 31, 2000 and 1999, respectively, our gross
billings were $2,479.3 million and $2,021.5 million, total commissions and fees
were $1,291.7 million and $909.0 million, net income (loss) was $56.9 million
and $(0.8) million, and EBITDA was $156.4 million and $69.9 million.
Our executive offices are located at 622 Third Avenue, New York, New York
10017. Our telephone number is (212)-351-7000 and our Internet address is
http://www.tmpw.com.
7
SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Commissions and fees.................................... $458,146 $628,121 $771,838 $908,955 $1,291,737
Operating expenses:
Salaries & related.................................... 263,039 352,485 442,511 512,554 667,398
Office & general...................................... 127,341 164,443 192,156 216,826 287,428
Marketing & promotion................................. 8,459 13,986 30,229 75,780 161,367
Merger & integration.................................. -- -- 22,412 63,054 64,604
Restructuring......................................... -- -- 3,543 2,789 --
Amortization of intangibles........................... 4,786 6,963 11,281 12,894 16,536
Special compensation and CEO bonus(1)................. 52,019 1,500 1,250 -- --
Total operating expenses................................ 455,644 539,377 703,382 883,897 1,197,333
Operating income........................................ 2,502 88,744 68,456 25,058 94,404
Other income (expense):
Interest income (expense), net(2)..................... (14,769) (10,725) (13,659) (14,126) 20,710
Other, net............................................ (326) 1,386 (2,095) (2,889) (1,095)
Income (loss) before provision for income taxes,
minority interests and equity in earnings (losses) of
affiliates............................................ (12,593) 79,405 52,702 8,043 114,019
Provision for income taxes.............................. 11,479 23,936 17,426 8,424 57,602
Net income (loss) applicable to common and Class B
common stockholders................................... (25,185) 55,017 34,852 (788) 56,859
Net income (loss) per common and Class B common share:
Basic................................................. $ (0.36) $ 0.67 $ 0.40 $ (0.01) $ 0.56
Diluted............................................... $ (0.36) $ 0.66 $ 0.39 $ (0.01) $ 0.53
Weighted average shares outstanding:
Basic................................................. 70,009 81,668 87,449 90,152 101,413
Diluted............................................... 70,009 82,945 89,305 90,152 107,903
8
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES AND OFFICES)
OTHER DATA:
Gross Billings:
Interactive (3).......................... $ 11,960 $ 31,589 $ 71,571 $ 176,587 $ 485,899
Advertising & Communications............. 391,158 672,187 881,809 843,955 877,775
eResourcing (4).......................... 146,475 187,516 223,063 295,133 391,637
Executive Search......................... 127,893 168,107 195,268 173,558 178,399
Directional Marketing.................... 466,230 497,848 520,129 532,258 545,584
---------- ---------- ---------- ---------- ----------
Total Gross Billings....................... $1,143,716 $1,557,247 $1,891,840 $2,021,491 $2,479,294
========== ========== ========== ========== ==========
Total operating expenses as a percentage of
commissions and fees..................... 99.5% 85.9% 91.1% 97.2% 92.7%
Number of employees........................ 4,451 6,292 7,097 7,432 9,500
Number of offices.......................... 201 268 321 330 320
DECEMBER 31,
--------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Current assets............................. $354,942 $495,248 $542,209 $ 642,645 $1,248,274
Current liabilities........................ 347,156 449,584 475,215 626,800 852,804
Total assets............................... 543,694 822,012 933,873 1,098,765 1,991,843
Long-term liabilities, less current
portion.................................. 105,083 167,574 178,594 136,933 81,163
Minority interests......................... 3,705 431 509 -- --
Redeemable preferred stock................. 2,000 -- -- -- --
Total stockholders' equity................. 85,750 204,423 279,555 335,032 1,057,876
- --------------------------
(1) Special compensation consists of a non-cash, non-recurring charge of
approximately $52.0 million for special management compensation in 1996
resulting from the issuance of approximately 7.2 million shares of Common
Stock of the Company to stockholders of predecessor companies of the Company
in exchange for their shares in those companies which they had received for
nominal or no consideration, as employees or as management of businesses
financed substantially by the principal stockholder of the company and,
accordingly, were not considered to have made substantive investments for
their minority shares. The CEO bonus for the year ended December 31, 1997
and the year ended December 31, 1998 consist of a mandatory bonus of $375
thousand per quarter payable to Andrew J. McKelvey, the Company's CEO and
Principal Stockholder, as provided for in the Principal Stockholder's then
existing employment agreement. Receipt of these bonus amounts was
permanently waived by the Principal Stockholder, and accordingly, since they
were not paid, are also accounted for as a contribution to Additional
Paid-in Capital.
(2) Interest expense for 1996 includes a $2.6 million non-cash, non-recurring
charge to reflect the exercise of a warrant issued in connection with the
Company's financing agreement.
(3) Represents fees earned in connection with recruitment, yellow page and other
advertisements placed on the Internet, interactive moving services and
employment searches and temporary contracting services sourced through the
Internet.
(4) Amounts for temporary contracting are reported net of the costs paid to the
temporary contractor.
9
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. You can identify these forward-looking statements by our
use of the words "believes," "anticipates," "plans," "expects," "may," "will,"
"would," "intends," "estimates," and similar expressions, whether in the
negative or affirmative. We cannot guarantee that we actually will achieve these
plans, intentions or expectations. Actual results or events could differ
materially from the plans, intentions and expectations disclosed in the
forward-looking statements we make. We have included important factors in the
cautionary statements in this prospectus, particularly under the headings "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Business Outlook," that we believe could cause our actual
results to differ materially from the forward-looking statements that we make.
The forward-looking statements do not reflect the potential impact of any future
acquisitions, mergers or dispositions. We do not assume any obligation to update
any forward-looking statement we make.
RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CONSIDER CAREFULLY
THESE RISK FACTORS TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS BEFORE YOU DECIDE TO PURCHASE SHARES OF OUR COMMON STOCK.
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH
Our business has grown rapidly in recent periods. As an example, we
completed 37 mergers or acquisitions accounted for as poolings of interests and
55 acquisitions accounted for as purchases from January 1, 1998 through
December 31, 2000. This growth of our business has placed a significant strain
on our management and operations. Our expansion has resulted, and is expected in
the future to result, in substantial growth in the number of our employees. In
addition, this growth is expected to result in increased responsibility for both
existing and new management personnel and incremental strain on our existing
operations, financial and management information systems. Our success depends to
a significant extent on the ability of our executive officers and other members
of senior management to operate effectively both independently and as a group.
If we are not able to manage existing or anticipated growth, our business,
financial condition and operating results will be materially adversely affected.
OUR SUCCESS DEPENDS ON THE VALUE OF OUR BRANDS, PARTICULARLY
MONSTER-REGISTERED TRADEMARK-.COM
Our success depends on our brands and their value. Our business would be
adversely affected if we were unable to adequately protect our brand names,
particularly Monster.com. We are also susceptible to others imitating our
products, particularly Monster.com, and infringing our intellectual property
rights. We may not be able to successfully protect our intellectual property
rights, upon which we are materially dependent. In addition, the laws of many
foreign countries do not protect intellectual property rights to the same extent
as the laws of the United States. Imitation of our products, particularly
Monster.com, or infringement of our intellectual property rights could diminish
the value of our brands or otherwise adversely affect our revenues.
TRADITIONAL MEDIA IS IMPORTANT TO US
A substantial portion of our total commissions and fees comes from designing
and placing recruitment advertisements in traditional media such as newspapers
and trade publications. This business constituted approximately 15.0% and 20.2%
of our total commissions and fees for the years ended December 31, 2000 and
1999, respectively. We also receive a substantial portion of our commissions and
fees from placing advertising in yellow page directories. This business
constituted approximately 7.6% and 11.1% of total commissions and fees for the
years ended December 31, 2000 and 1999, respectively. We cannot assure you
10
that the total commissions and fees we receive in the future will equal the
total commissions and fees which we have received in the past.
In addition, new media, like the Internet, may cause yellow page directories
and other forms of traditional media to become less desirable forms of
advertising media. If we are not able to generate Internet advertising fees to
offset any decrease in commissions from traditional media, our business,
financial condition and operating results will be materially adversely affected.
WE FACE RISKS RELATING TO DEVELOPING TECHNOLOGY, INCLUDING THE INTERNET
The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The emerging character of these products and services and
their rapid evolution will require our continuous improvement in performance,
features and reliability of our Internet content, particularly in response to
competitive offerings. We cannot assure that we will be successful in responding
quickly, cost effectively and sufficiently to these developments. In addition,
the widespread adoption of new Internet technologies or standards could require
us to make substantial expenditures to modify or adapt our Web sites and
services. This could affect our business, financial condition and operating
results. New Internet services or enhancements which we have offered or may
offer in the future may contain design flaws or other defects that could require
expensive modifications or result in a loss of client confidence. Any disruption
in Internet access or in the Internet generally could have a material adverse
effect on our business, financial condition and operating results.
WE ARE VULNERABLE TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS BROUGHT AGAINST
US BY OTHERS
Successful intellectual property infringement claims against us could result
in monetary liability or a material disruption in the conduct of our business.
We cannot be certain that our products, content and brand names do not or will
not infringe valid patents, copyrights or other intellectual property rights
held by third parties. We expect that infringement claims in our markets will
increase in number as more participants enter the markets. We may be subject to
legal proceedings and claims from time to time relating to the intellectual
property of others in the ordinary course of our business. We may incur
substantial expenses in defending against these third party infringement claims,
regardless of their merit.
COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS
Computer viruses may cause our systems to incur delays or other service
interruptions and could damage our reputation and have a material adverse effect
on our business, financial condition and operating results. The inadvertent
transmission of computer viruses could expose us to a material risk of loss or
litigation and possible liability. Moreover, if a computer virus affecting our
system is highly publicized, our reputation could be materially damaged and our
visitor traffic may decrease.
Internet users can freely navigate and instantly switch among a large number
of websites, many of which offer original content. It is difficult for us to
distinguish our content and attract users. In addition, many other websites
offer very specific, highly targeted content. These sites could have greater
appeal than our sites to particular groups within our target audience.
WE FACE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY
We expect our growth to continue, in part, by acquiring businesses. The
success of this strategy depends upon several factors, including:
- the continued availability of financing;
- our ability to identify and acquire businesses on a cost-effective basis;
11
- our ability to integrate acquired personnel, operations, products and
technologies into our organization effectively; and
- our ability to retain and motivate key personnel and to retain the clients
of acquired firms.
We cannot assure you that financing for acquisitions will be available on
terms we find acceptable, or that we will be able to identify or consummate new
acquisitions, or manage and integrate our recent or future expansions
successfully. Any inability to do so would materially adversely affect our
business, financial condition and operating results. We also cannot assure you
that we will be able to sustain the rates of growth that we have experienced in
the past.
OUR MARKETS ARE HIGHLY COMPETITIVE
The markets for our services are highly competitive. They are characterized
by pressures to:
- reduce prices;
- incorporate new capabilities and technologies; and
- accelerate job completion schedules.
Furthermore, we face competition from a number of sources. These sources
include:
- national and regional advertising agencies;
- Internet portals;
- specialized and integrated marketing communication firms;
- traditional media companies;
- executive search firms; and
- search and selection firms.
In addition, many advertising agencies and publications have started either
to internally develop or acquire new media capabilities, including Internet. We
are also competing with established companies that provide integrated
specialized services like website advertising services or website design, and
are technologically proficient. Many of our competitors or potential competitors
have long operating histories, and some may have greater financial, management,
technological development, sales, marketing and other resources than we do. In
addition, our ability to maintain our existing clients and attract new clients
depends to a large degree on the quality of our services and our reputation
among our clients and potential clients.
We have no significant proprietary technology that would preclude or inhibit
competitors from entering the online advertising, executive search, recruitment
advertising, or yellow page advertising markets. We cannot assure you that
existing or future competitors will not develop or offer services and products
which provide significant performance, price, creative or other advantages over
our services. This could have a material adverse effect on our business,
financial condition and operating results.
OUR OPERATING RESULTS FLUCTUATE FROM QUARTER TO QUARTER
Our quarterly operating results have fluctuated in the past and may
fluctuate in the future. These fluctuations are a result of a variety of
factors, including:
- the timing of acquisitions;
- the timing of yellow page directory closings, the largest number of which
currently occur in the third quarter; and
12
- the receipt of additional commissions from yellow page publishers for
achieving a specified volume of advertising, which are typically reported
in the fourth quarter.
Generally our quarterly commissions and fees earned from recruitment
advertising tend to be highest in the first quarter and lowest in the fourth
quarter. Additionally, recruitment advertising commissions and fees tend to be
more cyclical than yellow page commissions and fees. To the extent that a
significant percentage of our commissions and fees are derived from recruitment
advertising, our operating results may be subject to increased cyclicality.
EFFECT OF GLOBAL ECONOMIC FLUCTUATIONS
Demand for our services is significantly affected by the general level of
economic activity in the regions and industries in which we operate. When
economic activity slows, many companies hire fewer permanent employees.
Therefore, a significant economic downturn, especially in regions or industries
where our operations are heavily concentrated, could have a material adverse
effect on our business, financial condition and operating results. Further, we
may face increased pricing pressures during such periods. There can be no
assurance that during these periods our results of operations will not be
adversely affected.
WE DEPEND ON OUR CONSULTANTS
The success of our executive search business depends upon our ability to
attract and retain consultants who possess the skills and experience necessary
to fulfill our clients' executive search needs. Competition for qualified
consultants is intense. We believe that we have been able to attract and retain
highly qualified, effective consultants as a result of our reputation and our
performance-based compensation system. Consultants have the potential to earn
substantial bonuses based on the amount of revenue they generate by:
- obtaining executive search assignments;
- executing search assignments; and
- assisting other consultants to obtain or complete executive search
assignments.
Bonuses represent a significant proportion of consultants' total
compensation. Any diminution of our reputation could impair our ability to
retain existing or attract additional qualified consultants. Our inability to
attract and retain qualified consultants could have a material adverse effect on
our executive search business, financial condition and operating results.
OUR CONSULTANTS MAY DEPART WITH EXISTING EXECUTIVE SEARCH CLIENTS
The success of our executive search business depends upon the ability of our
consultants to develop and maintain strong, long-term relationships with
clients. Usually, one or two consultants have primary responsibility for a
client relationship. When a consultant leaves an executive search firm and joins
another, clients that have established relationships with the departing
consultant may move their business to the consultant's new employer. The loss of
one or more clients is more likely to occur if the departing consultant enjoys
widespread name recognition or has developed a reputation as a specialist in
executing searches in a specific industry or management function. Historically,
we have not experienced significant problems in this area. However, a failure to
retain our most effective consultants or maintain the quality of service to
which our clients are accustomed could have a material adverse effect on our
business, financial condition and operating results. Also, the ability of a
departing consultant to move business to his or her new employer could have a
material adverse effect on our business, financial condition and operating
results.
13
WE FACE RISKS MAINTAINING OUR PROFESSIONAL REPUTATION AND BRAND NAME
Our ability to secure new executive search engagements and hire qualified
professionals is highly dependent upon our overall reputation and brand name
recognition as well as the individual reputations of our professionals. We
obtain a majority of our new engagements from existing clients or from referrals
by existing clients. Therefore, the dissatisfaction of any client could have a
disproportionate, adverse impact on our ability to secure new engagements. Any
factor that diminishes our reputation or the reputation of any of our personnel
could make it more difficult for us to compete successfully for both new
engagements and qualified consultants. This could have an adverse effect on our
executive search business, financial condition and operating results.
WE FACE RESTRICTIONS IMPOSED BY BLOCKING ARRANGEMENTS
Either by agreement with clients or for marketing or client relationship
purposes, executive search firms frequently refrain, for a specified period of
time, from recruiting certain employees of a client, and possibly other entities
affiliated with such client, when conducting executive searches on behalf of
other clients. This is known as a "blocking" or "off-limits" arrangement.
Blocking arrangements generally remain in effect for one or two years following
completion of an assignment. The actual duration and scope of any blocking
arrangement, including whether it covers all operations of a client and its
affiliates or only certain divisions of a client, generally depends on such
factors as:
- the length of the client relationship;
- the frequency with which the executive search firm has been engaged to
perform executive searches for the client; and
- the number of assignments the executive search firm has generated or
expects to generate from the client.
Some of our executive search clients are recognized as industry leaders
and/or employ a significant number of qualified executives who are potential
candidates for other companies in that client's industry. Blocking arrangements
with a client of this nature, or the awareness by a client's competitors of such
an arrangement, may make it difficult for us to obtain executive search
assignments from, or to fulfill executive search assignments for, competitors
while employees of that client may not be solicited. As our client base grows,
particularly in our targeted business sectors, blocking arrangements
increasingly may impede our growth or ability to attract and serve new clients.
This could have an adverse effect on our executive search business, results of
operations and financial condition.
WE FACE RISKS RELATING TO OUR FOREIGN OPERATIONS
We conduct operations in various foreign countries, including Australia,
Belgium, Brazil, Canada, France, Germany, Ireland, Italy, Japan, Luxembourg, the
Netherlands, New Zealand, Singapore, Spain and the United Kingdom. For the years
ended December 31, 2000 and 1999, approximately 40.0% and 44.6% of our total
commissions and fees were earned outside of the United States. Such amounts are
collected in the local currency. In addition, we generally pay operating
expenses in the corresponding local currency. Therefore, we are at risk for
exchange rate fluctuations between such local currencies and the dollar. We do
not conduct any significant hedging activities.
We are also subject to taxation in foreign jurisdictions. In addition,
transactions between us and our foreign subsidiaries may be subject to United
States and foreign withholding taxes. Applicable tax rates in foreign
jurisdictions differ from those of the United States, and change periodically.
The extent, if any, to which we will receive credit in the United States for
taxes we pay in foreign jurisdictions will depend upon the application of
limitations set forth in the Internal Revenue Code of 1986, as well as the
provisions of any tax treaties which may exist between the United States and
such foreign jurisdictions.
14
Other risks inherent in transacting foreign operations include changes in
applicable laws and regulatory requirements, tariffs and other trade barriers
and political instability.
WE DEPEND ON OUR KEY PERSONNEL
Our continued success will depend to a significant extent on our senior
management, including Andrew J. McKelvey, our Chairman of the Board and CEO. The
loss of the services of Mr. McKelvey or of one or more key employees could have
a material adverse effect on our business, financial condition and operating
results. In addition, if one or more key employees join a competitor or form a
competing company, the resulting loss of existing or potential clients could
have a material adverse effect on our business, financial condition and
operating results. If we were to lose a key employee, we cannot assure you that
we would be able to prevent the unauthorized disclosure or use of our
procedures, practices, new product development or client lists.
WE ARE INFLUENCED BY A PRINCIPAL STOCKHOLDER
Andrew J. McKelvey beneficially owns all of our outstanding Class B common
stock and a large number of shares of our common stock, which together with his
Class B common stock ownership represents more than 46% of the combined voting
power of all classes of our voting stock. Mr. McKelvey can strongly influence
the election of all of the members of our board. He can also exercise
significant influence over our business and affairs. This includes any
determinations with respect to mergers or other business combinations, the
acquisition or disposition of our assets, whether or not we incur indebtedness,
the issuance of any additional common stock or other equity securities and the
payment of dividends with respect to common stock.
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT OUR ACQUISITION
Some of the provisions of our certificate of incorporation, bylaws and
Delaware law could, together or separately:
- discourage potential acquisition proposals;
- delay or prevent a change in control; and
- limit the price that investors might be willing to pay in the future for
shares of our common stock.
In particular, our board of directors may issue up to 800,000 shares of
preferred stock with rights and privileges that might be senior to our common
stock, without the consent of the holders of the common stock. Our certificate
of incorporation and bylaws provide, among other things, for advance notice of
stockholder proposals and director nominations.
THERE MAY BE VOLATILITY IN OUR STOCK PRICE
The market for our common stock has, from time to time, experienced extreme
price and volume fluctuations. Factors such as announcements of variations in
our quarterly financial results and fluctuations in advertising commissions and
fees, including the percentage of our commissions and fees derived from
Internet-based services and products could cause the market price of our common
stock to fluctuate significantly. Further, due to the volatility of the stock
market generally, the price of our common stock could fluctuate for reasons
unrelated to our operating performance.
The market price of our common stock is based in large part on professional
securities analysts' expectations that our business will continue to grow and
that we will achieve certain levels of net income. If our financial performance
in a particular quarter does not meet the expectations of securities analysts,
this may adversely affect the views of those securities analysts concerning our
growth potential and future financial performance. If the securities analysts
who regularly follow our common stock lower their ratings
15
of our common stock or lower their projections for our future growth and
financial performance, the market price of our common stock is likely to drop
significantly.
WE FACE RISKS ASSOCIATED WITH GOVERNMENT REGULATION
As an advertising agency which creates and places print and Internet
advertisements, we are subject to Sections 5 and 12 of the FTC Act. These
sections regulate advertising in all media, including the Internet, and require
advertisers and advertising agencies to have substantiation for advertising
claims before disseminating advertisements. The FTC Act prohibits the
dissemination of false, deceptive, misleading, and unfair advertising, and
grants the FTC enforcement powers to impose and seek civil penalties, consumer
redress, injunctive relief and other remedies upon advertisers and advertising
agencies which disseminate prohibited advertisements. Advertising agencies like
us are subject to liability under the FTC Act if the agency actively
participated in creating the advertisement, and knew or had reason to know that
the advertising was false or deceptive.
In the event that any advertising that we have created is found to be false,
deceptive or misleading, the FTC Act could potentially subject us to liability.
The fact that the FTC has recently brought several actions charging deceptive
advertising via the Internet, and is actively seeking new cases involving
advertising via the Internet, indicates that the FTC Act could pose a somewhat
higher risk of liability to the advertising distributed via the Internet. The
FTC has never brought any actions against us.
In addition, we cannot assure you that other current or new government laws
and regulations, or the application of existing laws and regulations will not:
- subject us to significant liabilities;
- significantly dampen growth in Internet usage;
- prevent us from offering certain Internet content or services; or
- otherwise have a material adverse effect on our business, financial
condition and operating results.
WE HAVE NEVER PAID DIVIDENDS
We currently intend to retain earnings, if any, to support our growth
strategy. We do not anticipate paying dividends on our stock in the foreseeable
future. In addition, payment of dividends on our stock is restricted by our
financing agreement.
16
USE OF PROCEEDS
TMP will not receive any proceeds from the sale of shares of TMP stock by
the selling stockholders.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our stock. We currently
anticipate that all future earnings will be retained by TMP to support our
growth strategy. Accordingly, we do not anticipate paying cash dividends on our
stock for the foreseeable future. The payment of any future dividends will be at
the discretion of our Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements, our general financial
condition, contractual restrictions and general business conditions. Our
financing agreement restricts the payment of dividends on our stock.
PRICE RANGE OF COMMON STOCK
Our stock is quoted on the Nasdaq National Market under the ticker symbol
"TMPW." The stock was initially offered to the public on December 12, 1996 at
$7.00 per share. The following table sets forth for the periods indicated the
high and low reported closing sale prices per share for our stock as reported by
Nasdaq. Effective February 29, 2000, a 2-for-1 stock split in the form of a
stock dividend was paid, the share and per share amounts set forth in this
section have been retroactively restated to give effect to the stock split.
YEAR ENDING DECEMBER 31, 2001 HIGH LOW
- ----------------------------- ---------------- ----------------
First Quarter............................................ $ 66.38 $ 36.44
Second Quarter (through April 6, 2001)................... $ 38.38 $ 30.63
YEAR ENDING DECEMBER 31, 2000 HIGH LOW
- ----------------------------- ---------------- ----------------
First Quarter............................................ $ 92.38 $ 60.00
Second Quarter........................................... $ 78.25 $ 49.13
Third Quarter............................................ $ 84.75 $ 64.81
Fourth Quarter........................................... $ 82.38 $ 53.06
YEAR ENDING DECEMBER 31, 1999 HIGH LOW
- ----------------------------- ---------------- ----------------
First Quarter............................................ $ 34.94 $ 19.50
Second Quarter........................................... $ 44.69 $ 21.50
Third Quarter............................................ $ 32.81 $ 22.06
Fourth Quarter........................................... $ 80.15 $ 25.00
There were approximately 2,253 stockholders of record of our Common Stock on
April 6, 2001. On April 6, 2001, the last reported sale price of our stock as
reported by Nasdaq was $35.50.
17
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information set forth below as of
December 31, 2000 and 1999 and for the three years in the period ended
December 31, 2000 has been derived from TMP's audited consolidated financial
statements included elsewhere in this prospectus. The selected consolidated
information with respect to the Company's financial position as of December 31,
1998 has been derived from TMP's audited consolidated balance sheet as of
December 31, 1998, not included herein. The selected consolidated financial
information set forth below as of December 31, 1997 and 1996 and for the two
years ended December 31, 1997 has been derived from our unaudited consolidated
financial statements which are not included in this prospectus. The following
financial information should be read in conjunction with TMP's consolidated
financial statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus. The Other Data presented below has not been audited.
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Commissions and fees.................................... $458,146 $628,121 $771,838 $908,955 $1,291,737
Operating expenses:
Salaries & related.................................... 263,039 352,485 442,511 512,554 667,398
Office & general...................................... 127,341 164,443 192,156 216,826 287,428
Marketing & promotion................................. 8,459 13,986 30,229 75,780 161,367
Merger & integration.................................. -- -- 22,412 63,054 64,604
Restructuring......................................... -- -- 3,543 2,789 --
Amortization of intangibles........................... 4,786 6,963 11,281 12,894 16,536
Special compensation and CEO bonus(1)................. 52,019 1,500 1,250 -- --
Total operating expenses................................ 455,644 539,377 703,382 883,897 1,197,333
Operating income........................................ 2,502 88,744 68,456 25,058 94,404
Other income (expense):
Interest income (expense), net(2)..................... (14,769) (10,725) (13,659) (14,126) 20,710
Other, net............................................ (326) 1,386 (2,095) (2,889) (1,095)
Income (loss) before provision for income taxes,
minority interests and equity in earnings (losses) of
affiliates............................................ (12,593) 79,405 52,702 8,043 114,019
Provision for income taxes.............................. 11,479 23,936 17,426 8,424 57,602
Net income (loss) applicable to common and Class B
common stockholders................................... (25,185) 55,017 34,852 (788) 56,859
Net income (loss) per common and Class B common share:
Basic................................................. $ (0.36) $ 0.67 $ 0.40 $ (0.01) $ 0.56
Diluted............................................... $ (0.36) $ 0.66 $ 0.39 $ (0.01) $ 0.53
Weighted average shares outstanding:
Basic................................................. 70,009 81,668 87,449 90,152 101,413
Diluted............................................... 70,009 82,945 89,305 90,152 107,903
18
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES AND OFFICES)
OTHER DATA:
Gross Billings:
Interactive (3).......................... $ 11,960 $ 31,589 $ 71,571 $ 176,587 $ 485,899
Advertising & Communications............. 391,158 672,187 881,809 843,955 877,775
eResourcing (4).......................... 146,475 187,516 223,063 295,133 391,637
Executive Search......................... 127,893 168,107 195,268 173,558 178,399
Directional Marketing.................... 466,230 497,848 520,129 532,258 545,584
---------- ---------- ---------- ---------- ----------
Total Gross Billings....................... $1,143,716 $1,557,247 $1,891,840 $2,021,491 $2,479,294
========== ========== ========== ========== ==========
Total operating expenses as a percentage of
commissions and fees..................... 99.5% 85.9% 91.1% 97.2% 92.7%
Number of employees........................ 4,451 6,292 7,097 7,432 9,500
Number of offices.......................... 201 268 321 330 320
DECEMBER 31,
--------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Current assets............................. $354,942 $495,248 $542,209 $ 642,645 $1,248,274
Current liabilities........................ 347,156 449,584 475,215 626,800 852,804
Total assets............................... 543,694 822,012 933,873 1,098,765 1,991,843
Long-term liabilities, less current
portion.................................. 105,083 167,574 178,594 136,933 81,163
Minority interests......................... 3,705 431 509 -- --
Redeemable preferred stock................. 2,000 -- -- -- --
Total stockholders' equity................. 85,750 204,423 279,555 335,032 1,057,876
- --------------------------
(1) Special compensation consists of a non-cash, non-recurring charge of
approximately $52.0 million for special management compensation in 1996
resulting from the issuance of approximately 7.2 million shares of Common
Stock of the Company to stockholders of predecessor companies of the Company
in exchange for their shares in those companies which they had received for
nominal or no consideration, as employees or as management of businesses
financed substantially by the principal stockholder of the company and,
accordingly, were not considered to have made substantive investments for
their minority shares. The CEO bonus for the year ended December 31, 1997
and the year ended December 31, 1998 consist of a mandatory bonus of $375
thousand per quarter payable to Andrew J. McKelvey, the Company's CEO and
Principal Stockholder, as provided for in the Principal Stockholder's then
existing employment agreement. Receipt of these bonus amounts was
permanently waived by the Principal Stockholder, and accordingly, since they
were not paid, are also accounted for as a contribution to Additional
Paid-in Capital.
(2) Interest expense for 1996 includes a $2.6 million non-cash, non-recurring
charge to reflect the exercise of a warrant issued in connection with the
Company's financing agreement.
(3) Represents fees earned in connection with recruitment, yellow page and other
advertisements placed on the Internet, interactive moving services and
employment searches and temporary contracting services sourced through the
Internet.
(4) Amounts for temporary contracting are reported net of the costs paid to the
temporary contractor.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO, THE CONSOLIDATED FINANCIAL STATEMENTS OF THE
COMPANY APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS, IN
ADDITION TO HISTORICAL INFORMATION, FORWARD LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THE FORWARD LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS.
ALL AMOUNTS REFERRED TO BELOW REFLECT THE AMOUNTS DISCLOSED IN THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND 1999 AND FOR EACH
OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 INCLUDED ELSEWHERE IN
THIS PROSPECTUS.
During the period of January 1, 2000 through December 31, 2000, the Company
consummated mergers with the following companies (the "2000 Mergers") in
transactions that provided for the exchange of all of the outstanding stock of
each entity for a total of 10,721,054 shares of TMP common stock:
NUMBER OF
ENTITY BUSINESS SEGMENT ACQUISITION DATE SHARES ISSUED
- ------ ---------------------------- ---------------- -------------
HW Group PLC................... eResourcing February 16,
2000 715,769
Microsurf, Inc................. Monstermoving.com February 16,
2000 684,462
Burlington Wells, Inc.......... eResourcing February 29,
2000 52,190
Illsley Bourbonnais............ Executive Search March 1, 2000 246,702
System One Services, Inc....... eResourcing April 3, 2000 1,022,257
GTR Advertising................ Advertising & Communications April 4, 2000 54,041
Virtual Relocation.com, Inc.... Monstermoving.com May 9, 2000 947,916
Business Technologies Ltd...... Monster.com May 17, 2000 205,703
Simpatix, Inc.................. Monster.com May 31, 2000 155,480
Rollo Associates, Inc.......... Executive Search May 31, 2000 110,860
Web Technology Partners, Monster.com
Inc.......................... May 31, 2000 623,892
Rich, Gardner & Associates, Advertising & Communications
Ltd.......................... August 31, 2000 43,535
Stratascape, Inc............... eResourcing August 31, 2000 311,978
Cashback2.com, Inc............. Monstermoving.com November 1, 2000 90,750
Jobtrak Corporation............ Monster.com November 7, 2000 3,333,060
SPEC Group Holdings, Inc....... eResourcing December 6, 2000 357,782
People.com Consultants, Inc.... eResourcing December 8, 2000 1,764,677
The transactions for the above acquired entities were accounted for as
poolings of interests. As a result, the financial position, and statements of
income (loss), comprehensive income (loss) and cash flows are presented as if
the combining companies had been consolidated for all periods presented. In
addition, the consolidated statements of stockholders' equity reflect our
accounts as if the additional common stock issued in connection with each of the
aforementioned combinations had been issued for all periods when each of the
related companies had issued shares and for the amounts that reflect the
exchange ratios of the 2000 Mergers. The consolidated balance sheets of the
Company as of December 31, 2000 and 1999 have been combined with those of the
2000 Mergers, all as of December 31, 2000 and 1999, except for the following:
Illsley Bourbonnais, for which the balance sheet as of January 31, 2000 has been
combined with that of TMP as of December 31, 1999 and Business
Technologies Ltd. ("BTL"), for which the balance sheet as of July 31, 1999 is
combined with that of TMP as of December 31, 1999.
The consolidated statements of income (loss) combine the results of TMP for
each year in the three year period ended December 31, 2000 with those of the
2000 Mergers all for the same periods except for the following: Illsley
Bourbonnais, for which the statements of income (loss) for the years ended
January 31, 2000 and 1999 are included in the statements of income (loss) for
the years ended December 31, 1999 and 1998, respectively; BTL, for which the
statements of income (loss) for the years ended
20
July 31, 1999 and 1998 are included in the statements of income (loss) for the
years ended December 31, 1999 and 1998, respectively; and HW Group PLC ("HW"),
for which the statement of income (loss) for the year ended March 31, 1999 is
included in the statement of income (loss) for the year ended December 31, 1998.
The results of Illsley Bourbonnais for the month ended January 31, 2000 are
included in both the consolidated statements of income (loss) for the years
ended December 31, 2000 and 1999. Therefore, the following amounts have been
included in both periods: (a) commissions and fees of $1.0 million and (b) net
income of $285 thousand, with no impact on net income (loss) per share.
Additionally, due to immateriality, the results of BTL for the period August 1,
1999 through December 31, 1999 of $314 thousand, in commissions and fees and
$50 thousand, in net income have not been included in the consolidated statement
of income (loss) for the year ended December 31, 1999 because the results of BTL
for the fiscal year ended July 31, 1999 were combined with our consolidated
statement of income (loss) for the year ended December 31, 1999. In addition,
the results of HW, for the three months ended March 31, 1999 are included in the
consolidated statements of income (loss) in both years ended December 31, 1999
and 1998, and the effects on both periods on (a) commissions and fees was
$11.1 million, (b) net income was $1.9 million and (c) diluted earnings per
share was $0.02.
OVERVIEW
TMP Worldwide Inc. ("TMP" or the "Company"), through its flagship
Interactive product, Monster-Registered Trademark-.com (www.monster.com), is the
on-line recruitment leader and a provider of online moving services, through the
Company's website, Monstermoving(sm).com (www.monstermoving.com). TMP is also
the world's largest recruitment advertising agency network through its
Advertising & Communications division, one of the world's largest selection and
temporary contracting agencies through its eResourcing division, a premier
Executive Search firm, and the world's largest yellow pages advertising agency
through its Directional Marketing division.
Our Interactive growth is attributable to increased sales of our Internet
products, expansion of our Interactive businesses into certain European
countries, migration of our traditional businesses to the Internet and the
addition of new Interactive services. Monster.com is the leading global career
portal on the Web with over 23 million unique visits per month as of
February 2001 per Nielson I/Pro. The Monster.com global network consists of
local language and content sites in the United States, Canada (French and
English), United Kingdom, Ireland, France, Germany, the Netherlands, Belgium,
Luxembourg, Australia, New Zealand, Singapore, India, Spain and Hong Kong.
A substantial part of our growth over the last three years in Advertising &
Communications and eResourcing has been achieved through acquisitions accounted
for as purchases. For the period January 1, 1998 through December 31, 2000, for
all segments, we completed 55 such acquisitions, with estimated annual gross
billings of approximately $261.0 million. Given the significant number of
acquisitions affecting the periods presented, the results of operations from
period to period may not necessarily be comparable.
Gross billings refers to billings for advertising placed on the Internet, in
newspapers and telephone directories by our clients, and associated fees for
related services. In addition, Executive Search fees, selection fees, and net
fees from temporary contracting services are also part of gross billings. Gross
billings for recruitment advertising and yellow page advertising placed by our
Advertising & Communications and Directional Marketing businesses respectively,
are not included in our consolidated financial statements because they include a
substantial amount of funds that are collected from our clients but passed
through to publishers for advertisements. However, the trends in gross billings
in these two segments directly impact the commissions and fees that they earn
because, for these segments, we earn commissions based on a percentage of the
media advertising purchased at a rate established by the related publisher. We
also earn associated fees for related services; such amounts are also included
in gross billings. Publishers and third party websites typically bill us for the
advertising purchased and we in turn bill
21
our clients for this amount and retain a commission. Generally, the payment
terms for Directional Marketing clients require payment to us prior to the date
payment is due to the publishers. The payment terms with Advertising &
Communications clients typically require payment when payment is due to
publishers. Historically, we have not experienced substantial problems with
unpaid accounts.
Commissions and fees related to our Interactive businesses are derived from:
- job postings and access to the resume database and related services
delivered via the Internet, primarily our own website, www.monster.com;
- searches for permanent and temporary employees, at the executive and
professional levels, and related services conducted through the Internet;
- Internet advertising services provided to our Directional Marketing
clients;
- the providing of interactive advertising services and technologies, which
allow advertisers to measure and track sales, repeat traffic and other key
statistics to enable such advertisers to greatly reduce costs, while
driving only the most qualified users to their web sites; and
- interactive advertising, sponsorships and referral fees, primarily on our
own website, www.monstermoving(sm).com.
Monstermoving.com (www.monstermoving.com) provides important relocation
information and services to those planning to move. According to independent
research conducted by Media Metrix for the month of February 2001,
Monstermoving.com had an average of 5.1 page views per user and a 0.5% reach,
for a power ranking of 2.6 (page views multiplied by reach). Monthly unique
visitors to Monstermoving.com were 433 thousand in February 2001 and viewers
stayed an average of 2 minutes. According to the U.S. Census Department 1997
Study, approximately 20% of the general U.S. population is relocating at any
point in time and we believe that these additional relocation services will be
highly valued by Monster.com's audience and customer base as well as others who
are planning to move.
Monstermoving.com was launched in October 2000, and prior to that date
conducted business through the individual properties that we acquired in 2000,
primarily Virtual Relocation.com, Inc. and Microsurf, Inc., which were accounted
for as poolings of interests. It is already one of the Internet's most
comprehensive providers of moving-related analytical tools, and features
information that addresses the entire relocation process. This information
includes new residence listings, community maps, education summaries, mortgage
quotes, moving quotes, insurance quotes, address and utility change services,
and home repair and maintenance information.
Monstermoving.com is directly accessible to Monster.com's large base of
consumer traffic through URL links and promotions on Monster.com. In addition,
the cross-selling of Monstermoving.com's services has started with our other
divisions and will provide an important new advertising venue for moving-related
clients, particularly in the Directional Marketing division, where over 30% of
our revenues are derived from the moving services industry, including van lines,
truck rentals and home services.
For Advertising & Communications in the U.S., publisher commissions
historically average 15% of recruitment advertising gross billings. We also earn
fees from related services such as campaign development and design, retention
and referral programs, resume screening, brochures and other collateral
services, research and other creative and administrative services. Outside of
the U.S., where, collectively, we derive the majority of our Advertising &
Communications commissions and fees, our commission rates for recruitment
advertising vary, historically ranging from approximately 10% in Australia to
15% in Canada and the United Kingdom.
We believe that our eResourcing and Executive Search services are helping to
broaden the universe of both job seekers and employers who utilize Monster.com.
Through the use of Monster.com, Advertising &
22
Communications, eResourcing and Executive Search, we believe that we can
accommodate all of our clients' employee recruitment needs, which is our "Intern
to CEO" strategy.
eResourcing offers placement services for executives and professionals in
permanent and temporary positions, including specific short-term projects. This
business focuses on mid-level professionals or executives, those who typically
earn between $75,000 and $150,000 annually, and provides these services
primarily in Australia, New Zealand, Europe and the U.S.
Executive Search offers an advanced and comprehensive range of services
aimed at finding the appropriate senior executive for our clients. Such senior
executives typically earn in excess of $250,000 annually. Our specialized
services include identification of candidates, competence measurement,
assessment of candidate/company cultural fit and transaction negotiation and
closure.
Our Directional Marketing division designs and executes yellow page
advertising, receiving an effective commission rate from directory publishers
which historically approximated 20% of yellow page advertising gross billings.
However, due to reductions in commission rates by the publishers and higher
discounts provided to clients, the rate declined to 19.0% in 1999 and was 17.9%
as of December 31, 2000. In addition to base commissions, certain yellow pages
publishers pay incentive commissions for increased annual volume of advertising
placed by advertising agencies. We typically recognize these additional
commissions, if any, in the fourth quarter when it is certain that such
commission has been earned. In the fourth quarters of 2000, 1999 and 1998 the
Company recognized $1.5 million, $0.1 million and $0.9 million, respectively.
However, due to overly aggressive sales volume objectives set by the publishers,
the Company does not foresee earning these incentive commissions in the future.
Interactive commissions and fees were $435.2 million for the year ended
December 31, 2000, an increase of $277.0 million or 175.1% over the same period
of 1999, which had Interactive commissions and fees of $158.2 million. This
growth reflects an increase in the acceptance of our Interactive products and
services by existing and new clients and the effect of increased sales and
marketing activities.
Advertising & Communications commissions and fees were up 5.4% at
$194.0 million for the year ended December 31, 2000 versus $183.9 million for
the same period of 1999 reflecting modest growth in traditional billings of 4.0%
and increased fees for creative and other value-added services.
eResourcing commissions and fees were $386.7 million, up $94.5 million or
32.3% from $292.2 million for the same period ended December 31, 1999. The
increase reflects the greater worldwide demand for professional, mid-level
management and information service technology positions (annual salaries ranging
from $75,000 to $150,000), and is also due to acquisitions accounted for as
purchases.
Executive Search commissions and fees were $178.4 million for the year ended
December 31, 2000, an increase of $5.1 million or 3.0% from $173.3 million for
the comparable twelve months of 1999, reflecting strong global demand for senior
executive positions.
Directional Marketing billings increased 2.5% to $545.6 million for year
ended December 31, 2000 and commissions and fees decreased 3.7% to
$97.5 million for the twelve months of 2000 compared to $101.3 million for the
prior year period, reflecting substantially reduced commissions paid by
publishers and the effects of higher discounts for certain large clients. Total
commissions and fees as a percent of related billings for the year ended
December 31, 2000 were 52.1% as compared to 45.0% for the prior year period. The
higher percentage reflects increased sales volume for Interactive, eResourcing
and Executive Search, where the Company retains greater portions of the amounts
billed.
Based on our consolidated results for the years ended December 31, 2000 and
1999, 40.0% and 44.6%, respectively, of our consolidated commissions and fees
are attributable to clients outside the U.S. The decline in the percent for 2000
is due primarily to the growth of Monster.com in the U.S.
23
RESULTS OF OPERATIONS
The following table sets forth our gross billings, commissions and fees,
commissions and fees as a percentage of gross billings, EBITDA and cash flow
information.
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1999 2000
---------- ---------- ----------
(IN THOUSANDS)
GROSS BILLINGS:
Interactive(1)........................................... $ 71,571 $ 176,587 $ 485,899
Advertising & Communications............................. 881,809 843,955 877,755
eResourcing(2)........................................... 223,063 295,133 391,637
Executive Search......................................... 195,268 173,558 178,399
Directional Marketing.................................... 520,129 532,258 545,584
---------- ---------- ----------
Total.................................................... $1,891,840 $2,021,491 $2,479,274
========== ========== ==========
COMMISSIONS AND FEES:
Interactive(1)........................................... $ 64,858 $ 158,215 $ 435,183
Advertising & Communications............................. 183,393 183,938 193,951
eResourcing(2)........................................... 221,864 292,231 386,666
Executive Search......................................... 195,268 173,277 178,399
Directional Marketing.................................... 106,455 101,294 97,538
---------- ---------- ----------
Total.................................................... $ 771,838 $ 908,955 $1,291,737
========== ========== ==========
COMMISSIONS AND FEES AS A PERCENTAGE OF GROSS BILLINGS:
Interactive(1)........................................... 90.6% 89.6% 89.6%
Advertising & Communications............................. 20.8% 21.8% 22.1%
eResourcing(2)........................................... 99.5% 99.0% 98.7%
Executive Search......................................... 100.0% 99.8% 100.0%
Directional Marketing.................................... 20.5% 19.0% 17.9%
Total.................................................... 40.8% 45.0% 52.1%
EBITDA(3)................................................ $ 104,740 $ 69,885 $ 156,369
Cash provided by operating activities.................... $ 73,460 $ 104,211 $ 187,391
Cash used in investing activities........................ $ (85,709) $ (63,343) $ (191,486)
Cash provided by (used in) financing activities.......... $ 32,023 $ (56,281) $ 509,964
Effect of exchange rate changes on cash and cash
equivalents............................................ $ (158) $ (754) $ (1,501)
- ------------------------
(1) Represents fees earned in connection with recruitment, yellow page and other
advertisements placed on the Internet, interactive moving services and
employment searches and temporary contracting services sourced through the
Internet.
(2) Amounts for temporary contracting are reported net of the costs paid to the
temporary contractor.
(3) Earnings before interest, income taxes, depreciation and amortization.
EBITDA is presented to provide additional information about our ability to
meet our future debt service, capital expenditures and working capital
requirements and is one of the measures which determines our ability to
borrow under our credit facility. EBITDA should not be considered in
isolation or as a substitute for operating income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a measure of
our profitability or liquidity.
24
EBITDA for the indicated periods is calculated as follows:
YEAR ENDED DECEMBER 31,
------------------------------
1998 1999 2000
-------- -------- --------
(IN THOUSANDS)
Net income (loss)........................................... $ 34,852 $ (788) $ 56,859
Interest (income) expense, net.............................. 13,659 14,126 (20,710)
Income tax expense.......................................... 17,426 8,424 57,602
Depreciation and amortization............................... 38,803 48,123 62,618
-------- ------- --------
EBITDA...................................................... $104,740 $69,885 $156,369
======== ======= ========
THE YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999
Gross billings for the year ended December 31, 2000 were $2,479.3 million,
an increase of $457.8 million or 22.6% as compared to gross billings of
$2,021.5 million for the year ended December 31, 1999. This increase in gross
billings resulted primarily from organic growth in our Interactive and Executive
Search businesses, and acquisitions in Advertising & Communications and
eResourcing.
Total commissions and fees for the year ended December 31, 2000 were
$1,291.7 million, an increase of $382.7 million or 42.1% versus $909.0 million
for the twelve months ended December 31, 1999. Interactive commissions and fees
increased $277.0 million or 175.1% to $435.2 million for the twelve months ended
December 31, 2000, from $158.2 million for the twelve months ended December 31,
1999, reflecting an increased acceptance of our Interactive products and
services by our clients and Internet users, our continued expansion into the
Europe and Asia-Pacific markets, and the benefit of Monster.com's marketing
initiatives.
The Advertising & Communications division reported traditional recruitment
advertising commissions and fees of $194.0 million for the twelve months ended
December 31, 2000 compared to $183.9 million for the year ended December 31,
1999, an increase of 5.4%. This reflects 4.0% growth in traditional billings,
primarily related to increased client activity and publisher price increases for
help-wanted advertisements placed in newspapers, and increased fees for creative
and other value-added services. In addition, the division's contribution to
total company interactive commissions and fees increased to $31.8 million for
the year ended December 31, 2000 compared to $13.4 million for the comparable
twelve month period.
eResourcing commissions and fees increased 32.3% to $386.7 million for the
twelve months ended December 31, 2000 compared to $292.2 million for the year
ended December 31, 1999, again reflecting the strong global labor market and
resulting demand for permanent and contract professional employees, particularly
in mid-level management and information technology positions.
Executive Search commissions and fees were $178.4 million for the twelve
months ended December 31, 2000 an increase of 3.0% from $173.3 million for the
year ended December 31, 1999, also reflecting the strong labor market, demand
for senior executive positions, and an increase in average billings per
consultant. The average number of consultants in 2000 was 194, down from 268 in
1999.
Directional Marketing commissions and fees decreased 3.7% to $97.5 million
for the twelve months ended December 31, 2000 versus $101.3 million for the year
ended December 31, 1999, reflecting substantially reduced commissions paid by
publishers and the effect of higher discounts for certain clients, partially
offset by a year-end 2000 incentive bonus of $1.5 million paid by a yellow pages
publisher.
Total operating expenses for the year ended December 31, 2000 were
$1,197.3 million, compared with $883.9 million for 1999. The increase of
$313.4 million or 35.5% is due primarily to acquisitions and internal growth,
including an additional $154.8 million in salary and related expenses,
$70.6 million in office and general expense, and $85.6 million of increased
marketing and promotion primarily for the Monster.com brand.
25
Salaries and related costs for the year ended December 31, 2000 were
$667.4 million or 51.7% of total commissions and fees, compared with
$512.6 million or 56.4% of total commissions and fees for the same period in
1999. The increase of $154.8 million or 30.2% is primarily due to increased
staff for the expansion of our Interactive operations, especially Monster.com,
and acquisitions accounted for as purchases in our Advertising & Communications
and eResourcing divisions.
Office and general expenses for the year ended December 31, 2000 were
$287.4 million or 22.3% of total commissions and fees, compared with
$216.8 million or 23.9% of commissions and fees for the same period in 1999. The
increase of $70.6 million or 32.6% is partially due to acquisitions and higher
costs for our Interactive operations, partially offset by reductions in expenses
for the Directional Marketing and Advertising & Communications businesses due to
improved efficiencies there.
Marketing and promotion expenses increased $85.6 million to $161.4 million
for the year ended December 31, 2000 from $75.8 million for the year ended
December 31, 1999, a 112.9% increase due primarily to increased marketing for
our Interactive operations, especially Monster.com.
Merger and integration expenses for the year ended December 31, 2000 were
$64.6 million, an increase of $1.5 million or 2.5%, compared with $63.1 million
for the same period in 1999. Costs incurred were a result of pooling of
interests transactions that occurred during the respective years and the planned
integration of such companies. In 2000 and 1999, merger and integration expense
consists primarily of office integration costs, the write-off of fixed assets
which will not be used in the future, separation pay, professional fees, and
employee stay bonuses to certain key personnel of the merged companies. Merger
and integration expense for the year ended December 31, 1999 also includes
reserves for the effects of uncollectible search fees as a result of the loss of
executive search consultants and non-cash compensation expense related to the
accelerated vesting of employee stock and stock option grants. The after tax
effect of these charges on diluted net income (loss) per share is $(0.49) and
$(0.47) for the year ended December 31, 2000 and 1999, respectively.
There were no restructuring charges for the year ended December 31, 2000,
compared with $2.8 million for the year ended December 31, 1999. The 1999
charges relate to LAI Worldwide Inc.'s ("LAI") plan, prior to its merger with
TMP, to significantly curtail the operations of its international offices in
London and Hong Kong. These charges include $0.5 million for the write-off of
leasehold improvements and fixed assets, $1.3 million for severance benefits
payable to 24 employees, and $1.0 million for consolidation of facilities
related to the restructuring.
Amortization of intangibles was $16.5 million for the year ended
December 31, 2000 compared to $12.9 million for the year ended December 31,
1999. The increase is due to our continued growth through acquisitions. As a
percentage of total commissions and fees, amortization of intangibles was 1.3%
and 1.4% for the years ended December 31, 2000 and 1999, respectively.
As a result of all of the above, operating income for the year ended
December 31, 2000 was $94.4 million, an increase of $69.3 or 276.7% from
$25.1 million for the comparable period in 1999.
Net interest income was $20.7 million for the year ended December 31, 2000
compared to net interest expense of $14.1 million in 1999. The change primarily
reflects interest income received on the net cash proceeds from our February
2000 follow-on stock offering, and positive cash flow for the year.
Additionally, our borrowing rate was 8.8% for the year ended December 31, 2000
compared with 10.8% for the year ended December 31, 1999.
Taxes on income for the year ended December 31, 2000 were $57.6 million on a
$114.0 million pretax profit, compared with a tax expense of $8.4 million on a
$8.0 million pretax profit for the year ended December 31, 1999. The increase of
$49.2 million reflects the higher pretax profit in the year ended December 31,
2000. In addition, in each period the provision reflects expenses that are not
tax deductible.
26
Such expenses are primarily related to merger costs from pooling of interests
transactions and amortization of intangible assets. The tax charge in each
period also reflects benefits from profits of certain pooled entities whose
earnings were not taxed at the corporate level prior to their merger with TMP.
As a result of all of the above, the net income applicable to common and
Class B common stockholders was $56.9 million for the year ended December 31,
2000, or $0.53 per diluted share. This represents an increase of $0.54 per
diluted share or 101.9% on a per share basis, despite an additional
17.8 million more diluted shares, compared to the net loss of $788,000 or $0.01
per diluted share the comparable 1999 period.
THE YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Gross billings for the year ended December 31, 1999 were $2,021.5 million, a
net increase of $129.7 million or 6.9% from $1,891.8 million for the year ended
December 31, 1998. This increase in gross billings resulted primarily from
organic growth in our Interactive, eResourcing and Directional Marketing
divisions as well as acquisitions in eResourcing.
Total commissions and fees for the year ended December 31, 1999 were
$909.0 million, an increase of $137.2 million or 17.8% from $771.8 million for
the year ended December 31, 1998. Interactive commissions and fees for the year
ended December 31, 1999 were $158.2 million, an increase of 143.9% or
$93.3 million as compared with $64.9 million for the year ended December 31,
1998. This increase in Interactive commissions and fees is due to: (i) an
increasing acceptance of our Interactive services and products from existing
clients, new clients and Internet users, (ii) the benefits of Monster.com's
marketing campaign, (iii) increases in the services and content available on our
websites, (iv) expansion into certain European markets and (v) price increases
on certain products.
Advertising & Communications commissions and fees of $183.9 million for the
year ended December 31, 1999 were virtually flat compared with $183.4 million
for the year ended December 31, 1998, reflecting reduced billings due to lower
volume of help-wanted advertisements placed in newspapers and a loss of business
in the Asia-Pacific Region, offset by substantial reductions in client discounts
and increased ancillary services in North America and an increase in business in
Europe.
eResourcing commissions and fees were $292.2 million, up $70.3 million or
31.7% from $221.9 million for the period ended December 31, 1998, due primarily
to organic growth in selection services in Australia and Continental Europe and
in temporary contracting operations. The increase in temporary contracting
reflects an increase in the number of contractors placed, particularly
information technology personnel and executives, which have higher margins than
general and support staff.
Executive Search commissions and fees were $173.3 million, a decrease of
$22.0 million or 11.3% from $195.3 million for the comparable year of 1998, due
primarily to a loss of consultants, as anticipated, at LAI and TASA Holding AG
("TASA"), which resulted from the merger and integration of these companies.
Directional Marketing commissions and fees were $101.3 million for the year
ended December 31, 1999, a decrease of $5.2 million or 4.8% from $106.5 million
for the year ended December 31, 1998, reflecting substantially reduced
commission rates and year-end incentives paid by publishers and the effects of
higher discounts for certain clients offset, in part by the benefits from higher
gross billings, internal growth and acquisitions.
Total operating expenses for the year ended December 31, 1999 were
$883.9 million compared with $703.4 million for same period in 1998. The
increase of $180.5 million or 25.7% is due to increases of $70.1 million in
salary and related costs, $40.7 million in merger and integration costs related
to mergers accounted for as poolings of interests, $45.6 million in marketing
and promotion expenses primarily to support Monster.com and $24.6 million in
office and general expenses.
27
Salaries and related costs for the year ended December 31, 1999 were
$512.6 million or 56.4% of total commissions and fees, compared with
$442.5 million or 57.3% of total commissions and fees for the same period in
1998. The increase of $70.1 million or 15.8% is primarily due to increased staff
for the expansion of our Interactive operations, especially Monster.com, and
acquisitions accounted for as purchases in eResourcing.
Office and general expenses for the year ended December 31, 1999 were
$216.8 million or 23.9% of total commissions and fees, compared with
$192.2 million or 24.9% of commissions and fees for the same period in 1998. The
increase of $24.6 million or 12.8% is primarily due to acquisitions and higher
costs for our Interactive operations, partially offset by reductions in expenses
for the Directional Marketing and Advertising & Communications businesses due to
improved efficiencies.
Marketing and promotion expenses increased $45.6 million to $75.8 million
for the year ended December 31, 1999 from $30.2 million for the year ended
December 31, 1998, a 150.7% increase due to increased spending to promote
Monster.com.
Merger and integration costs for the year ended December 31, 1999 were
$63.1 million compared with $22.4 million for the same period in 1998 an
increase of $40.7 million or 181.3%. This increase primarily resulted from the
pooling of interests transactions that occurred during the year ended
December 31, 1999 and the planned integration of such companies and is comprised
of: (i) $32.5 million of office integration costs, which include the closing of
excess leased facilities, the write-off of fixed assets which will not be used
in the future and a reserve for the effect, after reduction for related
compensation, of uncollectible search fees recorded as a result of a loss of
executive search consultants, (ii) $9.6 million for separation pay and
accelerated vesting of employee stock and stock option grants, both in
accordance with pre-existing contractual change in control provisions and
(iii) $3.6 million more of transaction related costs, which include legal,
accounting, printing and advisory fees and the costs incurred for the subsequent
registration of shares issued in the transactions, partially offset by
$5.0 million less for employee stay bonuses paid primarily with TMP shares and
options to certain key personnel of the merged companies. Approximately
$24.1 million of the $63.1 million are non-cash charges. The after tax effect of
these charges on diluted net income (loss) per share is $(0.47) and $(0.19) for
the year ended December 31, 1999 and 1998, respectively.
Restructuring charges for the year ended December 31, 1999 were
$2.8 million or, on an after tax basis, $(0.02) per diluted share, compared with
$3.5 million or $(0.02) per diluted share on an after tax basis for the year
ended December 31, 1998. These charges relate to LAI's closing of its London and
Hong Kong offices prior to LAI's merger with TMP. These charges include
$0.5 million for the write-off of leasehold improvements and fixed assets,
$1.3 million for severance benefits payable to 24 employees, and $1.0 million
for consolidation of facilities related to the restructuring.
As a result of the above, operating income for the year ended December 31,
1999 decreased $43.4 million or 63.4% to $25.1 million from $68.5 million for
the comparable period in 1998.
Net interest expense was $14.1 million for the year ended December 31, 1999
compared to $13.7 million for the year ended December 31, 1998. The effects of
lower interest rates and borrowing costs in 1999, resulting from the amended and
restated financing agreement entered into on November 5, 1998, were offset by
increased borrowings and interest expense of pooled companies.
Taxes on income for the year ended December 31, 1999 were $8.4 million on a
$8.0 million pretax profit, compared with a tax expense of $17.4 million on a
$52.7 million pretax profit for the year ended December 31, 1998. The decrease
of $9.0 million reflects the lower pretax profit in the year ended December 31,
1999. In addition, in each period the provision reflects expenses that are not
tax deductible. Such expenses are primarily related to merger costs from pooling
of interests transactions and amortization of intangible assets. The tax charge
in each period benefited from profits of certain pooled entities whose earnings
were not taxed at the corporate level prior to their merger with TMP.
28
As a result of all of the above, the net loss applicable to common and
Class B common stockholders for the year ended December 31, 1999 was $788,000 or
$0.01 per diluted share, a decrease of $0.40 per diluted share or 102.6% on a
per share basis from the net income of $34.9 million or $0.39 per diluted share
for the comparable 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements have been to fund (i) acquisitions,
(ii) working capital, (iii) capital expenditures and (iv) marketing and
development of our Interactive businesses. Our working capital requirements are
generally higher in the quarters ending March 31 and June 30, during which
periods the payments to the major yellow page directory publishers are at their
highest levels. We have met our liquidity needs over the last three years
through (a) funds provided by operating activities, (b) equity offerings,
(c) long-term borrowings and (d) capital leases. On January 27, 2000, in
connection with our third public offering, we issued an aggregate of 8,000,000
shares of common stock at a purchase price of $77 5/16 per share in an
underwritten public offering managed by Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., Salomon Smith Barney, Deutsche Bank Securities, Inc.,
Paine Webber Incorporated and U.S. Bancorp Piper Jaffrey, Inc. The offering was
completed in February 2000. The net proceeds from this offering were
$594.2 million, and approximately $82.0 million was used to pay down debt on the
Company's credit line.
The Company invests its excess cash predominantly in commercial paper and
overnight deposits that are highly liquid, of high-quality investment grade, and
have maturities of less than three months with the intent to make such funds
readily available for operating, acquisition and strategic equity investment
purposes. Despite an aggressive 2000 acquisition and related capital expenditure
program, at December 31, 2000, the Company had cash and cash equivalents
totaling $572.1 million, compared to $67.7 million and $83.9 million at
December 31, 1999 and 1998, respectively.
For the year ended December 31, 2000, cash provided by operating activities
of $187.4 million was primarily attributable to net income of $56.9 million,
depreciation and amortization of $62.6 million, provisions for doubtful accounts
of $26.0 million, common stock issued for matching contributions to 401(k) plan
and employee stay bonuses of $11.3 million, a tax benefit from the exercise of
stock options of $17.4 million, a provision for deferred income taxes of
$17.7 million, an increase in deferred commissions and fees of $78.7 million,
and an increase in accrued expenses and other liabilities of $11.1 million.
These increases were partially offset by an increase in prepaid expenses and
other assets of $43.6 million, an increase in accounts receivable of
$49.7 million, a gain on the disposal of fixed assets of $0.6 million and the
effect of pooled companies earnings included in more than one period of
$0.3 million. The increase in deferred commissions and fees relates principally
to the significant growth of Monster.com.
For the year ended December 31, 1999, cash provided by operating activities
of $104.2 million was primarily due to depreciation and amortization of
$48.1 million, provisions for doubtful accounts of $14.8 million, a loss on the
disposal of fixed assets of $12.1 million, common stock issued for matching
contributions to 401(k) plan and employee stay bonuses of $7.9 million, a tax
benefit from the exercise of stock options of $11.9 million, minority interests
and other of $0.4, pooled companies losses included in more than one period of
$1.9 million, an increase in deferred commissions and fees of $57.2 million, and
an increase in accrued expenses and other liabilities of $62.7 million. These
increases were partially offset by a net loss of $0.8 million, a benefit for
deferred income taxes of $4.1 million, an increase in accounts receivable of
$91.6 million, and an increase in work-in-process, prepaid and other of
$16.3 million.
For the year ended December 31, 1998, cash provided by operating activities
of $73.5 million was primarily attributable to net income of $34.9 million,
depreciation and amortization of $38.8 million, provisions for doubtful accounts
of $6.7 million, a net loss on the disposal of fixed assets of $2.9 million,
common stock issued for matching contributions to 401(k) plan and employee stay
bonuses of $9.3 million, waived CEO bonus of $1.3 million, tax benefits from the
exercise of stock options of $0.4 million, minority
29
interests and other of $0.1 million, pooled company earnings excluded from the
period presented of $0.9 million, an increase in deferred commissions and fees
of $7.9 million and an increase in accounts payable, accrued expenses and other
liabilities of $15.9 million. These increases were partially offset by a benefit
for deferred income taxes of $1.6 million, pooled companies earnings included in
more than one period of $3.2 million, an increase in accounts receivable of
$24.9 million and prepaid expenses and other assets of $15.9 million.
EBITDA was $156.4 million for the year ended December 31, 2000, an increase
of $86.5 million or 123.8% from $69.9 million for the year ended December 31,
1999. The increase primarily reflects, increases for the 2000 period over the
prior period of $69.3 million in operating income and $14.5 million in
depreciation and amortization costs. As a percentage of commissions and fees,
EBITDA increased to 12.1% for the year ended December 31, 2000 as compared with
7.7% for the year ended December 31, 1999. The higher percent reflects the
general increase in commissions and fees for the 2000 period and an increase in
operating margins, primarily at Monster.com and our Advertising &
Communications, eResourcing and Executive Search segments. EBITDA was
$69.9 million for the year ended December 31, 1999, a decrease of $34.8 million
or 33% from $104.7 million for the year ended December 31, 1998. As a percentage
of total commissions and fees, EBITDA decreased to 7.7% for the year ended
December 31, 1999 from 13.6% for the year ended December 31, 1998. The lower
percentage reflected the increase in merger & integration and restructuring
costs, which were 7.2% and 3.4% of commissions and fees for the 1999 and 1998
periods, respectively.
Cash used in investing activities was $191.5 million for the year ended
December 31, 2000, primarily as a result of payments for purchases of
businesses, net of cash acquired of $112.6 million and capital expenditures of
$78.9 million. Capital expenditures were generally comprised of purchases of
computer hardware and software as well as leasehold improvements related to
leased facilities as the Company upgraded systems and infrastructure to support
its acquisitions. Cash used in investing activities was $63.3 million for the
year ended December 31, 1999, primarily as a result of payments for purchases of
businesses, net of cash acquired of $28.6 million and capital expenditures of
$44.1 million, offset by proceeds from the sales of fixed assets, short term
investments and other assets of $9.4 million. Cash used in investing activities
was $85.7 million for the year ended December 31, 1998 primarily as a result of
payments for purchases of businesses, net of cash acquired of $47.7 million,
capital expenditures of $36.2 million and advances by pooled entities to
officers and affiliates and other investments of $3.2 million, offset by
proceeds from the sales of fixed assets and short term investments of
$1.4 million.
We estimate that our expenditures for computer equipment and software,
furniture and fixtures and leasehold improvements will be approximately
$60 million to $70 million for the year ended December 31, 2001, before
considering any 2001 acquisitions.
Cash provided by financing activities was $510.0 million for the year ended
December 31, 2000 primarily due to proceeds from our follow-on stock offering of
$595.7 million and the issuance of Common Stock pursuant to stock option
exercises of $33.3 million, partially offset by net payments under our line of
credit, long-term debt and capital lease obligations of $91.7 million and
dividends paid by pooled companies of $27.3 million. For the year ended
December 31, 1999, cash used in financing activities of $56.3 million was due
primarily to net payments under our line of credit, long-term debt and
capitalized lease obligations of $56.6 million, redemption of minority interests
by a pooled company of $2.0 million and dividends paid by pooled companies of
$24.8 million, offset by cash received from the exercise of employee stock
options of $19.0 million and net proceeds from the issuance of Common Stock of
$8.2 million. For the year ended December 31, 1998, cash provided by financing
activities of $32.0 million was due primarily to proceeds from pooled companies'
follow-on offerings of common stock of $49.1 million, net borrowings under our
line of credit, long-term debt and capital lease obligations of $5.9 million,
and cash received from the exercise of employee stock options of $1.5 million,
offset by dividends paid by pooled companies of $24.4 million.
30
At December 31, 2000, we had a $185 million committed line of credit from
our primary lender pursuant to a revolving credit agreement expiring
November 4, 2003. Of such line, at December 31, 2000, approximately
$150.1 million was unused and accounts receivable is sufficient to allow for the
draw-down of the entire amount. Our current interest rate under the agreement is
LIBOR plus 50 basis points. In addition, we had secured lines of credit
aggregating $19.0 million for our operations in Australia, New Zealand, France,
Belgium, Germany and Italy, of which approximately $15.3 million was unused at
December 31, 2000.
Part of our acquisition strategy is to pay, over time, a portion of the
purchase price of certain acquisitions through seller financed notes.
Accordingly, such notes are included in long-term debt, are generally payable
over five years and totaled approximately $17.7 million at December 31, 2000. We
intend to continue our acquisition strategy and the marketing and promotion of
our Interactive businesses through the use of cash and cash equivalents,
operating profits, issuance of additional shares of our common stock, borrowings
against our long-term debt facility and seller financed notes. We believe that
our cash and cash equivalents, anticipated cash flow from operations, and the
availability of funds under our existing financing agreements will provide us
with sufficient liquidity to meet our current and foreseeable cash needs.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which had an initial adoption
date by the Company of January 1, 2000. During the second quarter of 1999, the
FASB postponed the adoption date of SFAS No. 133 until January 1, 2001. The FASB
further amended SFAS No. 133 in June 2000. SFAS No. 133 requires that all
derivative financial instruments be recorded on the consolidated balance sheets
at their fair value. Changes in the fair value of derivatives will be recorded
each period in earnings or other comprehensive earnings, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Gains and losses on derivative instruments reported in
other comprehensive earnings will be reclassified as earnings in the periods in
which earnings are affected by the hedged item. The adoption of this statement
did not have a significant impact on the Company's results of operations,
financial position or cash flows.
In 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements," which became effective in the fourth
quarter of 2000. The adoption of SAB No. 101 did not have a material effect on
the Company's financial statements.
In 2000, the Emerging Issues Task Force ("EITF") of the FASB issued EITF
Issue No. 00-2, "Website Development Costs," which established guidelines for
accounting for website development costs and became effective for quarters
beginning after June 30, 2000. The adoption of EITF Issue No. 00-2 did not have
a significant effect on the Company's financial statements.
BUSINESS OUTLOOK
TMP Worldwide believes that its market-leading portfolio of on-line and
off-line services, combined with its geographic diversification and strong
balance sheet, positions the Company for growth in 2001. Despite concerns of an
economic recession or a slowdown in the labor markets, and, therefore our
consideration of the potential related impacts to TMP, we remain positive about
achieving our goals for commissions and fees and earnings growth for 2001.
The Company reaffirms its business outlook provided in the Current Report on
Form 8-K filed with the Securities and Exchange Commission on February 22, 2001.
We remain comfortable with diluted adjusted earnings per share in the range of
$1.38 to $1.42. Considering the seasonal nature of our businesses, on a
quarterly basis, we expect diluted adjusted earnings per share of: $0.14 to
$0.15 for the first quarter ending March 31; $0.30 to $0.31 for the second
quarter ending June 30; $0.46 to $0.47 for the third quarter ending
September 30; and $0.48 to $0.49 for the fourth quarter ending December 31,
2001.
31
FLUCTUATIONS OF QUARTERLY RESULTS
The Company's Interactive commissions and fees have grown sequentially
quarter on quarter over the last three years. However, commissions and fees for
its traditional operations are typically highest in the second quarter and
lowest in the fourth quarter; however, the cyclical nature of the economy and
our clients' employment needs have an overriding impact on our quarterly
results. The Company's quarterly commissions and fees are also affected by the
timing of yellow page directory closings, which currently have a concentration
in the third quarter. Yellow page publishers may change the timing of directory
publications, which may have an effect on our quarterly results. Our Directional
Marketing results are also affected by commissions and fees earned for volume
placements for the year and such amounts, if any, are typically reported in the
fourth quarter. Moreover, acquisition activity has had more of an impact on our
recently reported quarterly results than any other factor.
The following table sets forth summary quarterly unaudited financial
information for the years ended December 31, 2000 and 1999. (in millions, except
per share amounts).
2000 THREE MONTHS ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
Commissions and fees:
Interactive.......................................... $ 74.1 $ 97.0 $122.0 $142.1
Advertising & Communications......................... 47.2 49.6 49.4 47.8
eResourcing.......................................... 87.8 98.1 103.7 97.0
Executive Search..................................... 39.0 48.3 47.9 43.1
Directional Marketing................................ 23.3 23.1 29.3 21.9
------ ------ ------ ------
Total commissions and fees............................. $271.4 $316.1 $352.3 $351.9
====== ====== ====== ======
Operating income....................................... $ 11.6 $ 20.4 $ 35.7 $ 26.7
Net income applicable to common and Class B common
stockholders......................................... $ 5.6 $ 12.6 $ 26.3 $ 12.4
Net income per common and Class B common share:
Basic................................................ $ 0.06 $ 0.12 $ 0.26 $ 0.12
Diluted.............................................. $ 0.05 $ 0.12 $ 0.24 $ 0.11
Weighted average shares outstanding:
Basic................................................ 98.3 101.5 102.3 103.5
Diluted.............................................. 106.2 108.0 109.1 109.3
1999 THREE MONTHS ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
Commissions and fees:
Interactive.......................................... $ 25.7 $ 31.8 $ 43.8 $ 56.9
Advertising & Communications......................... 47.0 47.7 44.5 44.7
eResourcing.......................................... 62.4 71.0 80.3 78.5
Executive Search..................................... 41.5 42.7 47.8 41.3
Directional Marketing................................ 23.8 27.2 28.5 21.8
------ ------ ------ ------
Total commissions and fees............................. $200.4 $220.4 $244.9 $243.2
====== ====== ====== ======
Operating income....................................... $ 5.0 $ 12.4 $ 5.1 $ 2.6
Net income (loss) applicable to common and Class B
common stockholders.................................. $ 1.3 $ 5.1 $ (1.6) $ (5.6)
Net income (loss) per common and Class B common share:
Basic................................................ $ 0.02 $ 0.06 $(0.02) $(0.06)
Diluted.............................................. $ 0.01 $ 0.05 $(0.02) $(0.06)
Weighted average shares outstanding:
Basic................................................ 88.9 90.0 90.2 90.9
Diluted.............................................. 92.6 94.1 90.2 90.9
Earnings (loss) per share calculations for each quarter include the weighted
average effect for the quarter; therefore, the sum of the quarters may not equal
the full year earnings (loss) per share amount, which reflects the weighted
average effect on an annual basis. In addition, diluted earnings per share
calculations for each quarter include the effect of stock options and warrants,
when dilutive to the quarter.
32
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risks include fluctuations in interest rates,
variability in interest rate spread relationships (i.e., prime to LIBOR spreads)
and exchange rate variability. Approximately 55% of the Company's borrowings
relate to a five-year financing agreement with an outstanding principal balance
of approximately $34.9 million, including $25.8 million reflected as a reduction
to accounts receivable and $7.0 million for letters of credit, as of
December 31, 2000. Interest on the outstanding balance is charged based on a
variable interest rate related to the Company's choice of (1) the higher of the
prime rate or the Federal Funds rate plus 1/2 of 1% or (2) LIBOR plus 50 basis
points as specified in the agreement, and is thus subject to market risk in the
form of fluctuations in interest rates. The majority of the remainder of the
Company's borrowings are in fixed note equipment leases and seller financed
notes. The Company does not have any significant trading activity in derivative
financial instruments.
The Company also conducts operations in various foreign countries, including
Australia, Belgium, Canada, China, France, Germany, India, Italy, Japan, the
Netherlands, New Zealand, Singapore, Spain, and the United Kingdom. For the year
ended December 31, 2000 approximately 40.0% of our commissions and fees were
earned outside the United States and collected in local currency and related
operating expenses were also paid in such corresponding local currency.
Accordingly, we will be subject to increased risk for exchange rate fluctuations
between such local currencies and the dollar. We do not conduct any significant
hedging activities.
The financial statements of the Company's non-U.S. subsidiaries are
translated into U.S. dollars using current rates of exchange, with gains or
losses included in the cumulative translation adjustment account, a component of
stockholders' equity. During the twelve months of 2000, the Company had a
translation loss of $59.0 million, primarily attributable to the strengthening
of the U.S. dollar against the Australian dollar, the British pound, and the
Eurodollar.
33
BUSINESS
We have built Monster-Registered Trademark-.com (http://www.monster.com)
into the Internet's leading career destination portal. We are the world's
largest recruitment advertising agency and one of the world's largest executive
search and selection firms. In addition to offering these career solutions, we
are the world's largest yellow page advertising agency. We have more than 60,000
clients, including over 90 of the Fortune 100 and over 480 of the Fortune 500
companies.
INDUSTRY OVERVIEW
INTERACTIVE. The Internet is an increasingly significant global medium for
communications, content and commerce. Growth in Internet usage has been fueled
by a number of factors, including the availability of a growing number of useful
products and services, the large and growing installed base of personal
computers in the workplace and home, advances in the performance and speed of
personal computers and modems, improvements in network infrastructure, easier
and cheaper access to the Internet and increased awareness of the Internet among
businesses and consumers.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium.
Thousands of companies have created corporate websites that feature information
about their product offerings. Through the web, Internet content providers are
able to deliver timely, personalized content in a manner not possible through
traditional media. Internet content can be continuously updated, distributed to
a large number of consumers on a real-time basis, and accessed by users at any
time. Industry publications indicate that the historical and projected adoption
of online/Internet services represents a faster rate of penetration than
occurred with traditional media, such as radio, broadcast television and cable
television.
For job seekers, online recruiting can provide the ability to rapidly and
more easily build, update and distribute their resumes, conduct job searches and
gather information about employers. Online recruiting can also help to reduce
the time of a job search by permitting job seekers to define their specific job
needs and be contacted automatically when desired jobs become available. Online
recruiting is also proving to be attractive to employers and recruiters because
online job advertisements can be accessed by job seekers anywhere in the world
at anytime and more cost effectively than print media. Forrester Research
estimates that online spending by employers for recruitment will grow from $1.2
billion in 2000 to $7.1 billion in 2005.
THE RECRUITMENT ADVERTISING MARKET. Recruitment advertising traditionally
consists of creating and placing recruitment advertisements in the classified
advertising sections of newspapers. While the recruitment advertising market has
historically been cyclical, during the period of 1995 through 2000, the U.S.
market grew at a compound annual rate of approximately 12% according to the
Newspaper Association of America. The services provided by recruitment
advertising agencies can be complex and range from the design and placement of
classified advertisements to the creation of comprehensive image campaigns which
internationally "brand" a client as a quality employer. Further, shortages of
qualified employees in many industries, particularly in the technology area,
have increased the need for recruitment advertising agencies to expand the
breadth of their service offerings to effect national and sometimes global
recruitment campaigns. For the year ended December 31, 2000, global spending
(billings) in the recruitment classified advertisement section of newspapers was
approximately $8.7 billion according to the Newspaper Association of America.
Agencies which place recruitment classified advertising are paid commission
rates historically ranging from approximately 10% in Australia to 15% in the
U.S. and the United Kingdom of recruitment advertising placed in newspapers and
earn fees for providing additional recruitment services.
SELECTION AND TEMPORARY CONTRACTING. The mid-market selection finds for our
clients those professional candidates who typically earn between $50,000 and
$150,000. We have developed a suite of products and services which are aimed at
this market and seek to predict whether a candidate will be successful in a
34
given role. Temporary contracting supplements our management selection and
permanent placement services and allows our clients to quickly respond to
staffing needs that are a result of growth or changing business conditions.
According to the Staffing Industry Report, the United States temporary staffing
market grew from approximately $62 billion in revenue in 1998 to approximately
$86 billion in revenue in 2000 and the United States total staffing industry is
at more than $140.0 billion. The temporary staffing industry has experienced
significant growth in response to the changing work environment. These changes
are a result of increasing automation that has resulted and we believe will
continue to result in shorter technological cycles, and global competitive
pressures. Many employers responded to these challenges by turning to temporary
and contract personnel to keep personnel costs variable, help control costs,
achieve maximum flexibility, outsource highly specialized skills, and avoid the
negative effect of layoffs. We believe fundamental changes in the
employer-employee relationship continue to occur, with employers developing
increasingly stringent criteria for permanent employees, while moving toward
project-oriented temporary and contract hiring.
EXECUTIVE SEARCH. The market for executive search firms is generally
separated into two broad categories: retained executive search firms and
contingency executive search firms. Retained executive search firms service
their clients' senior management needs by acting in an ongoing client-consultant
relationship to actively identify, evaluate, assess and recommend to the client
suitable candidates for senior level positions. Retained search firms are
generally engaged on an exclusive basis and paid a contractually agreed-to fee.
Contingency executive search firms typically do not focus on the senior
executives and are generally paid a percentage of the hired candidate's salary
only when a candidate is successfully placed with the client. Contingency firms
are generally not hired on an exclusive basis and do not focus on the
assessment, evaluation or recommendation of a candidate other than to determine
if the candidate's resume qualifies him/her for the position. We provide
executive search services on a retained basis. Our executive search service
identifies senior executive candidates who typically earn in excess of $150,000
annually.
THE YELLOW PAGE ADVERTISING MARKET. Yellow page directories have been
published in the U.S. since at least the 1890's and, traditionally, have been
published almost exclusively by telephone utilities. In the early 1980's, due in
part to telephone deregulation, independent companies began publishing an
increasing number of directories. Currently, approximately 6,000 yellow page
directories are published annually by 200 publishers and, in the U.S., many
cities with populations in excess of 80,000 are served by multiple directories.
The percentage of adults who use the yellow pages has remained relatively
constant over the last ten years at over 56%, and such readers consult the
yellow pages approximately two times weekly. Accordingly, yellow page
directories continue to be a highly effective advertising medium.
According to the Yellow Page Publishers Association, for the year ended
December 31, 2000, total spending on yellow page advertisements in the U.S. was
$12.0 billion. Of this amount, approximately $10.0 billion was spent by local
accounts and approximately $2.0 billion was spent by national accounts. As those
terms are used in the yellow page industry, "local" refers to an advertisement
solicited by a yellow page publisher's own sales staff and "national" refers to
an advertisement that is placed by an advertising agency and that meets certain
criteria specified by the publisher. Local accounts are typically merchants who
primarily conduct their business within the geographic area served by the
publisher's directories.
The national account market, which is the client base that we service,
consists of companies that sell products or services in multiple markets. Most
national accounts use independent advertising agencies to design and implement
their yellow page advertising programs to create a consistent brand image and
compelling message, to develop an effective media plan and to execute the
placement of the advertising at the local level. Agencies which place national
advertising are paid commissions by yellow page publishers. The market has grown
each year since 1981. During the period of 1990 through 2000, the market has
grown at a compound average rate of approximately 6.0%.
35
OUR CAREER SOLUTIONS
"INTERN TO CEO" MIGRATION TO INTERACTIVE. We believe that our growth in the
career solutions area will continue to come from Monster.com's leadership
position combined with additional online growth opportunities from our
Advertising & Communications, eResourcing and Executive Search divisions and
from the capturing of a greater portion of budgets previously spent by
corporations on unassisted recruiting activities.
MONSTER.COM. Monster.com (http: //www.monster.com), the flagship brand of
our Interactive properties, is the nucleus of our "Intern to CEO" strategy. For
the year ended December 31, 2000, Monster.com's gross billings and commissions
and fees were $364.0 million and $362.0 million, respectively, and our total
Interactive gross billings and commissions and fees were $485.9 million and
$435.2 million, respectively.
Based on experience with our clients, we believe that only 20% to 30% of
open job positions are placed using traditional print media. We also believe
that online solutions will significantly expand the recruitment advertising
market because of their global reach and continuous availability. Furthermore,
online advertising is extremely cost effective when compared to other
traditional recruitment methods such as print media. Our Interactive recruitment
services have been actively marketed since May 1995 and Monster.com was one of
the first 500 commercial web sites out of more than 158 million which currently
exist.
According to I/PRO, Monster.com had approximately 23.6 million visits (the
gross number of occasions on which a user looked up a site) in February 2001
with the average length of each visit exceeding 15 minutes. Media Metrix
reported that for February 2001, 6.6% of the U.S. Internet population visited
Monster.com. In addition, for this month, an average of 28.6 unique pages were
viewed by each visitor, resulting in a power ranking of 188.8 (reach of 6.6
multiplied by average page views of 28.6) compared to 36.3 for the next closest
company and 129.8 for all other competitors combined. We believe that the power
ranking is significant because, by taking into account reach and page views, it
indicates Monster.com's usefulness and recognition.
Monster.com allows users to create their own personalized career page, My
Monster. Using My Monster, job seekers can store their resumes, cover letters
and job applications and create multiple Job Search Agents. They can also track
how many times their resume has been viewed by employers. My Monster is at the
center of the Monster.com job seeker experience, with over 13.6 million job
seeker accounts as of February 2001. Monster.com's Job Search Agent continuously
seeks to find the desired job for the job seeker. Job seekers can register for
this free service on the site by creating a simple personal profile indicating
the industry and location in which they want to work and any job-specific
keywords. The Job Search Agent then continually scans the entire Monster.com job
database for opportunities that match the requirements and delivers the leads to
job seekers' desktops, even while they are offline. As of February 2001,
Monster.com contained over 6.4 million Job Search Agent profiles and its resume
database contained over 8.6 million resumes which is growing by an average of
more than 25,000 resumes daily. Job seekers post their resumes free of charge in
a confidential searchable access-restricted database. This database can be
searched, using keyword searches, by employers who pay for the service. Job
seekers can search Monster.com's database of employment opportunities by
location, job category, industry and/or keyword. Keyword searches allow a user
to enter specific keywords to match skills, job titles or other requirements. We
have also introduced ChiefMonster (http://www.chiefmonster.com) which provides a
separate area for senior executives.
As of February 2001, Monster.com listed approximately 485,000 paid postings
from clients such as Adecco, Blockbuster Entertainment Inc., Dell Computer
Corporation, McDonald's and Procter & Gamble Co.
We also have developed private label applications of our Interactive
products. For example, we adapted Monster.com technology to create for Nortel
Networks a database of jobs which resides, through a
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hyper-link, on the Nortel Networks home page. The search features have the look,
feel and ease of use associated with Monster.com while appearing to the user as
a seamless part of the Nortel Networks site. We intend to continue to market
private label products as a way to increase the size of our databases.
To attract the maximum amount of traffic to our websites, we intend to
continue to develop additional value-added content, while developing strategic
alliances with other online content providers. For example, in 1999, we entered
into a content and marketing arrangement with America Online, Inc., pursuant to
which Monster.com, for the payment of $100 million, is the exclusive provider of
career search services in the United States and Canada for four years to over
27 million AOL members across seven AOL properties: AOL, AOL Canada, Compuserve,
ICQ, AOL.com, Netscape and Digital City. We believe that this agreement will
continue to increase traffic and attract new users to Monster.com.
In addition to the U.S., Monster.com has been customized, in language and
content, for the United Kingdom, Australia, Canada, the Netherlands, Belgium,
New Zealand, Singapore, Hong Kong, France, Germany, Ireland, Spain, Luxembourg,
India and Italy.
MONSTERMOVING(SM).COM. (http:// www.monstermoving.com) is one of the
world's largest online marketplaces for relocation information and services and
moving-related decision support tools, designed to reduce the time, cost and
stress associated with moving. This website provides relocation information on
more than 1,500 cities nationwide, and enables users to research real estate or
rental properties, check out mortgage and insurance quotes, and compare quotes
from moving companies or truck rental companies. Monstermoving.com features
everything from home and apartment searches to mortgage and mover quotes, school
information, and utility and community resources.
Visitors can view more than 1.4 million new and existing homes for sale,
over 130,000 new homes, models and build to suit plans, and 45,000 rental
properties and access more than 1,400 participating lenders covering more than
124 different loan programs for real-time, side-by-side comparisons of mortgage
rates. With one of the largest databases of moving companies anywhere, it
provides free quotes based on move size, route, and timing. This database
includes movers of every type and size: large, small, international,
long-distance, local, full-service and self-service. Also available are
side-by-side, city-to-city comparisons including cost of living, taxes, home and
insurance costs; as well as quality of life factors such as population, crime
index, and weather. Mortgage calculators help site visitors predict mortgage
costs. Visitors can determine their qualifications for a specific loan, or how a
traditional mortgage would differ from a balloon mortgage. To help movers
organize and plan their move according to their move date Monstermoving.com's
planner features a "to do" list relevant to each week of the user's move cycle
(e.g., find a van line mover five weeks prior to the move) and sends automated
email reminders to the customer. The Address Express feature allows customers to
quickly and simply notify the U.S. Post Office and other organizations of their
move date and new address.
By delivering dynamic content, with site-wide geo-targeting by city,
Monstermoving.com customizes information in order to provide people who are
moving with a more personalized and meaningful online experience. Relocating
visitors can choose a particular location or interest, and Monstermoving.com
will supply specific information and resources. The result is a faster, easier
way for visitors to access valuable information tailored to their unique needs
and interests.
Revenue is primarily earned from moving related businesses' advertisements
and customer retention programs, such as change of address services, and from
advertisements by other companies. The website is free to the consumer.
ADVERTISING & COMMUNICATIONS. We entered the recruitment advertising
business in 1993 and have expanded this business through organic growth and
acquisitions. For the year ended December 31, 2000, we had recruitment
advertising gross billings of $877.8 million and recruitment advertising
commissions and fees of $194.0 million. In addition, Interactive commissions and
fees earned by this division were $31.8 million. In addition to our worldwide
offices, we maintain relationships with unaffiliated agencies
37
throughout the world to further enhance our ability to reach qualified job
candidates. We believe that as employers find it more difficult to attract
qualified employees, they will increasingly seek out agencies that can implement
national and, in some cases, global recruitment strategies. As a full service
agency, we offer our clients comprehensive recruitment advertising services
including placement of classified advertising and other recruitment and
retention related services. We specialize in designing recruitment advertising
campaigns for clients in high growth industries and in industries with high
employee turnover rates. Furthermore, we continue to increase the amount of
business that we do outside of the newspapers, such as response management,
development of employer image campaigns, creation of collateral materials,
retention programs and other employee communications, and implementation of
alternative recruitment programs such as job fairs, employee referral programs
and campus recruiting. Such business accounted for approximately 9% of this
division's 2000 billings and approximately 21% of its commissions and fees.
Our task in formulating and implementing a global recruitment advertising
program is to design the creative elements of the campaign and to select the
appropriate media and/or other recruitment methods. This is done in the context
of the client's staffing parameters, which generally include skill requirements,
job location and advertising budget. In addition, while executing a given
campaign, we will often undertake basic research with respect to demographic
profiles of selected geographic areas to assist the client in developing an
appropriate overall strategy.
We have historically found that the strongest recruitment advertising
campaigns "brand" the client's image, demonstrate the client's unique selling
points and stress the client's employee benefits and corporate culture.
Effectively differentiating one employer from another has become particularly
important in the technology and healthcare sectors where there is an acute
shortage of qualified job candidates. The success of a campaign may depend on
whether an organization is seen as sufficiently distinct from its competitors.
After completing the design of an advertisement's creative elements, we
develop an appropriate media plan. Typically, a variety of media is used,
including newspapers, trade journals, the Internet, outdoor/transit media,
direct mail, radio and television. If we recommend use of newspapers, we may
recommend certain newspapers or editions of a particular newspaper which are
targeted to a specific demographic segment of the population. We may also
recommend a variety of advertisement sizes and vary the frequency with which an
advertisement appears.
After an advertisement is placed, we conduct extensive customer analysis to
assure satisfaction, including monitoring the effectiveness of the chosen media.
As an example, for a transportation client, we analyzed cost-per-response,
cost-per-application and cost-per-hire data for over a dozen media vehicles
running in approximately 30 markets in an effort to determine the return on
investment of each media vehicle. Our Advertising & Communications division also
maintains a quality assurance program for its larger clients which involves
formal creative reviews by our clients as well as soliciting client feedback.
In the U.S., we receive commissions generally equal to 15% of recruitment
advertising gross billings. Outside of the U.S., where, collectively, we derive
the majority of our recruitment advertising commissions and fees, our commission
rates for recruitment advertising vary, ranging from approximately 10% in
Australia to 15% in Canada and the United Kingdom. We also earn fees from
value-added services such as design, research and other creative and
administrative services which resulted in aggregate commissions and fees equal
to approximately 22.1% of advertising and communications gross billings for the
twelve months ended December 31, 2000.
ERESOURCING. Candidates for mid-level management positions are normally
attracted by classified advertising or chosen through the use of computerized
database files, a process we call "selection", as opposed to the detailed search
process used for senior executives. We have enhanced this process through the
use of interactive media and resume databases, mainly through Monster.com. We
screen and interview applicants prior to providing the client with a short list.
Upon acceptance of the short list of suitable candidates, the client then
proceeds to interview the selected candidates. The next steps in the process
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include reference checking, negotiation of an offer, confirmation of acceptance
and start date, and performance follow-ups at the end of one and three months.
For these assignments involving mid-level executives we have also developed
a process which is designed to evaluate a person's capacity to perform in a
current or future role. It can be used for internal and external candidates and
is based on the premise that if the requirements for an individual job are
thoroughly understood, it is possible to develop testing protocols which assess
and predict a candidate's ability to succeed in a specific position. Tools and
exercises include aptitude testing, job simulations, behavioral and situational
interviews, leadership and team exercises, group discussions, role plays and
work sample tests. The goals of the selection process are to put the right
people in the right job, boosting both individual job satisfaction and
productivity.
We also provide temporary contract employees in Australia, New Zealand, the
United Kingdom, the United States and Western Europe. The demand for contract
employee services was created by organizations' need for flexible work forces
with the types of skills required to meet their particular circumstances in a
changing market.
We place qualified executives and professionals in temporary positions, or
for specific short term projects. Contractors can be used for emergency support
or to complement the skills of a client's core, permanent staff. Contracting can
also be linked to our selection services, with the client using a "try before
you buy" strategy. The period for the contracting assignment can vary from as
little as one day to over 12 months.
For the year ended December 31, 2000, eResourcing gross billings and
commissions and fees, which are computed after deducting the costs of temporary
contractors, were $391.6 million and $386.7 million, respectively. The costs of
such temporary contractors was $518.8 million, resulting in traditional gross
revenue, of $910.4 million. In addition, Interactive commissions and fees were
$21.7 million.
EXECUTIVE SEARCH. Traditional recruitment and online advertising did not
efficiently target the senior executive. Therefore, in order to expand the range
of services we offer to our clients, we entered the executive search field in
1998. We currently have 33 executive search offices in 16 countries. In
addition, we have developed ChiefMonster, an exclusive marketplace within
Monster.com, that pre-screens applicants for senior-level executive positions
(VP and above). Approved executives can search for opportunities across a wide
range of industries, by location, category and compensation level. Employers and
search consultants who use the web site have immediate access to top-quality,
pre-screened talent. We believe that our expansion into the executive search
field will continue to enable us to attract and service new major clients
because we can market ourselves as a full service firm that can accommodate all
of our clients' employment and recruitment advertising needs from intern to CEO.
Our retained executive search process typically targets senior level
executives (those earning over $150,000, annually) and includes the following
steps:
- a consultant interviews the client in order to analyze the senior
executive position that needs to be filled, the general environment of the
client's work place and the character and quality of candidates that have
successfully performed as an executive of the client;
- our consultant then prepares a written synopsis of the position to be
filled in order to attract a suitable, qualified, successful candidate;
- the synopsis is then forwarded to other recruiters in order to assist with
the search for a candidate that fits the criteria set forth in the
synopsis;
- a pool of suitable candidates is gathered and the consultants begin to
schedule interviews;
- the candidates are then interviewed and analyzed by the consultants to
determine if the candidate meets the requisite experience and potential
cultural fit outlined by the consultant and the client;
39
- reports of the most suitable candidates are prepared by the consultant and
presented to the client, who then chooses the candidates to be met;
- the consultant then organizes a mutually convenient time and place for the
client to personally meet and interview such candidates;
- the consultant will follow up with the successful candidate to obtain any
supplemental information needed or requested by the client, including
references and other documentary materials; and
- the consultant then assists the client in structuring and negotiating the
final compensation package and other benefits for the hired executive
based on all relevant factors researched by the consultant, including
industry comparisons, the experience levels of the executive and future
trends.
For the twelve months ended December 31, 2000, Executive Search gross
billings and commissions and fees were $178.4 million.
OUR DIRECTIONAL MARKETING BUSINESS
We entered the Yellow Page advertising business in 1967 and have grown to
become the largest Yellow Page advertising agency in the world based on gross
billings. We have been able to use our 30 plus years of understanding consumers'
use of yellow page directories to introduce our clients to other directional
advertising media that facilitate a connection between consumers and our
clients, such as Direct Response and Interactive. For the year ended
December 31, 2000, this division had gross billings and commissions and fees of
$545.6 million and $97.5 million, respectively. This division also generated
$8.8 million of interactive commissions and fees.
CREATING AND PLACING DIRECTORY ADVERTISEMENTS. There are currently
approximately 6,000 yellow page directories in the U.S. Each has a separate
closing date for accepting advertisements and one or more of these closings
occur on every working day of the year. The steps involved in placing an
advertisement are numerous and can take as long as nine months.
The first step in the process is the formulation of the advertising
program's creative elements including illustrations, advertising copy, slogans
and other elements which are designed to attract a potential customer's
attention. To assess the effectiveness of a proposed campaign, we generally
undertake extensive research to determine which alternatives best reach the
client's target market. This research typically includes focus group testing and
the running of split-run advertisements. Focus group testing involves forming
groups of potential customers and gauging their reaction to a variety of
potential advertisements. Split-run testing measures the results of specific
campaigns by placing more than one version of an advertisement in various
editions of the same yellow page directory. By using multiple phone numbers and
various monitoring methods, we can then determine which advertisements generate
the most effective response.
After designing an advertising program, we create a media plan which targets
our client's customer base in a cost-effective manner. We analyze targeted
directories to determine circulation, rate of usage and demographic profile. We
then recommend advertisements ranging from a full page to as little as a one
line listing. For some of our larger yellow page advertising clients,
advertisements are placed in over 3,000 directories.
To ensure client satisfaction, we maintain an extensive quality control
program. Account teams have frequent in-person client contact as well as formal
annual creative reviews. We also solicit feedback through client interviews,
written surveys and other methods consisting of focus groups made up of yellow
page users and yellow page user pollings. The principal aims of this program are
client retention and sales growth. We believe our focus on customer service has
enabled us to maintain our client retention rate, year to year, in excess of
95%.
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In addition to traditional advertising, we offer to our clients a variety of
services ranging from managing the maintenance and installation of telephone
lines for branch locations to the staffing and operation of fulfillment centers
which respond to toll-free calls requesting product brochures and other
information. While beyond the typical scope of services provided by an
advertising agency, these ancillary services are designed to further integrate
us into client processes for the mutual benefit of both parties.
CLIENTS. Our yellow page clients generally determine the content of their
advertising programs on a centralized basis. Placement of the advertising,
however, requires an extensive local selling and quality control effort because
many of our clients are franchisors or manufacturers who are dependent upon
franchisees or independent dealers for distribution. The participation of
franchisees and dealers in the yellow page program is discretionary and must be
solicited at the local level. As an example of the scale of this task, in 2000,
we visited or had contact with over half a million individual store locations.
We have a Yellow Page sales, marketing, Interactive and customer service
staff of approximately 990 people to implement this local effort. We believe the
size and breadth of this staff, its local client relationships and its databases
of client branch locations, franchisors and dealers provide us with a strong
competitive advantage in executing the yellow page programs of existing clients.
We believe these resources are critical in marketing our services to potential
new clients and in marketing and executing our Interactive-based service
offerings.
SALES AND MARKETING
Our sales, marketing and customer service staff is divided into two groups:
(i) new business generation and (ii) existing client relationship maintenance
and improvement. We maintain separate sales and marketing staffs for our
Monster.com, Monstermoving.com, Advertising & Communications, eResourcing
Executive Search and Directional Marketing businesses. In addition to
specializing by product, each group is accountable for, and incentivized to,
cross-sell our other products. Our Interactive sales staff has targeted our
advertising and communications and directional marketing clients to capitalize
on the additional services that our Interactive products can cost effectively
provide to such clients. In addition to pursuing cross-selling opportunities
within our existing client base, each product sales force also designs targeted
selling campaigns for potential new clients. We assign a marketing manager to
our clients in order to work closely with the client to develop and design the
appropriate marketing and advertising campaign. Our customer service
representative works closely with the marketing manager and the client to
implement the marketing and advertising campaign, evaluate the effectiveness of
the campaign and monitor client satisfaction levels.
CLIENTS
At December 31, 2000, we had more than 60,000 clients, including more than
90 of the Fortune 100 companies and more than 480 of the Fortune 500 companies.
Our clients include: The Allstate Corporation, American Home Products
Corporation, Arrow Electronics, Inc., AT&T Corp., The Coca-Cola Company, CVS
Corporation, Ford Motor Company, GTE Corporation, Hewlett-Packard Company, The
Home Depot, Inc., MCI Worldcom, Inc., Merck & Co., Inc., Mobil Corporation,
Morgan Stanley Dean Witter, Motorola, Inc., Sears, Roebuck and Co., Sprint
Corporation, Symbol Technologies, Inc. and United Parcel Service, Inc. No one
client accounts for more than 5% of our total annual commissions and fees.
COMPETITION
The markets for our services and products are highly competitive and are
characterized by pressure to reduce prices, incorporate new capabilities and
technologies, and accelerate job completion schedules.
We face competition from a number of sources. These sources include national
and regional advertising agencies, media companies, as well as specialized and
integrated marketing communication firms. Many advertising agencies and media
companies have started to either internally develop or acquire
41
new media capabilities. New boutique businesses that provide integrated or
specialized services (such as advertising services or website design) and are
technologically proficient, especially in the new media arena, are also
competing with us. Many of our competitors or potential competitors have long
operating histories, and some have greater financial, management, technological,
development, sales, marketing and other resources than do we. In addition, our
ability to maintain our existing clients and generate new clients depends to a
significant degree on the quality of our services, pricing and our reputation
among our clients and potential clients.
INTELLECTUAL PROPERTY
Our success and ability to compete is dependent in part on the protection of
our original content for the Internet and on the goodwill associated with our
trademarks, trade names, service marks and other proprietary rights. We rely on
copyright laws to protect the original content that we develop for the Internet.
In addition, we rely on Federal trademark laws to provide additional protection
for the appearance of our Internet sites. A substantial amount of uncertainty
exists concerning the application of copyright laws to the Internet, and there
can be no assurance that existing laws will provide adequate protection for our
original content. In addition, because copyright laws do not prohibit
independent development of similar content, there can be no assurance that
copyright laws will provide any competitive advantage to us.
We also assert common law protection on certain names and marks that we have
used in connection with our business activities.
We rely on trade secret and copyright laws to protect the proprietary
technologies that we have developed to manage and improve our Internet sites and
advertising services, but there can be no assurance that such laws will provide
sufficient protection to us, that others will not develop technologies that are
similar or superior to ours, or that third parties will not copy or otherwise
obtain and use our technologies without authorization. We have filed patent
applications with respect to certain of our software systems, methods and
related technologies, but there can be no assurance that such applications will
be granted or that any future patents will not be challenged, invalidated or
circumvented, or that the rights granted there under will provide us with a
competitive advantage. In addition, we rely on certain technology licensed from
third parties, and may be required to license additional technology in the
future, for use in managing our Internet sites and providing related services to
users and advertising customers. Our ability to generate fees from Internet
commerce may also depend on data encryption and authentication technologies that
we may be required to license from third parties. There can be no assurance that
these third party technology licenses will be available or will continue to be
available to us on acceptable commercial terms or at all. The inability to enter
into and maintain any of these technology licenses could have a material adverse
effect on our business, financial condition and operating results.
Policing unauthorized use of our proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford us little or no
effective protection of our intellectual property. In addition, there can be no
assurance that third parties will not bring claims of copyright or trademark
infringement against us or claim that our use of certain technologies violates a
patent. We anticipate an increase in patent infringement claims involving
Internet-related technologies as the number of products and competitors in this
market grows and as related patents are issued. Further, there can be no
assurance that third parties will not claim that we have misappropriated their
creative ideas or formats or otherwise infringed upon their proprietary rights
in connection with our Internet content. Any claims of infringement, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, require us to enter into costly royalty or
licensing arrangements or prevent us from using important technologies or
methods, any of which could have a material adverse effect on our business,
financial condition or operating results.
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GOVERNMENT REGULATION
As an advertising agency which creates and places print and Internet
advertisements, we are subject to Sections 5 and 12 of the Federal Trade
Commission Act (the "FTC Act") which regulate advertising in all media,
including the Internet, and require advertisers and advertising agencies to have
substantiation for advertising claims before disseminating advertisements. The
FTC Act prohibits the dissemination of false, deceptive, misleading, and unfair
advertising, and grants the Federal Trade Commission ("FTC") enforcement powers
to impose and seek civil penalties, consumer redress, injunctive relief and
other remedies upon advertisers and advertising agencies which disseminate
prohibited advertisements. Advertising agencies are subject to liability under
the FTC Act if the agency actively participated in creating the advertisement,
and knew or had reason to know that the advertising was false or deceptive.
In the event that any advertising created by us was found to be false,
deceptive or misleading, the FTC Act could potentially subject us to liability.
The fact that the FTC has recently brought several actions charging deceptive
advertising via the Internet, and is actively seeking new cases involving
advertising via the Internet, indicates that the FTC Act could pose a somewhat
higher risk of liability to the advertising distributed via the Internet. The
FTC has never brought any actions against us.
There can be no assurance that other current or new government laws and
regulations, or the application of existing laws and regulations, will not
subject us to significant liabilities, significantly dampen growth in Internet
usage, prevent us from offering certain Internet content or services or
otherwise cause a material adverse effect on our business, financial condition
or operating results.
EMPLOYEES
At December 31, 2000, we employed approximately 9,500 people worldwide. Our
employees are not represented by a labor union or a collective bargaining
agreement. We regard the relationships with our employees as satisfactory.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY PERSONNEL
The executive officers, directors and key personnel of the Company are as
follows:
NAME AGE POSITION
- ---- -------- --------
Andrew J. McKelvey........................ 66 Chairman of the Board, CEO and Director
Thomas G. Collison........................ 61 Vice Chairman and Secretary
James J. Treacy........................... 43 Chief Operating Officer, Executive Vice
President and Director
Paul M. Camara............................ 53 Executive Vice President--Creative/Sales/
Marketing
Jeffrey C. Taylor......................... 40 CEO--TMP Interactive
Andrew R. Banks........................... 49 CEO--eResourcing
Peter Dolphin............................. 54 CEO--Advertising & Communications
Stuart J. McKelvey........................ 33 CEO--Directional Marketing
Steven B. Potter.......................... 46 CEO--Executive Search
George R. Eisele.......................... 64 Executive Vice President of TMP Worldwide
Direct and Director
Bart W. Catalane.......................... 44 Senior Vice President and Chief Financial
Officer
Myron F. Olesnyckyj....................... 39 Vice President--General Counsel
Michael Kaufman........................... 55 Director
John Swann................................ 65 Director
Ronald J. Kramer.......................... 42 Director
Andrew J. McKelvey founded the Company in 1967, and has served as Chairman
of the Board and CEO since that time. Mr. McKelvey has a B.A. from Westminster
College. Mr. McKelvey was a member of the Board of Directors of the Yellow Page
Publishers Association and the Association of Directory Marketing from 1994
through September 1996. Mr. McKelvey is the father of Stuart J. McKelvey.
Thomas G. Collison joined the Company in February 1977 as Controller.
Subsequently, he was named Vice President--Finance; Senior Vice President;
Executive Vice President and Chief Financial Officer and, in March 1996, Vice
Chairman. Mr. Collison received a B.S. from Fordham University.
James J. Treacy joined the Company in June 1994 as chief executive officer
of the Advertising & Communications Division. In April 1996, Mr. Treacy was
named Executive Vice President--Finance and Strategy. In February 1998,
Mr. Treacy, in addition to his then current position, was named to the position
of Chief Operating Officer. In September, 1998, Mr. Treacy was named a director.
Prior to joining the Company, Mr. Treacy was Senior Vice President--Western
Hemisphere Treasurer for the WPP Group USA, Inc. Prior thereto, Mr. Treacy was a
corporate officer of the Ogilvy Group Inc. Mr. Treacy received a B.B.A from
Siena College and an M.B.A. from St. John's University.
Paul M. Camara joined the Company in February 1970. Mr. Camara was elected
as a Vice President of the Company in 1978 and as a Senior Vice President in
1987. He was named to his current position in April 1996. Mr. Camara received a
B.A. from the University of Massachusetts--Dartmouth.
Jeffrey C. Taylor joined the Company in November 1995. Mr. Taylor was
founder and president of Adion, Inc., a recruitment advertising firm, from
May 1989 until its purchase by the Company in
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November 1995. Mr. Taylor founded The Monster Board(sm) in April 1994. He
attended the University of Massachusetts. Mr. Taylor graduated from the
Executive M.B.A. (OPM) program at the Harvard Business School in August 1999.
Andrew R. Banks joined the Company in July 1999 at his current position,
following the Company's acquisition of Morgan & Banks Limited ("M&B"). From 1985
until February 1999, Mr. Banks was Joint Managing Director of M&B, an
international selection and temporary contracting company headquartered in
Australia.
Peter Dolphin joined the Company in January 1996 as Chairman of the
Company's U.K. Advertising & Communications operations. Mr. Dolphin was one of
the three founding partners of Moxon, Dolphin & Kerby, a London-based
recruitment advertising agency founded in 1976, where he was a Director of the
firm until its purchase by the Company in January 1996. In January 1997,
Mr. Dolphin was appointed as the Managing Director of the Company's European
operations and in July 1999 to his current position. He studied at the City of
London University, where he graduated with a Business Studies qualification.
Stuart J. McKelvey joined Monster-Registered Trademark-.com as a project
manager in March 1996 and became a senior project manager in October 1996. He
was named to his current position in March 1998. Mr. McKelvey holds a B.A. from
Stetson University. Stuart J. McKelvey is the son of Andrew J. McKelvey.
Steven B. Potter joined the Company in October 1999 at his current position,
upon the Company's merger with Highland Search Group L.L.C. ("Highland"). From
August 1995 until October 1999, Mr. Potter was Managing Partner and co-founder
of Highland, an executive search boutique specializing in financial services.
Prior to that, Mr. Potter spent 14 years with Russel Reynolds Associates, Inc.,
where he last headed the global banking and merchant banking practices and,
beginning in 1992, served as a member of the Executive Committee. Mr. Potter is
a 1977 graduate of Yale University.
George R. Eisele joined the Company in 1976, and has been Executive Vice
President of TMP Worldwide Direct, the Company's direct response business, since
1989, and a director of the Company since September 1987.
Bart W. Catalane joined the Company in June 1999 as Senior Vice President
and Chief Financial Officer. Prior to joining the Company, from January 1999 to
May 1999, Mr. Catalane was Executive Vice President and Chief Financial Officer
of ABC's Broadcasting Division, a unit of The Walt Disney Company. Prior to
that, Mr. Catalane was Executive Vice President and Chief Financial Officer of
the ABC Radio Division from June 1996 to December 1998 and Executive Vice
President of the ABC Radio Networks from August 1989 to May 1996. Mr. Catalane
is a 1978 graduate of Fairfield University in Connecticut and earned an M.B.A.
from Babson College in Wellesley, Massachusetts in 1980.
Myron F. Olesnyckyj joined the Company in June 1994. From September 1986
through May 1994, Mr. Olesnyckyj was associated with Fulbright & Jaworski L.L.P.
and predecessor firms. Mr. Olesnyckyj holds a B.S.F.S. from Georgetown
University's School of Foreign Service and a J.D. from the University of
Pennsylvania Law School.
Michael Kaufman has been a director of the Company since October 1997. Until
July 1, 2000, Mr. Kaufman was the President of SBC/Prodigy Transition.
Mr. Kaufman previously served as President and CEO of Pacific Bell's Consumer's
Market Group. Prior thereto, Mr. Kaufman was the President and CEO of Pacific
Bell Communications, a subsidiary of SBC Communications Inc., and from 1993
through April 1997 he was the regional president for the Central and West Texas
market area of Southwestern Bell Telephone. Mr. Kaufman holds a B.A. and an
M.B.A. from the University of Wisconsin.
John Swann has been a director of the Company since September 1996. In 1995,
Mr. Swann founded Cactus Digital Imaging Systems, Ltd., Canada's largest
supplier of electronically produced large format color prints.
45
Ronald J. Kramer has been a director of the Company since February 2000.
Mr. Kramer has been a managing director of Dresdner, Kleinwort Wasserstein
(formerly Wasserstein Perella & Co., Inc.) since July 1999. Prior thereto,
Mr. Kramer was the Chairman and CEO of Ladenburg Thalmann Group Inc. and had
been employed there for more than the last five years. Mr. Kramer is also a
director of Griffon Corporation, Lakes Gaming and New Valley Corporation.
The Board of Directors has a Compensation Committee charged with
recommending to the Board the compensation for the Company's executives and
administering the Company's stock option and benefit plans. The Compensation
Committee is currently composed of Messrs. Kramer and Kaufman. The Board of
Directors also has an Audit Committee charged with recommending to the Board the
appointment of independent auditors of the Company, as well as discussing and
reviewing, with the independent auditors, the scope of the annual audit and
results thereof. The Audit Committee is currently composed of Messrs. Kramer and
Kaufman. The Board of Directors also has a Strategy Committee charged with
recommending to the Board strategic plans. The Strategy Committee is currently
composed of Messrs. Kramer and Kaufman. Finally, the Board of Directors has an
Executive Committee which is empowered to act on behalf of the whole Board. The
Executive Committee is currently composed of Messrs. McKelvey and Treacy.
DIRECTOR COMPENSATION
Directors who are full time employees of the Company receive no additional
compensation for their services as a director. Each of the Company's
non-employee directors receives $15,000 per year for services rendered as a
director, plus a per meeting fee of $5,000 for each meeting of the board of
directors or a committee of the board of directors attended in person after the
fifth such meeting attended in person, plus reimbursement of expenses incurred
in connection with his or her duties as director.
The Company has adopted the 1996 Stock Option Plan for Non-Employee
Directors (the "Directors' Plan"), pursuant to which options to acquire a
maximum aggregate of 360,000 shares of Common Stock may be granted to
non-employee directors. Pursuant to the Directors' Plan, each of
Messrs. Kaufman and Swann, its non-employee directors, was granted an option to
purchase 22,500 shares of Common Stock at a purchase price per share equal to
the fair market value of the Common Stock on the date of such director's
election to the Board of Directors ($11.81 in the case of Mr. Kaufman and $7.00
in the case of Mr. Swann). The options have a ten-year term and become
exercisable as determined by the Compensation Committee. The options may be
exercised by payment in cash, check or shares of Common Stock.
Pursuant to the 1999 Plan, each new non-employee director of the Company
will be automatically granted an option to purchase 22,500 shares of Common
Stock upon his or her commencement of service as a non-employee director.
Accordingly, Mr. Kramer received such option in February 2000, at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
In addition, each non-employee director of the Company will automatically be
granted an option to purchase 5,000 shares of Common Stock under the 1999 Plan
on the day following each Annual Meeting of Stockholders that occurs at least
one year after the first anniversary of the date he or she first became a
non-employee director. Automatic option grants will have a ten-year term and an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Options granted to non-employee directors upon their commencement of
service will be 50% vested on the date of grant and will generally become fully
vested on the first anniversary of the date of grant. Options granted to
non-employee directors on an annual basis will generally become 50% vested on
each of the first two anniversaries of the date of grant. The Company will no
longer make grants under the Directors' Plan.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation paid or to be paid by the Company as well as certain other
compensation awarded, earned by and paid, during the
46
fiscal years indicated, to the Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company for such periods
in all capacities in which they served.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ---------------------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
- ------------------------------ -------- ---------- ---------- ------------ ------------ ------------
Andrew J. McKelvey,........... 2000 $ 500,000 -- $ 3,400(1) -- --
Chairman of the Board and 1999 833,364 -- 21,874(1) -- --
CEO 1998 1,500,000 -- 21,395(1) -- --
James J. Treacy,.............. 2000 475,000 $ 118,750 3,400(2) -- --
Chief Operating Officer and 1999 329,576 35,000 3,200(2) 400,000 --
Executive Vice President-- 1998 231,100 35,000 3,200(2) 150,000 --
Finance and Strategy
Jeffrey C. Taylor,............ 2000 400,000 150,000 46,827(3) -- --
CEO--TMP Interactive 1999 400,000 112,500 67,375(3) 2,000,000 --
1998 401,314 50,000 20,000(3) 200,000 --
Paul M. Camara,............... 2000 500,031 125,000 3,400(2) -- --
Executive Vice President-- 1999 359,148 -- 3,200(2) 500,000 --
Creative/Sales/Marketing 1998 225,031 -- 3,200(2) 200,000 --
Steven B. Potter,............. 2000 400,000 1,000,000 3,400(2) -- --
CEO--Executive Search 1999 200,000 3,242,138 3,400(2) 20,000 --
1998 200,000 1,922,719 3,200(2) -- --
- ------------------------
(1) Matching contributions made to the Company's 401(k) Plan were $3,400, $3,200
and $3,200 in 2000, 1999 and 1998, respectively. Also includes lease
payments for an automobile of $18,674 and $18,195 in 1999 and 1998,
respectively.
(2) Represents matching contributions made to the Company's 401(k) Plan.
(3) Matching contributions made to the Company's 401(k) Plan were $3,400, $3,200
and $3,200 in 2000, 1999 and 1998, respectively. Also includes lease
payments for an automobile of $16,800 in each of 1999 and 1998, and $43,427
and $47,375 in 2000 and 1999, respectively, representing Mr. Taylor's
commission compensation.
STOCK OPTIONS
The Company did not make individual grants of stock options to its officers
and directors named in the Summary Compensation Table during the year ended
December 31, 2000.
47
The following table sets forth at December 31, 2000 the number of securities
underlying unexercised options and the value of unexercised options held by each
of the executive officers named in the Summary Compensation Table:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR END OPTIONS AT YEAR END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Andrew J. McKelvey......................... -- -- -- --
James J. Treacy............................ 215,832 477,500 $ 9,948,373 $ 16,411,938
Jeffrey C. Taylor.......................... 325,162 1,764,401 10,880,745 56,133,064
Paul M. Camara............................. 120,750 602,750 5,154,875 20,756,625
Steven B. Potter........................... 5,000 15,000 37,500 112,500
- ------------------------
(1) Computed based upon the difference between the Stock Option exercise price
and $55.00, the closing price of the Company's Common Stock on December 31,
2000.
EMPLOYMENT AGREEMENTS
The Company has entered into an amended employment agreement with Andrew J.
McKelvey, effective as of November 15, 1996, for a term ending on November 14,
2001. The agreement provides for automatic renewal for successive one year terms
unless either party notifies the other to the contrary at least 90 days prior to
the expiration of the then current term. The agreement also provides that
Mr. McKelvey will serve as Chairman of the Board and CEO of the Company and will
be nominated for election as a director during all periods of his employment.
Under the agreement, Mr. McKelvey is entitled to a base salary of $1,500,000 per
year and until November 1998, when his agreement was amended, was entitled to
mandatory quarterly bonuses of $375,000. Mr. McKelvey waived such bonuses. On
May 1, 1999, the Company and Mr. McKelvey further amended the employment
agreement to provide for an annual base salary of $500,000 and an annual bonus,
based on exceeding earnings per share targets, not to exceed $500,000. Under the
agreement, Mr. McKelvey may terminate his employment upon 90 days' prior written
notice for any reason. The agreement also provides that in the event
Mr. McKelvey's employment is terminated by the Company prior to its expiration
for reasons other than for "cause," the Company shall pay Mr. McKelvey his base
salary for the remaining term of the agreement at the times it would have been
payable had he remained employed. The agreement further provides that in the
event of Mr. McKelvey's voluntary resignation, termination of his employment by
the Company for cause or nonrenewal of the agreement, Mr. McKelvey shall not be
entitled to any severance, and in the event of his disability or death he or his
estate shall be paid his base salary for a period of 180 days after any such
termination at the times it would have been payable had he remained employed.
The agreement also contains confidentiality provisions, whereby Mr. McKelvey
agrees not to disclose any confidential information regarding the Company and
its affiliates.
The Company has entered into a second amended employment agreement with
James J. Treacy, effective as of October 1, 1999, for an indefinite term on an
at-will basis. The agreement provides that either party may terminate the
agreement for any reason. Pursuant to the agreement, Mr. Treacy will serve as
Chief Operating Officer and Executive Vice President, Finance and Strategy of
the Company for a base salary in 1999 of $475,000 and an annual bonus equivalent
to a percentage, ranging from 25% to 50%, of his salary if certain goals
mutually agreed upon by Mr. Treacy and the Chief Executive Officer are attained
by Mr. Treacy and/or the Company. The agreement provides that in the event
Mr. Treacy is terminated for "cause" or voluntarily resigns, he shall not be
entitled to any severance, and in the event Mr. Treacy is terminated by reason
of his death, disability or for other reasons, he or his estate shall be
entitled to his base salary and minimum annual bonus for a period of one year
after the effective date of his termination payable at the times they would have
been payable had he remained employed, less income earned by him
48
from the performance of any personal services during such period. The agreement
provides that in the event Mr. Treacy's employment is terminated by death all of
his options shall become fully vested and exercisable for the shorter of one
year or the balance of the term provided in the stock option agreement. The
agreement contains confidentiality provisions, whereby Mr. Treacy agrees not to
disclose any confidential information regarding the Company and its affiliates,
as well as nonsolicitation provisions which prohibit Mr. Treacy from soliciting
any active or prospective accounts of the Company or its affiliates for a period
of one year following termination.
The Company's subsidiary, TMP Interactive Inc., entered into a second
amended and restated employment agreement with Jeffrey C. Taylor, effective as
of August 28, 1998, for a term ending December 31, 2001. That agreement provides
for automatic renewal for successive one year terms unless either party notifies
the other to the contrary at least 60 days prior to its expiration. The
agreement provides that Mr. Taylor will serve as Chief Executive Officer of TMP
Interactive Inc. and currently provides Mr. Taylor with a base salary of
$400,000 per year and annual bonuses of at least $100,000 per year based on
formulae mutually agreed to by the parties. Under the agreement, Mr. Taylor may
terminate his employment upon written notice for certain material alterations in
his responsibilities, duties, and authorities or upon 90 days' prior written
notice for any reason. The agreement provides that in the event Mr. Taylor's
employment is terminated by TMP Interactive Inc. prior to its expiration for
reasons other than cause or is terminated by Mr. Taylor for certain material
alterations in his responsibilities, duties and authorities, TMP
Interactive Inc. shall pay Mr. Taylor his base salary and his annual bonus from
the preceding year or, if not yet issued a minimum of $100,000 and all of
Mr. Taylor's options to purchase TMP stock shall become fully vested and
Mr. Taylor and his immediate family shall be provided with specified insurance
for a period of one year. The agreement also provides that in the event of
Mr. Taylor's voluntary resignation, termination of his employment by TMP
Interactive Inc. for "cause" or non-renewal of the agreement, Mr. Taylor shall
not be entitled to any severance, and in the event of his disability or death he
or his estate shall be paid his base salary and certain other benefits for a
period of 90 days at the times they would have been payable had he remained
employed. The agreement contains confidentiality provisions, whereby Mr. Taylor
agrees not to disclose any confidential information regarding TMP
Interactive Inc. and its affiliates, as well as non-competition provisions. The
non-competition covenants generally survive the termination or expiration of
Mr. Taylor's employment for two years, provided that in certain circumstances
TMP Interactive Inc. must pay Mr. Taylor one-half of his base salary, one-half
of his $75,000 minimum annual bonus, medical benefits and an additional payment
of $19,792 per month for the duration of the non-competition obligation.
Mr. Taylor's agreement also prohibits him from soliciting or servicing customers
or prospective customers of TMP Interactive Inc. and its affiliates for a period
of two years following the termination or expiration of his employment.
The Company entered into an employment agreement with Steven B. Potter,
effective as of October 21, 1999, for a term ending October 21, 2001. The
agreement provides that Mr. Potter will serve as President-North American
Executive Search Operations of the Company and its successor or successors in
interest and currently provides a base salary of $400,000 per year with a
minimum annual cash bonus of $1,000,000 payable semi-annually and a minimum
annual equity bonus of $600,000 payable annually in either cash, Common Stock of
the Company or options to purchase Common Stock of the Company or any
combination thereof. Under the agreement, Mr. Potter may terminate his
employment upon 60 days prior written notice for any reason. The agreement
provides that in the event Mr. Potter's employment is terminated by the Company
prior to the expiration of the agreement for reasons other than "cause" or is
terminated by Mr. Potter for certain material alterations in his
responsibilities, duties and authorities, the Company shall pay Mr. Potter his
base salary and his annual cash bonus for the remaining period of time under the
agreement and Mr. Potter and his immediate family shall be provided with
specified insurance for the shorter of the remaining time under the agreement or
one year. The agreement also provides that in the event of Mr. Potter's
voluntary termination, termination of his employment by the Company for "cause,"
expiration of the term of the agreement, or termination by virtue of
Mr. Potter's death or disability Mr. Potter shall not be entitled to any
severance. The agreement contains confidentiality
49
provisions, whereby Mr. Potter agrees not to disclose confidential information
regarding the Company and its affiliates, as well as noncompetition and
non-solicitation provisions. The non-competition covenants generally survive the
termination or expiration of Mr. Potter's employment until the greater of two
years from the date of the agreement or six months after Mr. Potter ceases to be
employed by the Company or its affiliates. The non-solicitation provisions
survive the termination or expiration of Mr. Potter's employment until the
greater of four years from the date of the agreement or two years after
Mr. Potter ceases to be employed by the Company or its affiliates.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On September 16, 1996, the Company's Board of Directors established a
Compensation Committee, which currently consists of Messrs. Kramer and Kaufman
to recommend compensation for the Company's executives and to administer the
Company's stock option and other benefit plans. Prior to September 16, 1996, all
matters concerning executive officer compensation were addressed by the entire
Board of Directors. In February 2000 and in October 1997, respectively,
Mr. Kramer and Mr. Kaufman received stock options to purchase 22,500 shares and
22,500 shares of Common Stock, respectively, at an exercise price of $63.07 per
share and $11.81 per share, respectively, equal to the fair market value on the
date of grant.
CERTAIN TRANSACTIONS
Messrs. McKelvey, Eisele, Camara and Collison have approximately 69.4%, 10%,
5% and 5% interests, respectively, in International Drive, L.P., the lessor of
the Company's 48,000 square foot office in Mt. Olive, New Jersey. This lease
runs through December 2004 and the Company's rent for this space is $46,200 per
month.
On January 1, 1996, TMP Worldwide Communications Inc., the Company's
Canadian recruitment advertising subsidiary, entered into a management agreement
with TMPW Canada Inc., a recruitment advertising company owned by Mr. Swann,
pursuant to which TMP Worldwide Communications Inc. provides management services
in exchange for a percentage of the billings of TMPW Canada Inc. which is agreed
to from time to time. The agreement has no stated term but is terminable by
either party on 30 days' notice. For the years ended December 31, 2000, 1999 and
1998, TMPW Canada Inc. paid approximately $795,000, $396,000, and $537,000,
respectively to TMP Worldwide Communications Inc. for management services.
Beginning in June 1999, the Company periodically used the service of an
aircraft from a company owned by Mr. McKelvey, and in connection therewith,
$561,000 and $215,000 was paid during the years ending December 31, 2000 and
1999, respectively.
The Company believes that all transactions with the aforementioned directors
and executive officers were made on terms no less favorable to the Company than
would have been obtained from unaffiliated third parties and were approved or
ratified by the entire Board, including disinterested directors.
50
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 31, 2001 (except as
otherwise noted in the footnotes), regarding the beneficial ownership determined
in accordance with the rules of the Securities and Exchange Commission, which
generally attribute beneficial ownership of securities to persons who possess
sole or shared voting power and/or investment power with respect to those
securities, of the Company's Common Stock by: (i) each person known by the
Company to own beneficially more than five percent (5%) of the Company's
outstanding Common Stock; (ii) each director of the Company; (iii) each
executive officer named in the Summary Compensation Table (see
"Management--Executive Compensation"); and (iv) all directors and executive
officers of the Company as a group. Except as otherwise specified, the named
beneficial owner has the sole voting and investment power over the shares
listed.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF PERCENTAGE OF
COMMON STOCK/CLASS B PERCENTAGE OF CLASS B
NAME OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK COMMON STOCK
- ------------------------ ----------------------- ------------- -------------
Andrew J. McKelvey(1)......................... 24,847,356 23.5% 100%
James J. Treacy(2)............................ 744,037 * --
Jeffrey C. Taylor(3).......................... 405,587 * --
Steven B. Potter(4)........................... 409,847 * --
Paul M. Camara(5)............................. 322,033 * --
George R. Eisele(6)........................... 154,926 * --
Michael Kaufman(7)............................ 25,000 * --
John Swann(8)................................. 24,240 * --
Ronald J. Kramer(9)........................... 22,500 * --
All directors and executive officers as a
group
(15 persons)(10)............................ 27,771,093 26.3% 100%
Putnam Investments, Inc.(11).................. 5,583,726 5.3% --
Janus Capital Corporation(12)................. 10,165,540 9.6% --
- ------------------------
* Less than 1%
(1) Includes 4,762,000 shares of Class B Common Stock which are convertible, on
a share for share basis, into Common Stock. Each share of Class B Common
Stock has ten votes per share. Also includes 4,115 shares of Common Stock
owned by Mr. McKelvey's wife, 200 shares of Common Stock owned by
Mr. McKelvey's daughter and 995 shares of Common Stock held by TMP's 401(k)
Plan. Mr. McKelvey disclaims beneficial ownership of the shares owned by his
wife.
(2) Includes 600 shares of Common Stock owned by Mr. Treacy's daughters, 995
shares of Common Stock held by TMP's 401(k) Plan, and 215,832 shares of
Common Stock issuable upon the exercise of options which are exercisable
within 60 days of March 31, 2001.
(3) Includes 995 shares of Common Stock held by TMP's 401(k) Plan and 325,162
shares of Common Stock issuable upon the exercise of options which are
exercisable within 60 days of March 31, 2001.
(4) Includes 93 shares of Common Stock held by TMP's 401(k) Plan, 1,290 shares
of Common Stock held in trust for Mr. Potter's children, and 5,000 shares of
Common Stock issuable upon the exercise of options which are exercisable
within 60 days of March 31, 2001.
(5) Includes 995 shares of Common Stock held by TMP's 401(k) Plan and 120,750
shares of Common Stock issuable upon the exercise of options which are
exercisable within 60 days of March 31, 2001.
(6) Includes 828 shares of Common Stock held by TMP's 401(k) Plan and 2,000
shares of Common Stock issuable upon the exercise of options which are
exercisable within 60 days of March 31, 2001.
51
(7) Consists of 25,000 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days of March 31, 2001.
(8) Consists of 24,240 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days of March 31, 2001.
(9) Consists of 22,500 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days of March 31, 2001.
(10) Includes 4,762,000 shares of Class B Common Stock, which are convertible on
a share for share basis, into Common Stock, 7,077 shares held by TMP's
401(k) plan and 22,098,435 shares of Common Stock beneficially owned. Also
includes 903,581 shares subject to options which are exercisable within
60 days of March 31, 2001.
(11) Putnam Investments, Inc. may be deemed to beneficially own 5,583,726 shares
of our Common Stock which are held of record by clients of Putnam
Investments, Inc. Putnam Investments, Inc. does not have sole voting or
dispositive power with respect to any of the shares and has shared voting
power with respect to 43,400 shares and shared dispositive power with
respect to 5,583,726 shares. Information with respect to Putnam
Investments, Inc. has been derived from their Schedule 13G dated
February 22, 2001, as filed with the Securities and Exchange Commission.
(12) Janus Capital Corporation may be deemed to beneficially own 10,165,540
shares of our Common Stock which are held of record by clients of Janus
Capital Corporation. Janus Capital Corporation does not have sole voting or
dispositive power with respect to any of the shares and has shared voting
power with respect to 10,165,540 shares and shared dispositive power with
respect to 10,165,540 shares. Information with respect to Janus Capital
Corporation has been derived from their Schedule 13G dated February 15, 2001
as filed with the Securities and Exchange Commission.
52
SELLING STOCKHOLDERS
The following table sets forth information as of April 6, 2001 except as
otherwise noted, with respect to the number of shares of Common Stock
beneficially owned or to be acquired by each of the selling stockholders and
assumes that all shares subject to vesting schedules and conditions have vested.
The shares offered hereby were acquired by the selling stockholders from TMP
pursuant to the acquisition of or merger with companies owned by such selling
stockholders or were acquired or may be acquired pursuant to stock bonus
arrangements entered into in connection therewith. No selling stockholder owns
more than one percent of the outstanding Common Stock.
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
704803 Ontario Limited....................... 49,428 49,428 0
1064066 Ontario Limited...................... 7,830 7,830 0
1132766 Ontario Inc.......................... 149 149 0
1220669 Ontario Limited...................... 100,679 100,679 0
1223402 Ontario Inc.......................... 154 154 0
1365074 Ontario Inc.......................... 4,529 4,529 0
86 Burchell Trust (Mike)..................... 50 50 0
86 Burschell Trust (Ed Jr.).................. 50 50 0
1201 Venture Investments..................... 166 166 0
745 Associates Limited Partnership........... 37,000 37,000 0
Atsushi Aba.................................. 42 42 0
Mark David Abbott............................ 244 85 159
ABFS I....................................... 121 121 0
ABFS I Incorporated.......................... 36 36 0
Greg Abrahams................................ 1,374 1,374 0
Gregory Ruben Abrahams....................... 1,624 1,624 0
ABS Capital Partners II, L.P................. 4,702 4,702 0
Brad Ackerman................................ 363 22 341
Gordon Arthur Ross Adam...................... 59,555 59,555 0
Jurgen Adler................................. 13,810 13,810 0
Mardon Afrasiabi............................. 9 9 0
All Asia Co. Ltd............................. 93 93 0
Philippa Allen............................... 125 125 0
Simon Allsop................................. 146 146 0
Mark C. Alpert............................... 42 42 0
Rita Altland................................. 150 150 0
Anita M. Ames................................ 14 5 9
Jeffrey Amling............................... 98 98 0
Emma Anderson................................ 595 595 0
Kristi Anderson.............................. 2,812 2,812 0
Steve Anderson............................... 48,229 48,229 0
Karen J. Andrews............................. 150 150 0
James P. Angelini............................ 2,362 1,647 715
Arthur Anton Trust........................... 2,812 1,109 1,703
APA Excelsior IV, L.P........................ 76,687 76,687 0
Kimberly J. Arnold........................... 200 200 0
Manggoh Arow................................. 215 215 0
Mona Arshi................................... 1,083 1,083 0
53
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Rick B. Aspros............................... 273 205 68
Paul Atkinson................................ 54,555 54,555 0
Angela Mary Austin........................... 5,957 5,957 0
John Stewart Austin.......................... 5,957 5,957 0
Douglas J. Baird............................. 42 42 0
Amanda Baker................................. 119 119 0
Mandy Baker.................................. 21 21 0
Michelle Balfour............................. 81 81 0
David G. Bannister........................... 103 103 0
John S. Baran................................ 409 182 227
Gregory H. Barnhill.......................... 41 41 0
Nicholas John Barr........................... 209 209 0
Philippa Barrett............................. 379 379 0
Christopher H. Bartlett II................... 60 60 0
Lynda Bartlett............................... 6 6 0
Greg Batti & Pamela Collier.................. 117 117 0
Batza 1980 Trust............................. 40 40 0
Michael Batza................................ 361 361 0
Kent T. Baum................................. 41 41 0
E.G.J.G.M. Beckers........................... 12,976 12,976 0
Els Beckers.................................. 9,346 9,346 0
J. Carter Beese, Jr.......................... 42 42 0
Robert V. A. & Rebecca M. Benner............. 84 84 0
Harris Berenholz............................. 458 4 454
James K. Bergdoll............................ 300 300 0
James K. Bergdoll, as Trustee under
Irrevocable Trust dated 10/25/96 for the
benefit of Daniel J. Byrnes................ 645 645 0
James K. Bergdoll, as Trustee under
Irrevocable Trust dated 10/25/96 for the
benefit of Kathryn L. Byrnes............... 645 645 0
James K. Bergdoll, as Trustee under
Irrevocable Trust dated 10/25/96 for the
benefit of Kristin L. Byrnes............... 645 645 0
Jennifer A. Bergdoll......................... 300 300 0
Judith A. Bergdoll........................... 300 300 0
Rustin J. Bergdoll........................... 300 300 0
Alfred R. Berkeley III....................... 42 42 0
Bertrand Berullier........................... 13,080 13,080 0
Bhagwan Enterprises LLC...................... 58 58 0
Bishopsgate Holdings......................... 875 875 0
Robert S. Blank.............................. 1,616 404 1,212
Catherine Boardman........................... 27 27 0
George B. Bolton............................. 80 80 0
Steven J. & Brenda B. Bottom................. 84 84 0
William P. Boume............................. 41 41 0
Chris Bowen.................................. 1,723 431 1,292
William B. Boyd.............................. 41 41 0
54
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Peter B. Brack............................... 42 42 0
Bruce H. Brandaleone......................... 63 63 0
Stephen A. Brandon........................... 11,982 11,982 0
John L. Brenner.............................. 125 125 0
Susan R. Brenner............................. 125 125 0
Walter W. Brewster........................... 80 80 0
Briles & Fujii DMD, PC 401(k)................ 3,400 2,038 1,362
British Columbia Investment Management
Corp....................................... 17,527 17,527 0
Christopher H.G. Brown....................... 9,630 9,630 0
Peggy L. Buchenroth.......................... 2,272 2,272 0
Bunting Family II, LLC....................... 3,209 3,209 0
Matt Buonomano............................... 6,891 1,723 5,168
I.C. Bupp and A. Robinson revocable trust.... 42 42 0
Fred & Joan Burdette......................... 46 46 0
R. William M. Burgess, Jr.................... 55 55 0
Gregory J. Burkus............................ 42 42 0
Scott Burri.................................. 452 452 0
Paul Butterworth............................. 117 117 0
Randall T. Byrnes............................ 110 110 0
Susan P. Byrnes Health Education Center...... 182 182 0
CSR Defined Benefit Pension Plan............. 1,616 404 1,212
Edward I. Cahill............................. 60 60 0
California Public Employees'................. 20,055 20,055 0
Denis J. Callaghan & Catherine H. Bray....... 42 42 0
Christopher Camut............................ 13 13 0
Jeffrey Canin................................ 159 159 0
Paul Canniff................................. 504 504 0
Revocable Trust of Tadhg Canniffe and
Bernadette Canniffe dated March 11, 1998... 37,789 37,789 0
Capital Science Partners, Ltd................ 647 162 485
Michael J. Carney............................ 10,319 10,319 0
Cato D. & Mary F. Carpenter.................. 84 84 0
Christopher Cayley........................... 240 240 0
Christopher Peter Cayley..................... 135 135 0
Hillary Cecil................................ 1,616 404 1,212
Henry Chan................................... 187 187 0
Chapel Hill Partners, L.P.................... 81,417 81,417 0
Ishmael Chawla............................... 3,185 796 2,389
Lim Fung Chee................................ 93 93 0
Ann & Parker J. Y. Chen...................... 58 58 0
Joe Childs................................... 4,045 599 3,446
King Mei Ching............................... 214 214 0
Henry Khan Fong Chok......................... 214 214 0
Lau Li Choo.................................. 108 108 0
Angela Chopra................................ 595 595 0
Hyundeok Chung............................... 1,247 312 935
Brett D. Clifford............................ 41 41 0
Phillip & Jill Clough........................ 42 42 0
55
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
William Cock................................. 3,553 3,553 0
William Richard John Cock.................... 1,354 1,354 0
Kathryn E. Coffee............................ 11 11 0
Paul J. Cohen................................ 954 715 239
Geroge Cole.................................. 9 9 0
Marco A. Coleman............................. 273 205 68
Douglas S. Collat............................ 60 60 0
Colleen Research Foundation.................. 494 494 0
Commonwealth of Pennsylvania Public.......... 16,043 16,043 0
J. Michael Connelley......................... 63 63 0
Robert E. Conroy............................. 40 40 0
Coopman-Franey Family Trust.................. 3 3 0
Kathleen G. Correia.......................... 158,617 158,617 0
Coutts & Co. Ltd., custodian for APA
Excelsior IV/Offshore, L.P................. 13,531 13,531 0
Bradford Craighead........................... 10,125 4,050 6,075
Creon BV..................................... 412 412 0
Joanne Cumper................................ 24 24 0
Alexander T. Dalgnault, Jr................... 42 42 0
Clinton R. Daly.............................. 40 40 0
William Dausch............................... 20 20 0
Mike B. Davey................................ 40 40 0
Sarah David.................................. 1,275 1,275 0
Paul Davis................................... 163 163 0
Graeme Ketcheson Deans....................... 487 487 0
Donald W. Delson............................. 63 63 0
Navtej Deol.................................. 144,687 144,687 0
Dr. Armin Deuter............................. 3,480 3,480 0
Peter F. deVos............................... 63 63 0
Calvin Dick.................................. 47 47 0
Dinte Resources, Inc......................... 172 43 129
Peter Dion................................... 2,500 797 1,703
David & Christy DiPietro..................... 42 42 0
Dolby Partners............................... 1,300 1,300 0
Eileen T. Donahue............................ 2,079 2,079 0
Jay C. Doraiswami and Valli K. Doraiswami, as
Trustees of the Doraiswami Family Trust.... 29,754 29,754 0
Draper Franchise LLC......................... 182 182 0
Jaymie A. Durnan............................. 688 172 516
Yvonne Ellis................................. 67 67 0
Helen Engelhart.............................. 54 54 0
Enterprise International Holding Ltd., Inc... 802 802 0
EPIC Relocation, LLC......................... 4,224 2,862 1,362
Steven L. Eskenazi........................... 42 42 0
Lary Evans................................... 292 292 0
Jonathan E. Farber........................... 241 241 0
Christopher & Hadley Feiss................... 42 42 0
Andrew Feller................................ 60 15 45
56
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Mark A. Fenske............................... 14,037 14,037 0
Edward D. Fitzgerald......................... 14 14 0
Barry Flamm.................................. 862 216 646
Pamela Flores................................ 803 803 0
Julie Flowers................................ 94 94 0
George R. Floyd.............................. 40 40 0
Edward Foehl................................. 627 470 157
Kenneth T. Folkman........................... 13,819 13,819 0
Fort Pond Bay Co., LLC....................... 15,247 8,435 6,812
Antonia Fowell............................... 243 243 0
Fox Ventures Inc............................. 12,104 12,104 0
Adrian George Fox............................ 1,191 1,191 0
Belinda Anne Fox............................. 4,765 4,765 0
Ivy T. Fradin................................ 40 40 0
Marc J. Fratello............................. 2,957 2,957 0
Ceri Freeman................................. 379 379 0
William T. Freeman........................... 1,797 1,797 0
Bonnie Bershad Freundlich.................... 324 81 243
Richard I. Freundlich........................ 5,854 39 5,815
Jennie Ping Fu............................... 1,364 1,364 0
Fujitsu Basic Software Corp.................. 494 494 0
GCWF Investment Partners II.................. 58 58 0
Peter Gadinas................................ 756 17 739
Giacomo Garaventa............................ 19 19 0
Satinder Garcha.............................. 1,181,544 1,181,544 0
Furman Gardner............................... 24,395 24,395 0
John D. Gentry............................... 1,616 404 1,212
Bethany George............................... 2,812 2,812 0
Simon Georgiou............................... 37 37 0
Thomas O. Gephart............................ 1,660 1,660 0
Astrid Gerber................................ 54 54 0
Bruna M. Giammarco Non Resident Trust........ 57,680 57,680 0
John P. Giammarco, as Trustee of the
Giammarco Irrevocable GST Trust dated March
26, 1998................................... 14,601 14,601 0
Peter Cave Gibbs............................. 64 64 0
Neil Gibson.................................. 37 37 0
Elaine S. Gilde.............................. 1,600 400 1,200
Jack Gill.................................... 252 252 0
Margaret Gilmore............................. 6,815 6,815 0
John W. Gimblett............................. 57,722 57,722 0
Charles Glass................................ 251 251 0
Theresa Johnson Glenn........................ 6 6 0
Susan Golob.................................. 1,723 431 1,292
Steven Goode................................. 970 243 727
Mark A. Goodman.............................. 42 42 0
Jemina Gore.................................. 44 44 0
Steve Goretti................................ 5,341 173 5,168
Gary J. Goulski.............................. 200 70 130
57
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Dawn Grain................................... 40 40 0
Lynsey Graves................................ 6 6 0
David M. Gray................................ 42 42 0
Robert C. Greco.............................. 202 202 0
Jonathan E. Greenleaf........................ 364 127 237
Jeffrey A. Greiner........................... 1,251 1,251 0
Jeffrey A. Greiner as custodian for Carolyn
Greiner.................................... 881 881 0
Susan Greiner................................ 381 381 0
Aled Griffiths............................... 54 54 0
Benjamin H. Griswold IV...................... 42 42 0
Daniel Gross and Associates Pension Plan..... 2,263 566 1,697
Carl Grossman................................ 442 111 331
Grove Street Capital LLC..................... 2,493 2,493 0
Thomas W. Guard.............................. 7 7 0
Richard T. Hale.............................. 40 40 0
David Hall................................... 27 27 0
Michael J. Halloran.......................... 42 42 0
Richard E. Halperin.......................... 2,294 574 1,720
Jerry Harris................................. 796 796 0
Susanne Harris............................... 1,624 1,624 0
David Hartzell............................... 22 22 0
David & Christine E. Hartzell................ 42 42 0
Hiroshi Hasegawa............................. 58 58 0
Nicholas John Hawkins........................ 21 21 0
Rebecca Hazell............................... 40 40 0
Donald R. Heacock............................ 42 42 0
Janet L. Heal................................ 150 150 0
Donald B. Hebb, Jr........................... 27 27 0
Hebb Family Limited Partnership.............. 1,112 1,112 0
Kristin Hebert............................... 5,000 5,000 0
Simone Hermsen............................... 27 27 0
Blue Heron Capital LLC....................... 1,168 1,168 0
J. Adam Hilt................................. 42 42 0
Thomas R. Hitchner........................... 84 84 0
Seamus Hoar.................................. 536 536 0
Seamus John Hoar............................. 135 135 0
Kim Hodgson.................................. 67 67 0
A.G. Hoffman & Associates.................... 187 187 0
Gordon Hoffman............................... 58 58 0
Christopher L. Holter........................ 40 40 0
Thomas Holzechen............................. 13,810 13,810 0
Devora Hosseinof............................. 108 108 0
Robert E. Howard IV.......................... 60 60 0
Alan Michael Hughes.......................... 19,591 19,591 0
Simon Hughes................................. 34 34 0
Donald H. Hunter............................. 16,407 16,407 0
Elme Hurndell................................ 6 6 0
58
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Gail C. Husick............................... 2 2 0
Abdul Aziz Hussain........................... 93 93 0
John P. Imlay, Jr............................ 98 98 0
Inacom Corp.................................. 2,285 2,285 0
Lucy Ingram.................................. 37 37 0
Invemed Associates, Inc...................... 47,676 35,757 11,919
Robert P. Irwin.............................. 21 21 0
Tormod Isetorp............................... 989 989 0
Sue Iveson................................... 31 31 0
Michael Jaharis.............................. 10,259 1,744 8,515
Jakeb Futures, L.P........................... 8,996 8,996 0
Francis J. Jamison, Jr....................... 40 40 0
Nicola Jeffrey............................... 216 216 0
Frederic Johnson............................. 3,375 1,350 2,025
Martin Johnson............................... 117 117 0
Paul Johnson................................. 1,818 1,818 0
Rowland Johnson & Carol Joyce Family Trust... 117 117 0
Thomas W. Johnson............................ 42 42 0
Allison Jones................................ 27 27 0
Nick Jones................................... 8 8 0
Reinhard Junker.............................. 5,280 5,280 0
Steve & Karla Jurvelson...................... 584 584 0
Kadila Holdings, Inc......................... 7,795 2,686 5,109
William & Jeri Kallman....................... 30 30 0
William Kallman.............................. 273 273 0
Howard T. Kamisky............................ 40 40 0
Douglas Kaplan............................... 33 8 25
Joelle M. Kayden............................. 11 11 0
Kenneth Karl Kelly III....................... 1,364 1,364 0
Peter Kelly.................................. 41,301 41,301 0
E. Robert Kent, Jr........................... 42 42 0
Cristina H. Kepner........................... 4,490 3,241 1,249
Patrick Kerins & Terry Morgenthaler.......... 42 42 0
Patrick Kersten.............................. 2,139 2,139 0
Keswick Private Fund I, L.L.C................ 401 401 0
Saurabh Khetrapal............................ 245,530 245,530 0
Robert S. Killerbrew, Jr..................... 40 40 0
Kjelloch Marta Beijers Stifelese............. 593 593 0
Paul W. Killian.............................. 63 63 0
Kirlin Partners.............................. 117 117 0
Jennie V. Kjos............................... 955 717 238
Dr. Thomas Kleine............................ 5,280 5,280 0
Lisa Knight.................................. 1,362 1,362 0
Jeffrey Kolber............................... 1,364 1,364 0
Reinbard Kolvenbach.......................... 13,810 13,810 0
Gayle Kovacs MMP............................. 30 30 0
Kranzlin Family LLC.......................... 40 40 0
Dr. Gerhard Kratz............................ 5,280 5,280 0
59
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Eric Krauss.................................. 2,584 646 1,938
A.B. Krongard................................ 105 105 0
John A. Kryramowski.......................... 40 40 0
KuLeuven R & D............................... 824 824 0
Revocable Trust of Ankesh Kumar and Abha
Kumar dated April 19, 1998................. 37,975 37,975 0
Steven Kyriakos.............................. 2,117 88 2,029
Dean Kyriakos................................ 101,133 67,975 33,158
Lacey Lee Limited............................ 35,065 35,065 0
Monica Mary Ellen Lacey...................... 47 47 0
Monica Lacey................................. 13 13 0
LD Pensions.................................. 989 989 0
Laerstandens Bradforsikring.................. 2,966 2,966 0
Bruce Langone................................ 2,272 1,704 568
John & Nancy Larkin.......................... 42 42 0
Stephen Leavy................................ 595 595 0
John A. Lechner.............................. 40 40 0
Hsing Chung Lee & Ivy Lo..................... 58 58 0
John Peter Lee............................... 2,000 2,000 0
Mark Levine.................................. 125 125 0
Katherine Levy............................... 156 156 0
Siobhan Lewington............................ 187 187 0
Linehan Foundation........................... 40 40 0
Linehan 1982 Trust........................... 60 60 0
Earl Linehan................................. 716 716 0
Michael Linehan.............................. 60 60 0
Lion Investments, L.P........................ 160,748 160,748 0
Tom Litle.................................... 8,614 2,154 6,460
Bruce Lock................................... 302 302 0
Brent M. Lockwood............................ 40 40 0
Howard Loewenberg............................ 42 42 0
Ana Maria Lopez.............................. 13 13 0
Lornes B.V................................... 3,262 3,262 0
Linda A. Lohenitz............................ 125 125 0
Michael D. Lohenitz.......................... 125 125 0
Loyola College of Maryland................... 2,056 2,056 0
Mark A. Ludwick.............................. 244 85 159
Marcelo MacKinlay............................ 12,155 12,155 0
Frank G. Magdlen............................. 545 409 136
Samantha Malin............................... 434 434 0
Ira & Michelle Malls......................... 42 42 0
Management Resources International Holding
B.V........................................ 23,817 23,817 0
John Graham Manley........................... 5,144 5,144 0
Graham Manley................................ 10,832 10,832 0
Suzanne Manzler.............................. 200 70 130
Andrew W. Marcus............................. 42 42 0
John Marsden................................. 541 541 0
60
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Yvonne V. Marsh.............................. 459 115 344
Tim Marshall................................. 700 700 0
Timothy Noel Ridings Marshall................ 108 108 0
Stefan Martens............................... 690 690 0
Charles E. Mather IV......................... 382 96 286
Jacqueline S. Maxwell........................ 4,000 4,000 0
Anthony M. May............................... 60 60 0
Brian McCabe................................. 1,525 844 681
Jami & Thomas McDonald....................... 21 21 0
Jamie N. McDonald............................ 25 25 0
James T. McGibbon............................ 156 42 114
Peter M. McGowan............................. 55 55 0
Michelle McGregor............................ 778 778 0
James McLeod................................. 200 70 130
Rick C. McMahill............................. 14,637 14,637 0
David G. Meckley............................. 125 125 0
Eleanor Meckley.............................. 125 125 0
Juan Jose Pol Mendez......................... 16,840 16,840 0
Mercian Corp................................. 889 889 0
June Mesrie.................................. 4,747 4,747 0
Lucinda Sandford Mezey....................... 40 40 0
Stephen R. Mickelberg........................ 1,216 4 1,212
Gilbert & Peggy Miller....................... 58 58 0
Peggy J. Miller.............................. 44,588 32,691 11,897
Brent B. Milner.............................. 31 31 0
Michael Misera............................... 63 63 0
Stephen T. Mitchell.......................... 40 40 0
Moab International Investments BVA........... 79,677 79,677 0
Anne Marie Moles............................. 6 6 0
Justin Michael McKern More................... 1,083 1,083 0
J.L. Malcom Morris........................... 21 21 0
Michele M. Morrow............................ 200 200 0
W. Christopher Mortenson, Jr................. 42 42 0
Frank G. Moscow.............................. 221 166 55
Frank Moscow & Corina Carmen................. 117 117 0
Dean Mueller................................. 701 701 0
Rudolf Muller................................ 13,810 13,810 0
Donald Munoz................................. 11 11 0
Michael P. Murray............................ 22 22 0
NCB Consulting Ltd........................... 4,740 4,740 0
Kapil Nanda.................................. 101 101 0
Ajay Narain & Kaajal Narain, Trustees of Ajay
Narain & Kaajal Narain Revocable Trust..... 150,284 150,284 0
Laurie Nash.................................. 13 13 0
Carl Neun.................................... 58 58 0
John Newton.................................. 584 584 0
Donald Notman, Jr............................ 24 24 0
Richard Novotny.............................. 30 30 0
61
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Ocean Assets LLC............................. 80 80 0
Michael O'Donnell............................ 219 219 0
Sally O'Hare................................. 462 462 0
James Z. O'Leary............................. 221 166 55
Suzanne D. Olsen............................. 818 614 204
Oregon Health Sciences Foundation............ 3,405 3,405 0
Ian Organ.................................... 22,400 22,400 0
Florenciz Barranco Ortega.................... 39,338 39,338 0
Jonathan Osgood.............................. 42 42 0
Frederic Oster............................... 2,139 2,139 0
Michael T. Ott............................... 42 42 0
The P/A Fund III, L.P........................ 91,689 91,689 0
Robert K. Packard............................ 42 42 0
John H. Park................................. 1,090 818 272
William Paternotte........................... 74 74 0
Patricof Private Investment Club, L.P........ 1,467 1,467 0
Charles LF Paulson........................... 409 182 227
Erick JC Paulson............................. 509 282 227
Philip Gordon Perry.......................... 5,416 5,416 0
Stuart A. Peschka............................ 273 205 68
Jill Pett.................................... 108 108 0
Helen Pickup................................. 6 6 0
Raymond Poon................................. 93 93 0
Raymond Poon & Associates.................... 93 93 0
Harold W. Pote............................... 1,142 286 856
Roger G. Powell.............................. 42 42 0
Susan Powell................................. 9 9 0
Glenn Powers................................. 973 812 161
Pregnator AB................................. 22,405 22,405 0
Margaret Mary V. Preston..................... 40 40 0
Simon Pyne................................... 61 61 0
Trustees of the Quarry Dougall Employee Share
Option Trust............................... 22,718 22,718 0
Constance May & Brian Aubrey Herb Quarry..... 5,957 5,957 0
Gareth David Quarry.......................... 318,190 318,190 0
Michele Elizabeth Quarry..................... 2,233 2,233 0
R&S Partners Limited Partnership............. 58,427 58,427 0
Rainbow Family Trust......................... 1,168 1,168 0
Rajah Holdings............................... 2,735 2,735 0
Marc Ramault................................. 21,857 21,857 0
Max Ramberg & Constance Barbara Ramberg as
Trustees of the Max & Constance Ramberg
Trust of 1982.............................. 365,939 365,939 0
Kenneth C. Ramberg........................... 274,314 274,314 0
Steve Ranson................................. 81 81 0
Russell T. Ray............................... 103 103 0
Thomas Reichwein............................. 12,110 12,110 0
Ulrich P. Reiter............................. 22,884 22,884 0
62
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Ted Remillard................................ 243 243 0
Rhode Island Employees' Retirement System.... 2,005 2,005 0
Fredric Rich................................. 26,964 26,964 0
Carlo Richartz............................... 6,418 6,418 0
W. Gar Richlin............................... 63 63 0
Arnold Richman............................... 401 401 0
Barry W. Ridings............................. 84 84 0
William P. Rienhoff IV....................... 40 40 0
Allen Roberts................................ 33 8 25
Elizabeth Rosalind Roberts................... 6,499 6,499 0
Jonathan Robin............................... 1,866 1,866 0
Stephen Mark Rodney.......................... 4,765 4,765 0
Robert S. Rollo.............................. 18,678 18,678 0
Robert Stone Rollo and Kimberlee Dockson
Rollo TTEE UAO 6/8/90 (Restated 5/20/97)... 55,430 55,430 0
Rooster Investment Company LLC............... 3,232 808 2,424
Richard A. Rosee............................. 80 80 0
Harold R. Ross............................... 100 100 0
Roth Capital Partners, Inc................... 7,410 7,410 0
William R. Rothe............................. 40 40 0
John C. Rudder............................... 9,988 9,988 0
Dr. Christoph Rummel......................... 13,810 13,810 0
S. Lawrence Rusoff........................... 647 162 485
Clint W. Sager II............................ 1,216 426 790
Sagres Group................................. 346 346 0
Pedro Garcia-Cano Salgado.................... 15,602 15,602 0
Timothy Sandborn............................. 954 715 239
Purmjit Sandhu............................... 81 81 0
Olivia Santos................................ 2,941 735 2,206
Steven E. Schaedel........................... 608 213 395
Martine Schipper............................. 51 51 0
Sandra Schoem................................ 5,031 1,258 3,773
Steven R. Schuh.............................. 53 53 0
Brian E. Schuliger........................... 4,222 4,222 0
Claus Schulmeister........................... 13,810 13,810 0
Pierre Schumacher............................ 6,418 6,418 0
Randy Schwartz............................... 482 482 0
Thomas Schweizer, Jr......................... 42 42 0
Search Competence Hoffman AB................. 22,405 22,405 0
Select Investments, Ltd...................... 437 437 0
Gavin Sharpe................................. 1,261 1,261 0
Mayo A. Shattuck III......................... 142 142 0
Robert Shattuck.............................. 33 33 0
Jill A. Shaw................................. 40 40 0
Andrew T. Sheehan............................ 197 197 0
Bernard J. Sheinfeld......................... 6,912 6,912 0
Adam Shelnut................................. 1,338 468 870
Jennifer Shenbaum............................ 1,205 1,205 0
63
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Isabelle M. Sherman.......................... 266,444 46,715 219,729
Mark A. Sherman.............................. 266,444 46,715 219,729
Nick Shilton................................. 1,571 1,571 0
Michael & Emma Sigal......................... 8,647 8,647 0
Abha Singhvi, Trustee of Abha Singhvi
Revocable Trust............................ 152,284 152,284 0
R.J.C. Sijthoff.............................. 12,976 12,976 0
Ron Sijthoff................................. 11,346 11,346 0
Andrew Skinner............................... 4,566 4,566 0
Andrew Luis Ojanguren Skinner................ 2,708 2,708 0
Tim Skipper.................................. 4,800 4,800 0
Timothy Peter Skipper........................ 1,083 1,083 0
Smith Family Unitrust, L.P. No. 1............ 2,005 2,005 0
Baldwin Smith, Jr............................ 1,072 504 568
C. Ian Sym Smith............................. 187 187 0
David F. Smith............................... 42 42 0
Kendall & Ariene Smith....................... 58 58 0
Raymond W. Smith............................. 2,432 8 2,424
Stuart E. Smith.............................. 76 76 0
John A. Spilman.............................. 30 30 0
Dr. Dieter Spori............................. 2,280 2,280 0
SPF-Empreendimentos Educacionais Ltda........ 7,967 7,967 0
Cleo Staniforth.............................. 541 541 0
Charlotte Stearn............................. 377 377 0
Robert & Kit Stebbins........................ 46 46 0
William N. Steitz............................ 24,229 24,229 0
Stephens & Company........................... 252 252 0
William G. Stewart........................... 60 60 0
Emma Still................................... 13 13 0
Emma Louise Still............................ 27 27 0
Natasha Stimpson............................. 216 216 0
John D. Stobo, Jr............................ 46 46 0
Nicola Stokes................................ 189 189 0
Cari Stork................................... 584 584 0
Strand Capital Performing Arts Center........ 92 92 0
Charlotte Surguy............................. 108 108 0
Mary Liften Sutherland....................... 1,147 287 860
Thomas W. Sutton............................. 40 40 0
Patrick Leslie James Swaffer................. 6,499 6,499 0
Charles Howard King Swindall................. 541 541 0
Janet Louise Swindall........................ 541 541 0
Alison Jane Taylor........................... 1,083 1,083 0
Andrew David Taylor.......................... 1,137 1,137 0
B. Scott Taylor.............................. 89,228 56,070 33,158
Thomas I. Teague............................. 3,043 1,907 1,136
Technology Gateway Partnership............... 7,588 19 7,569
Patricia Tehan............................... 22,400 22,400 0
John Terry................................... 292 292 0
64
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Sanjeet Thadani.............................. 144,687 144,687 0
The Brentwood Group, Ltd..................... 49 36 13
The Samuel Lewis Green Trust................. 236 59 177
David & Diane Thompson....................... 27 27 0
George Thompson.............................. 909 682 227
Jim Thornton................................. 1,164 1,164 0
Tilly Nominees Ltd........................... 3,646 3,646 0
Richard Timbers.............................. 2,502 2,502 0
David Tonhofer............................... 2,139 2,139 0
William E. Traum............................. 250 250 0
R. Tufts & Joyce Tufts....................... 93 93 0
UMB Bank TTE Bartlett Jackson................ 46 46 0
UMB Bank TTE Carl Stoney..................... 46 46 0
Jeffrey Tung................................. 565 565 0
Daniel Valladares............................ 2,621 2,621 0
Freddy Vanlancker............................ 21,857 21,857 0
Leiven VanMarcke............................. 647 162 485
VanRam Associates International N.V.......... 29,997 29,997 0
William David Newsum Vaughan................. 541 541 0
Joseph R. Vicente............................ 1,186 1,186 0
Mark Villilo................................. 2,447 2,447 0
Mark Villilo custodian for Nicholas A.
Villilo.................................... 400 400 0
Mark Villilo custodian for Alyssa R.
Villilo.................................... 400 400 0
Susan L. Villilo............................. 400 400 0
Peter Vlachos................................ 10,498 7,092 3,406
Chris Vroom.................................. 63 63 0
WS Investments 99B........................... 1,969 1,969 0
David Waage.................................. 500 500 0
James P. Wade................................ 42 42 0
Mark Wagner.................................. 162 162 0
Walter F. Wagner............................. 2,533 2,533 0
Mark Walters................................. 216 216 0
Lisa Cattermole Watkins...................... 1,083 1,083 0
David W. Weaver.............................. 14 14 0
David & Traci Weaver......................... 42 42 0
Jill Webb.................................... 27 27 0
Emma Weedon.................................. 40 40 0
Suzanne Weight............................... 27 27 0
Dorothy Wenner............................... 125 125 0
West Family Foundation....................... 13,300 13,300 0
Byron L. West................................ 368 368 0
Karen West................................... 7,095 7,095 0
Jeffrey S. Westmount......................... 42 42 0
Cort Whitehead............................... 6,891 1,723 5,168
Jill Whitehouse.............................. 5,956 5,956 0
Valerie Whitehouse........................... 8,124 8,124 0
Mark Whittington............................. 147 147 0
Scott Wieler................................. 74 74 0
65
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED OF COMMON STOCK BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING REGISTERED HEREIN(1) AFTER OFFERING(2)
- ------------------- ------------------ -------------------- ------------------
Don Willis................................... 6,891 1,723 5,168
Claire Wilkinson............................. 240 240 0
Laura E. Wingate............................. 39,654 39,654 0
Caesar Wong.................................. 273 205 68
Beverly L. Wright............................ 42 42 0
Yarmuth Dion, Inc............................ 15,000 8,188 6,812
Makoto Yasuda................................ 206 206 0
Joseph J. Yelenic............................ 14,637 14,637 0
Lee Choo Yeo TTE............................. 46 46 0
David Croy Drysdale Young.................... 55,802 55,802 0
Sally Young.................................. 899 899 0
- ------------------------
(1) This prospectus also covers any additional shares of our common stock which
become issuable by reason of any stock split, stock dividend,
recapitalization, or similar transaction that is effected without the
receipt of consideration and results in an increase in the number of shares
of our common stock that are outstanding.
(2) Assumes that all shares offered by each selling stockholder are sold in this
offering.
66
DESCRIPTION OF CAPITAL STOCK
The Certificate of Incorporation of the Company provides the Company with
the authority to issue 1,500,000,000 shares of Common Stock, 39,000,000 shares
of Class B Common Stock, 200,000 shares of 10.5% Cumulative Preferred Stock and
800,000 shares of Preferred Stock. No shares of Preferred Stock are outstanding.
The 10.5% Cumulative Preferred Stock was redeemed and no shares are outstanding.
COMMON STOCK AND CLASS B COMMON STOCK
DIVIDENDS Each share of Common Stock and Class B Common Stock is entitled
to dividends if, as and when dividends may be declared by the Board of Directors
of the Company and paid. Under the Delaware General Corporation Law, the Company
may declare and pay dividends only out of its surplus, or in case there shall be
no such surplus, out of its net profits for the fiscal year in which the
dividend is declared and/or the preceding year. No dividends may be declared,
however, if the capital of the Company has been diminished by depreciation,
losses or otherwise to an amount less than the aggregate amount of capital
represented by any issued and outstanding stock having a preference on
distribution. Dividends must be paid on both the Common Stock and the Class B
Common Stock at any time that dividends are paid on either. Any dividend so
declared and payable in cash, capital stock of the Company (other than Common
Stock or Class B Common Stock) or other property will be paid equally, share for
share, on the Class B Common Stock and Common Stock. Dividends and distributions
payable in shares of Class B Common Stock may be paid only on shares of Class B
Common Stock, and dividends and distributions payable in shares of Common Stock
may be paid only on shares of Common Stock. If a dividend or distribution
payable in Common Stock is made on the Common Stock, the Company must also make
a simultaneous dividend or distribution on the the Class B Common Stock.
Pursuant to any such dividend or distribution, each share of Class B Common
Stock will receive a number of shares of Class B Common Stock equal to the
number of shares of Common Stock payable on each share of Common Stock.
VOTING RIGHTS Each share of Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to ten votes on all matters. Except as
described below, the Common Stock and the Class B Common Stock vote together as
a single class on all matters presented for a vote of the stockholders,
including the election of directors. The holders of a majority of the
outstanding shares of Common Stock or Class B Common Stock, voting as separate
classes, must approve certain amendments affecting shares of such class.
Specifically, if there is any proposal to amend the Certificate of Incorporation
in a manner that would increase or decrease the number of authorized shares of
Common Stock or Class B Common Stock, increase or decrease the par value of the
shares of Common Stock or Class B Common Stock or alter or change the powers,
preferences, or special rights of the shares of Common Stock or Class B Common
Stock so as to affect them adversely, such an amendment must be approved by a
majority of the outstanding shares of the affected class, voting separately as a
class. In addition, any merger or consolidation in which each share of Common
Stock receives consideration that is not of the same type or is less than the
amount of the consideration to be received by each share of Class B Common
Stock, other than consideration payable in securities which provide each share
of Class B Common Stock with the number of votes that is no more than ten times
the number of votes provided each share of Common Stock, must be approved by a
majority of the outstanding shares of Common Stock, voting separately as a
class. Shares of Common Stock and Class B Common Stock do not have cumulative
voting rights.
TERMS OF CONVERSION. Each share of Class B Common Stock is convertible at
any time, at the option of and without cost to the stockholder, into one share
of Common Stock. If at any time (i) the outstanding shares of Class B Common
Stock represent less than 15% of the combined voting power of issued and
outstanding shares of Common Stock and Class B Common Stock, or (ii) the Board
of Directors and the holder of a majority of the outstanding shares of Class B
Common Stock approve the conversion of all of the Class B Common Stock into
Common Stock, or (iii) the holder of a majority of the outstanding shares of
Class B Common Stock dies, then each outstanding share of Class B Common Stock
shall be converted automatically into one share of Common Stock without any
action by the holder. In the event of such a
67
conversion, certificates formerly representing outstanding shares of Class B
Common Stock will thereafter be deemed to represent an equal number of shares of
Common Stock.
LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or winding
up of the Company, holders of the shares of Common Stock and Class B Common
Stock are entitled to share equally, share for share, in the assets available
for distribution.
OTHER. Additional shares of Class B Common Stock may only be issued upon
stock splits of, or stock dividends on, the existing Class B Common Stock. No
stockholder of the Company has preemptive or other rights to subscribe for
additional shares of the Company.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series as
determined by the Board of Directors. The Board of Directors is authorized to
issue the shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividends rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the stockholders. The issuance of such Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock, including the loss of voting control to
others. The Company currently has no plan to issue any shares of such Preferred
Stock.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware General Corporation Law (the "Delaware
Anti-Takeover Law"), certain "business combinations" between a Delaware
corporation whose stock generally is publicly traded or held of record by more
than 2,000 stockholders and any person acquiring 15% or more of the voting stock
of such Delaware corporation (an "interested stockholder") are prohibited for a
three-year period following the time that such stockholder became an interested
stockholder, unless (i) either the business combination or the transaction which
resulted in the stockholder becoming an "interested stockholder" was approved by
the board of directors of the corporation prior to the time the other party to
the business combination became an interested stockholder, (ii) upon
consummation of the the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers and stock held in employee stock plans in
which the employees do not have a right to determine confidentially whether to
tender or vote stock held by the plan), or (iii) the business combination was
approved by the board of directors of the corporation and authorized by 66 2/3%
of the voting stock which the interested stockholder did not own. The
corporation may opt out of the effect of this statement by (i) including a
provision to such effect in the corporation's original certificate of
incorporation, (ii) amendment to the corporation's bylaws made by the board of
directors within 90 days after the effective date of the statute or
(iii) amendment of the corporation's certificate of incorporation or bylaws
approved by holders of a majority of the shares entitled to vote; provided that
such amendment shall generally not take effect until 12 months after its
adoption and shall not effect any business combination with interested
stockholders which are effected during such 12 months. The three-year
prohibition does not apply to certain business combinations proposed by an
interested stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an interested
stockholder, transactions with an interested stockholder involving the assets or
stock of
68
the corporation or its majority-owned subsidiaries and transactions which
increase an interested stockholder's percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who becomes the
beneficial owner of 15% or more of a Delaware corporation's voting stock.
Section 203 could have the effect of delaying, deferring or preventing a change
in control of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of a director's duty of loyalty to the Company or
its stockholders, (ii) for acts of omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derives an improper personal benefit. Moreover, the provisions do not
apply to claims against a director for violations of certain laws, including
federal securities laws. If the Delaware General Corporation Law is amended to
authorize the further elimination or limitation of directors' liability, then
the liability of directors of the Company shall automatically be limited to the
fullest extent provided by law. The Company's Bylaws also contain provisions to
indemnify the directors and officers of the Company to the fullest extent
permitted by the Delaware General Corporation Law. In addition, the Company has
entered into indemnification agreements with its current directors. These
provisions and agreements may have the practical effect in certain cases of
eliminating the ability of stockholders to collect monetary damages from
directors. The Company believes that these contractual agreements and the
provisions in its Certificate of Incorporation and Bylaws are necessary to
attract and retain qualified persons as directors and officers.
TRANSFER AGENT
The Transfer Agent for the Common Stock is The Bank of New York.
PLAN OF DISTRIBUTION
The selling stockholders named herein (or pledgees, donees, transferees or
other successors-in-interest selling shares received from a named selling
stockholder as a gift, partnership, distribution or other non-sale-related
transfer after the date of this prospectus) may offer their shares at various
times in one or more transactions on the Nasdaq National Market, in special
offerings, exchange distributions, secondary distributions, negotiated
transactions, or a combination of such. They may sell at market prices at the
time of sale, at prices related to the market price or at negotiated prices. The
selling stockholders may use broker-dealers to sell their shares. If this
happens, broker-dealers will either receive discounts or commissions from the
selling stockholders, or they will receive commissions from purchasers of shares
for whom they acted as agents. Compensation as to a particular broker-dealer
might be in excess of customary commissions and will be in amounts to be
negotiated in connection with the sale. Broker-dealers or agents and the selling
stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because selling
stockholders may be deemed to be "underwriters" within the meaning of
Section2(11) of the Securities Act, the selling stockholders will be subject to
the prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus.
69
LEGAL OPINION
For the purpose of this offering, our outside counsel, Fulbright & Jaworski
L.L.P., New York, New York 10103, is giving its opinion on the validity of the
shares.
EXPERTS
The consolidated financial statements and schedule of the Company included
herein have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the periods set forth in their reports
included herein, and are included herein in reliance upon such reports given
upon the authority of said firm as experts in accounting and auditing.
The consolidated statements of operations and stockholders' equity of
Morgan & Banks Limited for the year ended December 31, 1998 and the statements
of cash flows for the nine months ended December 31, 1998, included in the
Company's financial statements for the year ended December 31, 1998 are included
in reliance on the report of Pannell Kerr Forster, independent auditors, given
upon the authority of that firm as experts in accounting and auditing.
The consolidated statements of operations, stockholders' equity,
comprehensive income and cash flows, and schedule of LAI Worldwide, Inc. for the
year ended February 28, 1999 (not presented separately herein) have been audited
by Arthur Andersen LLP, independent certified public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The consolidated financial statements of QD Group Limited as of
30 September 1999 and 1998 and for each of the two years then ended included
herein have been audited by Arthur Andersen, independent chartered accountants,
as indicated in their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in giving said report.
70
INDEX TO FINANCIAL STATEMENTS
TMP WORLDWIDE INC. AND SUBSIDIARIES
PAGE NO.
--------
Report of Independent Certified Public Accountants.......... F-2
Independent Auditor's Report to the Members of Morgan &
Banks Limited............................................. F-3
Report of Independent Certified Public Accountants (with
respect to LAI Worldwide, Inc.)........................... F-4
Consolidated Financial Statements:
Balance sheets as of December 31, 2000 and 1999........... F-5
Statements of income (loss) for the years ended December
31, 2000, 1999 and 1998................................. F-6
Statements of comprehensive income (loss) for the years
ended December 31, 2000, 1999 and 1998.................. F-7
Statements of stockholders' equity for the years ended
December 31, 2000, 1999 and 1998........................ F-8
Statements of cash flows for the years ended December 31,
2000, 1999 and 1998..................................... F-11
Notes to consolidated financial statements................ F-12
QD GROUP LIMITED
Consolidated profit and loss account for the six months
ended 30 June 2000 and 30 June 1999 (unaudited)........... F-43
Consolidated balance sheet as at 30 June 2000 and 30 June
1999 (unaudited).......................................... F-44
Consolidated cash flow statement for the six months ended
30 June 2000 and 30 June 1999 (unaudited)................. F-45
Notes to the financial statements (unaudited)............... F-46
Auditors' report............................................ F-51
Consolidated profit and loss account for the year ended
30 September 1999 and 30 September 1998................... F-52
Consolidated balance sheet as at 30 September 1999 and
30 September 1998......................................... F-53
Company balance sheet as at 30 September 1999 and
30 September 1998......................................... F-54
Consolidated cash flow statement as at 30 September 1999 and
30 September 1998......................................... F-55
Notes to the accounts....................................... F-56
PRO FORMA CONDENSED CONSOLIDATED INFORMATION (UNAUDITED).... F-74
Pro forma condensed consoldiated statement of income (loss)
for the year ended December 31, 2000...................... F-75
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of TMP
Worldwide Inc. and Subsidiaries (the "Company") as of December 31, 2000 and
1999, and the related consolidated statements of income (loss), comprehensive
income (loss), stockholders' equity and cash flows for each of the three years
in the period ended December 31, 2000. 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 audits. We did not audit the
financial statements of Morgan & Banks Limited for the year ended December 31,
1998 which reflect total commissions & fees of approximately $255.4 million.
Those financial statements were audited by another auditor whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Morgan & Banks Limited for 1998, is based solely on the report of the other
auditor. We did not audit the financial statements of LAI Worldwide, Inc. and
subsidiaries for the year ended February 28, 1999 which are combined with the
Company's financial statements for the year ended December 31, 1998 and reflect
total commissions & fees of approximately $61.8 million. Those financial
statements were audited by another auditor whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for LAI
Worldwide, Inc. and subsidiaries for 1998, is based solely on the report of the
other auditor.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 and the reports of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TMP Worldwide Inc. and Subsidiaries
as of December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.
/s/ BDO SEIDMAN, LLP
-------------------------------
BDO SEIDMAN, LLP
New York, New York
February 16, 2001
F-2
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF MORGAN & BANKS LIMITED
SCOPE
We have audited the financial statements of Morgan & Banks Limited for the
financial year ended 31 December 1998. The financial statements include the
consolidated accounts of the economic entity, comprising the company and the
entities it controlled at the year's end or from time to time during the
financial year. The company's directors are responsible for the preparation and
presentation of these financial statements and the information they contain. We
have conducted an independent audit of the financial statements and the
information they contain in order to express an opinion on them to the members
of the company.
Our audit has been conducted in accordance with Australian Auditing
Standards, which are substantially the same as generally accepted auditing
standards in the United States of America, to provide reasonable assurance as to
whether the financial statements are free of material misstatement. Our
procedures included examination, on a test basis, of evidence supporting the
amounts and other disclosures in the financial statements, and the evaluation of
accounting policies and significant accounting estimates. These procedures have
been undertaken to form an opinion as to whether, in all material respects, the
financial statements are presented fairly in accordance with Australian
Accounting Standards and other mandatory professional reporting requirements and
statutory requirements so as to present a view which is consistent with our
understanding of the company's and the economic entity's financial position and
the results of its operations and its cash flows.
The audit opinion expressed in this report has been formed on the above
basis.
AUDIT OPINION
In our opinion, the financial statements of Morgan & Banks Limited are
properly drawn up:
(a) so as to give a true and fair view of the profit for the financial year
ended on 31 December 1998 and the cash flows for the nine month period
ended 31 December 1998 of the company and the economic entity;
(b) in accordance with applicable Australian Accounting Standards and other
mandatory professional reporting requirements.
/s/ Pannell Kerr Forster /s/ A.P. Whiting
------------------------------ ----------------------------
Pannell Kerr Forster A.P. Whiting
Chartered Accountants PARTNER
New South Wales Partnership
SYDNEY, 15 APRIL 1999
(Amended at 19 March 2001 to delete references to the balance sheet as at
31 December 1999, and profits and cash flows for periods ending 31 March 1998
and 1997.)
F-3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To LAI Worldwide, Inc.:
We have audited the consolidated statements of operations, stockholders'
equity, comprehensive income and cash flows of LAI Worldwide, Inc. (a Florida
corporation) for the year ended February 28, 1999 (not presented separately
herein). 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 audits.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of LAI
Worldwide, Inc. and subsidiaries for the year ended February 28, 1999, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Tampa, Florida
April 7, 1999
F-4
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
DECEMBER 31,
-----------------------
2000 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents................................... $ 572,101 $ 67,733
Accounts receivable, net.................................... 551,246 487,888
Work-in-process............................................. 33,806 25,632
Prepaid and other........................................... 91,121 61,392
---------- ----------
Total current assets.................................... 1,248,274 642,645
Property and equipment, net................................. 143,750 84,866
Intangibles, net............................................ 521,088 324,269
Other assets................................................ 78,731 46,985
---------- ----------
$1,991,843 $1,098,765
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 360,331 $ 367,924
Accrued expenses and other current liabilities............ 300,958 142,064
Accrued integration and restructuring costs............... 28,014 21,453
Deferred commissions and fees............................. 155,276 74,109
Current portion of long-term debt......................... 8,225 21,250
---------- ----------
Total current liabilities............................... 852,804 626,800
Long-term debt, less current portion........................ 28,034 106,010
Other long-term liabilities................................. 53,129 30,923
---------- ----------
Total liabilities....................................... 933,967 763,733
---------- ----------
Commitments and Contingencies (Note 13)
Stockholders' equity:
Preferred stock, $.001 par value, authorized 800,000
shares; issued and outstanding: none.................... -- --
Common stock, $.001 par value, authorized 200,000,000
shares; issued and outstanding: 99,210,728 and
87,261,453, shares, respectively........................ 99 87
Class B common stock, $.001 par value, authorized
39,000,000 shares; issued and outstanding: 4,762,000
shares.................................................. 5 5
Additional paid-in capital................................ 1,130,031 377,415
Other comprehensive loss.................................. (63,924) (4,921)
Deficit................................................... (8,335) (37,554)
---------- ----------
Total stockholders' equity.............................. 1,057,876 335,032
---------- ----------
$1,991,843 $1,098,765
========== ==========
See accompanying notes to consolidated financial statements.
F-5
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
---------- -------- --------
Commissions and fees........................................ $1,291,737 $908,955 $771,838
---------- -------- --------
Operating expenses:
Salaries & related........................................ 667,398 512,554 442,511
Office & general.......................................... 287,428 216,826 192,156
Marketing & promotion..................................... 161,367 75,780 30,229
Merger & integration...................................... 64,604 63,054 22,412
Restructuring............................................. -- 2,789 3,543
Amortization of intangibles............................... 16,536 12,894 11,281
CEO special bonus......................................... -- -- 1,250
---------- -------- --------
Total operating expenses.................................. 1,197,333 883,897 703,382
---------- -------- --------
Operating income.......................................... 94,404 25,058 68,456
---------- -------- --------
Other income (expense):
Interest expense.......................................... (9,490) (22,638) (19,576)
Interest income........................................... 30,200 8,512 5,917
Other, net................................................ (1,095) (2,889) (2,095)
---------- -------- --------
19,615 (17,015) (15,754)
---------- -------- --------
Income before provision for income taxes, minority interests
and equity in losses of affiliates........................ 114,019 8,043 52,702
Provision for income taxes.................................. 57,602 8,424 17,426
---------- -------- --------
Income (loss) before minority interests and equity in losses
of affiliates............................................. 56,417 (381) 35,276
Minority interests.......................................... (442) 107 28
Equity in losses of unconsolidated affiliates............... -- (300) (396)
---------- -------- --------
Net income (loss) applicable to common and Class B common
stockholders.............................................. $ 56,859 $ (788) $ 34,852
========== ======== ========
Net income (loss) per common and Class B common share:
Basic..................................................... $ 0.56 $ (0.01) $ 0.40
========== ======== ========
Diluted................................................... $ 0.53 $ (0.01) $ 0.39
========== ======== ========
Weighted average shares outstanding:
Basic..................................................... 101,413 90,152 87,449
========== ======== ========
Diluted................................................... 107,903 90,152 89,305
========== ======== ========
See accompanying notes to consolidated financial statements.
F-6
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Net income (loss)........................................... $ 56,859 $ (788) $34,852
Foreign currency translation adjustment..................... (59,003) (1,294) (2,343)
-------- ------- -------
Comprehensive income (loss)................................. $ (2,144) $(2,082) $32,509
======== ======= =======
See accompanying notes to consolidated financial statements.
F-7
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
CLASS B
COMMON STOCK, COMMON STOCK,
$.001 PAR VALUE $.001 PAR VALUE ADDITIONAL OTHER UNAMORTIZED
--------------------- ---------------------- PAID-IN COMPREHENSIVE STOCK-BASED
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) COMPENSATION DEFICIT
---------- -------- ----------- -------- ---------- -------------- ------------- --------
Balance, January 1,
1998................... 58,805,531 $59 27,175,082 $ 27 $228,240 $(1,284) $ -- $(22,619)
Issuance of common stock
in connection with the
exercise of options.... 419,898 1 -- -- 1,494 -- -- --
Tax benefit of stock
options exercised...... -- -- -- -- 407 -- -- --
Capital contribution from
Principal Stockholder
re: CEO bonus and
other.................. -- -- -- -- 1,250 -- -- --
Issuance of common stock
in connection with
acquisitions........... 402,812 -- -- -- 5,546 -- -- --
Issuance of compensatory
options................ -- -- -- -- 295 -- -- --
Issuance of common stock
by pooled companies.... 1,005,712 1 -- -- 49,733 -- -- --
Repurchase and
cancellation of common
stock.................. (574,704) (1) -- -- (668) -- -- --
Conversion of Class B
shares................. 22,413,082 22 (22,413,082) (22) -- -- -- --
Issuance of common stock
for compensation....... 515,420 1 -- -- 11,941 -- (3,308) --
Issuance of common stock
for matching
contribution to 401(k)
plan................... 54,546 -- -- -- 627 -- -- --
Amortization of stock
based compensation..... -- -- -- -- -- -- 576 --
Pooled companies'
earnings included in
both current and
previous years......... -- -- -- -- -- -- -- (3,182)
Pooled company's
earnings, excluded from
statement of
operations............. -- -- -- -- -- -- -- 873
Foreign currency
translation
adjustment............. -- -- -- -- -- (2,343) -- --
Dividends declared by
pooled companies....... -- -- -- -- -- -- -- (22,963)
Net income............... -- -- -- -- -- -- -- 34,852
---------- --- ----------- ---- -------- ------- ------- --------
Balance, December 31,
1998................... 83,042,297 $83 4,762,000 $ 5 $298,865 $(3,627) $(2,732) $(13,039)
========== === =========== ==== ======== ======= ======= ========
TOTAL
STOCKHOLDERS'
EQUITY
-------------
Balance, January 1,
1998................... $204,423
Issuance of common stock
in connection with the
exercise of options.... 1,495
Tax benefit of stock
options exercised...... 407
Capital contribution from
Principal Stockholder
re: CEO bonus and
other.................. 1,250
Issuance of common stock
in connection with
acquisitions........... 5,546
Issuance of compensatory
options................ 295
Issuance of common stock
by pooled companies.... 49,734
Repurchase and
cancellation of common
stock.................. (669)
Conversion of Class B
shares................. --
Issuance of common stock
for compensation....... 8,634
Issuance of common stock
for matching
contribution to 401(k)
plan................... 627
Amortization of stock
based compensation..... 576
Pooled companies'
earnings included in
both current and
previous years......... (3,182)
Pooled company's
earnings, excluded from
statement of
operations............. 873
Foreign currency
translation
adjustment............. (2,343)
Dividends declared by
pooled companies....... (22,963)
Net income............... 34,852
--------
Balance, December 31,
1998................... $279,555
========
See accompanying notes to consolidated financial statements.
F-8
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
CLASS B
COMMON STOCK, COMMON STOCK,
$.001 PAR VALUE $.001 PAR VALUE ADDITIONAL OTHER UNAMORTIZED
--------------------- ---------------------- PAID-IN COMPREHENSIVE STOCK-BASED
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) COMPENSATION DEFICIT
---------- -------- ----------- -------- ---------- -------------- ------------- --------
Balance, December 31,
1998................... 83,042,297 $83 4,762,000 $ 5 $298,865 $(3,627) $(2,732) $(13,039)
Issuance of common stock
in connection with the
exercise of options.... 2,230,990 2 -- -- 19,044 -- -- --
Tax benefit of stock
options exercised...... -- -- -- -- 11,869 -- -- --
Issuance of common stock
in connection with
acquisitions........... 928,619 1 -- -- 24,275 -- -- --
Issuance of compensatory
options................ -- -- -- -- 680 -- -- --
Issuance of common stock
for matching
contribution to 401(k)
plan................... 42,954 -- -- -- 902 -- -- --
Forfeiture of stock-based
compensation due to
departure of employees
of pooled entity....... -- -- -- -- (1,033) -- 1,033 --
Issuance of common stock
for employee stay
bonuses................ 462,772 1 -- -- 7,048 -- -- --
Issuance of common stock
for purchase of
minority interest...... 38,862 -- -- -- 1,210 -- -- --
Tax benefit in connection
with taxable pooling of
interests.............. -- -- -- -- 6,400 -- -- --
Public offering of shares
by pooled entity....... 514,959 -- -- -- 8,155 -- -- --
Accelerated vesting of
stock based
compensation........... -- -- -- -- -- -- 1,699 --
Pooled companies' losses
included in both
current and previous
years.................. -- -- -- -- -- -- -- 1,941
Foreign currency
translation
adjustment............. -- -- -- -- -- (1,294) -- --
Dividends declared by
pooled companies....... -- -- -- -- -- -- -- (25,668)
Net loss................. -- -- -- -- -- -- -- (788)
---------- --- ----------- --- -------- ------- ------- --------
Balance, December 31,
1999................... 87,261,453 $87 4,762,000 $ 5 $377,415 $(4,921) $ -- $(37,554)
========== === =========== === ======== ======= ======= ========
TOTAL
STOCKHOLDERS'
EQUITY
-------------
Balance, December 31,
1998................... $279,555
Issuance of common stock
in connection with the
exercise of options.... 19,046
Tax benefit of stock
options exercised...... 11,869
Issuance of common stock
in connection with
acquisitions........... 24,276
Issuance of compensatory
options................ 680
Issuance of common stock
for matching
contribution to 401(k)
plan................... 902
Forfeiture of stock-based
compensation due to
departure of employees
of pooled entity....... --
Issuance of common stock
for employee stay
bonuses................ 7,049
Issuance of common stock
for purchase of
minority interest...... 1,210
Tax benefit in connection
with taxable pooling of
interests.............. 6,400
Public offering of shares
by pooled entity....... 8,155
Accelerated vesting of
stock based
compensation........... 1,699
Pooled companies' losses
included in both
current and previous
years.................. 1,941
Foreign currency
translation
adjustment............. (1,294)
Dividends declared by
pooled companies....... (25,668)
Net loss................. (788)
--------
Balance, December 31,
1999................... $335,032
========
See accompanying notes to consolidated financial statements.
F-9
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
CLASS B
COMMON STOCK, COMMON STOCK,
$.001 PAR VALUE $.001 PAR VALUE ADDITIONAL OTHER
--------------------- ---------------------- PAID-IN COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) DEFICIT
---------- -------- ----------- -------- ---------- -------------- --------
Balance, December 31, 1999....... 87,261,453 $87 4,762,000 $ 5 $ 377,415 $ (4,921) $(37,554)
Issuance of common stock in
connection with public offering
completed on Feb. 2, 2000...... 8,000,000 8 -- -- 594,230 -- --
Issuance of common stock in
connection with the exercise of
options........................ 2,130,956 2 -- -- 33,309 -- --
Tax benefit of stock options
exercised...................... -- -- -- -- 17,436 -- --
Issuance of common stock in
connection with acquisitions... 1,392,478 2 -- -- 94,164 -- --
Issuance of common stock for
matching contribution to 401(k)
plan........................... 14,399 -- -- -- 1,023 -- --
Issuance of common stock for
employee stay bonuses.......... 346,302 -- -- -- 10,233 -- --
Other issuances of common stock
of pooled companies............ 65,140 -- -- -- 2,221 -- --
Pooled companies' earnings
included in both current and
previous years................. -- -- -- -- -- -- (285)
Foreign currency translation
adjustment..................... -- -- -- -- -- (59,003) --
Dividends declared by pooled
companies...................... -- -- -- -- -- -- (27,355)
Net income....................... -- -- -- -- -- -- 56,859
---------- --- ----------- --- ---------- -------- --------
Balance, December 31, 2000....... 99,210,728 $99 4,762,000 $ 5 $1,130,031 $(63,924) $ (8,335)
========== === =========== === ========== ======== ========
TOTAL
STOCKHOLDERS'
EQUITY
-------------
Balance, December 31, 1999....... $ 335,032
Issuance of common stock in
connection with public offering
completed on Feb. 2, 2000...... 594,238
Issuance of common stock in
connection with the exercise of
options........................ 33,311
Tax benefit of stock options
exercised...................... 17,436
Issuance of common stock in
connection with acquisitions... 94,166
Issuance of common stock for
matching contribution to 401(k)
plan........................... 1,023
Issuance of common stock for
employee stay bonuses.......... 10,233
Other issuances of common stock
of pooled companies............ 2,221
Pooled companies' earnings
included in both current and
previous years................. (285)
Foreign currency translation
adjustment..................... (59,003)
Dividends declared by pooled
companies...................... (27,355)
Net income....................... 56,859
----------
Balance, December 31, 2000....... $1,057,876
==========
See accompanying notes to consolidated financial statements.
F-10
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------------
2000 1999 1998
--------- ----------- -----------
Cash flows from operating activities:
Net income (loss)......................................... $ 56,859 $ (788) $ 34,852
--------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 62,618 48,123 38,803
Provision for doubtful accounts......................... 25,990 14,735 6,734
Tax benefit of stock options exercised.................. 17,436 11,869 407
Net (gain) loss on disposal and write-off of fixed
assets................................................ (539) 12,118 2,907
Common stock issued for matching contribution to 401(k)
plan and employee stay bonuses........................ 11,256 7,951 9,261
Provision (benefit) for deferred income taxes........... 17,669 (4,123) (1,605)
Waived CEO bonus........................................ -- -- 1,250
Minority interests and other............................ -- 406 130
Effect of pooled companies' (earnings) losses included
in more than one period............................... (285) 1,941 (3,182)
Effect of pooled company earnings excluded from the
period presented...................................... -- -- 873
Changes in assets and liabilities, net of effects from
purchases of businesses:
Increase in accounts receivable, net.................... (49,733) (91,568) (24,815)
Increase in work-in-process, prepaid and other.......... (43,625) (16,327) (15,913)
Increase in deferred commissions and fees............... 78,651 57,162 7,866
Increase in accounts payable, accrued expenses and other
current liabilities................................... 11,094 62,712 15,892
--------- ----------- -----------
Total adjustments..................................... 130,532 104,999 38,608
--------- ----------- -----------
Net cash provided by operating activities............. 187,391 104,211 73,460
--------- ----------- -----------
Cash flows from investing activities:
Capital expenditures...................................... (78,891) (44,112) (36,217)
Payments for purchases of businesses, net of cash
acquired................................................ (112,595) (28,641) (47,714)
Purchases of short and long term investments.............. -- (150) (38,281)
Sales of short term investments........................... -- 101 39,047
Proceeds from sale of assets.............................. -- 9,749 648
Other..................................................... -- (290) (3,192)
--------- ----------- -----------
Net cash used in investing activities................. (191,486) (63,343) (85,709)
--------- ----------- -----------
Cash flows from financing activities:
Payments on capitalized leases............................ (4,284) (3,618) (4,009)
Borrowings under line of credit and proceeds from issuance
of long-term debt....................................... 164,888 1,308,820 1,066,183
Repayments under line of credit and principal payments on
long-term debt.......................................... (252,344) (1,361,846) (1,056,318)
Net proceeds from stock issuance.......................... 595,748 8,155 49,065
Cash received from the exercise of employee stock
options................................................. 33,311 19,046 1,495
Redemption of minority interest........................... -- (2,000) --
Dividends paid by pooled companies........................ (27,355) (24,838) (24,393)
--------- ----------- -----------
Net cash provided by (used in) financing activities... 509,964 (56,281) 32,023
--------- ----------- -----------
Effect of exchange rate changes on cash and cash
equivalents............................................... (1,501) (754) (158)
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 504,368 (16,167) 19,616
Cash and cash equivalents, beginning of year................ 67,733 83,900 64,284
--------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 572,101 $ 67,733 $ 83,900
========= =========== ===========
See accompanying notes to consolidated financial statements.
F-11
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
TMP Worldwide Inc. ("TMP" or the "Company"), founded in 1967, is a global
provider of career solutions. The Company, through its flagship Interactive
product, Monster-Registered Trademark-.com (www.monster.com), is the on-line
recruitment leader and a provider of on-line moving services, through the
Company's website, Monstermoving-TM-.com (www.monstermoving.com). TMP is also
the world's largest recruitment advertising agency network through its
Advertising & Communications division, one of the world's largest selection and
temporary contracting agencies through its eResourcing division, a premier
Executive Search firm, and the world's largest yellow pages advertising agency
through its Directional Marketing division.
During the period of January 1, 2000 through December 31, 2000, the Company
consummated mergers with the following companies (the "2000 Mergers") in
transactions that provided for the exchange of all of the outstanding stock of
each entity for a total of 10,721,054 shares of TMP common stock:
NUMBER OF
ENTITY BUSINESS SEGMENT ACQUISITION DATE SHARES ISSUED
- ------ ---------------------------- ---------------- -------------
HW Group PLC................... eResourcing February 16,
2000 715,769
Microsurf, Inc................. Monstermoving.com February 16,
2000 684,462
Burlington Wells, Inc.......... eResourcing February 29,
2000 52,190
Illsley Bourbonnais............ Executive Search March 1, 2000 246,702
System One Services, Inc....... eResourcing April 3, 2000 1,022,257
GTR Advertising................ Advertising & Communications April 4, 2000 54,041
Virtual Relocation.com, Inc.... Monstermoving.com May 9, 2000 947,916
Business Technologies Ltd...... Monster.com May 17, 2000 205,703
Simpatix, Inc.................. Monster.com May 31, 2000 155,480
Rollo Associates, Inc.......... Executive Search May 31, 2000 110,860
Web Technology Partners, Monster.com
Inc.......................... May 31, 2000 623,892
Rich, Gardner & Associates, Advertising & Communications
Ltd.......................... August 31, 2000 43,535
Stratascape, Inc............... eResourcing August 31, 2000 311,978
Cashback2.com, Inc............. Monstermoving.com November 1, 2000 90,750
Jobtrak Corporation............ Monster.com November 7, 2000 3,333,060
SPEC Group Holdings, Inc....... eResourcing December 6, 2000 357,782
People.com Consultants, Inc.... eResourcing December 8, 2000 1,764,677
The transactions for the above acquired entities were accounted for as
poolings of interests. As a result, the financial position, and statements of
income (loss), comprehensive income (loss) and cash flows are presented as if
the combining companies had been consolidated for all periods presented. In
addition, the consolidated statements of stockholders' equity reflect TMP's
accounts as if the additional common stock issued in connection with each of the
aforementioned combinations had been issued for all periods when each of the
related companies had issued shares and for the amounts that reflect the
exchange ratios of the 2000 Mergers. The consolidated balance sheets of the
Company as of December 31, 2000 and 1999 have been combined with those of the
2000 Mergers, all as of December 31, 2000 and 1999, except for the following:
Illsley Bourbonnais, for which the balance sheet as of January 31, 2000 has been
combined with that of TMP as of December 31, 1999 and Business
Technologies Ltd. ("BTL"), for which the balance sheet as of July 31, 1999 is
combined with that of TMP as of December 31, 1999.
F-12
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
The consolidated statements of income (loss) combine the results of TMP for
each year in the three year period ended December 31, 2000 with those of the
2000 Mergers all for the same periods except for the following: Illsley
Bourbonnais, for which the statements of income (loss) for the years ended
January 31, 2000 and 1999 are included in the statements of income (loss) for
the years ended December 31, 1999 and 1998, respectively; BTL, for which the
statements of income (loss) for the years ended July 31, 1999 and 1998 are
included in the statements of income (loss) for the years ended December 31,
1999 and 1998, respectively; and HW Group PLC ("HW"), for which the statement of
income (loss) for the year ended March 31, 1999 is included in the statement of
income (loss) for the year ended December 31, 1998.
The results of Illsley Bourbonnais for the month ended January 31, 2000 are
included in both the consolidated statements of income (loss) for the years
ended December 31, 2000 and 1999. Therefore, the following amounts have been
included in both periods: (a) commissions and fees of $1.0 million and (b) net
income of $285 thousand, with no impact on net income (loss) per share.
Additionally, due to immateriality, the results of BTL for the period August 1,
1999 through December 31, 1999 of $314 thousand, in commissions and fees and
$50 thousand, in net income have not been included in the consolidated statement
of income (loss) for the year ended December 31, 1999 because the results of BTL
for the fiscal year ended July 31, 1999 were combined with our consolidated
statement of income (loss) for the year ended December 31, 1999. In addition,
the results of HW, for the three months ended March 31, 1999 are included in the
consolidated statements of income (loss) in both years ended December 31, 1999
and 1998, and the effects on both periods on (a) commissions and fees was
$11.1 million, (b) net income was $1.9 million and (c) diluted earnings per
share was $0.02.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Investments in unconsolidated affiliates are accounted for using the equity
method when the Company owns at least 20% but no more than 50% of such
affiliates, unless in the case of a 50% ownership where there is managerial
control by the Company. Under the equity method, the Company records its
proportionate share of profits and losses based on its percentage interest in
these affiliates.
NATURE OF BUSINESS AND CREDIT RISK
The Company operates in five business segments: Interactive (including
Monster.com and Monstermoving.com), Advertising & Communications, eResourcing,
Executive Search and Directional Marketing. The Company's commissions and fees
are earned from the following activities: (a) job postings placed on its career
website, Monster.com, (b) resume and other database access, (c) executive
placement services, (d) moving related advertisements on its website,
Monstermoving.com, (e) mid-level employee selection and temporary contracting
services, (f) selling and placing recruitment advertising and related services,
(g) resume screening services and (h) selling and placing yellow page
advertising and related services. These services are provided to a large number
of customers in many different industries. The
F-13
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company operates principally throughout North America, the United Kingdom,
Continental Europe and the Asia/Pacific Region (primarily Australia and New
Zealand).
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The Company
performs continuing credit evaluations of its customers and does not require
collateral. For the most part, the Company has not experienced significant
losses related to receivables from individual customers or groups of customers
in any particular industry or geographic area. In addition, the Company invests
in short term commercial paper rated P1 by Moody's or A1 by Standard & Poors or
better.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable and accounts payable approximate fair
value because of the immediate or short-term maturity of these financial
instruments.
The carrying amount reported for long-term debt approximates fair value
because, in general, the interest on the underlying instruments fluctuates with
market rates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of commissions and fees and expenses during
the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents, which consist primarily of commercial paper and
time deposits, are stated at cost, which approximates fair value. For financial
statement presentation purposes, the Company considers all highly liquid
investments having an original maturity of three months or less as cash
equivalents. At December 31, 2000 and 1999, outstanding checks in excess of cash
balances were included in accounts payable on the balance sheet.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated useful
lives:
YEARS
--------
Buildings and improvements.................................. 5-32
Furniture and equipment..................................... 3-10
Capitalized software costs.................................. 3-5
Computer equipment.......................................... 3-7
Transportation equipment.................................... 3-18
F-14
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leasehold improvements are amortized over their estimated useful lives or
the lives of the related leases, whichever is shorter.
INTANGIBLES
Intangibles represent acquisition costs in excess of the fair value of net
tangible assets of businesses purchased and consist primarily of the value of
ongoing client relationships, trademarks and goodwill. These costs are being
amortized over periods ranging from two to thirty years on a straight-line
basis.
LONG-LIVED ASSETS
Long-lived assets, such as ongoing client relationships, goodwill and
property and equipment, are evaluated for impairment when events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable through the estimated undiscounted future cash flows resulting from
the use of these assets. When any such impairment exists, the related assets
will be written down to fair value.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The financial position and results of operations of the Company's foreign
subsidiaries are determined using local currency as the functional currency.
Assets and liabilities of these subsidiaries are translated at the exchange rate
in effect at each year-end. Income statement accounts are translated at the
average rate of exchange prevailing during the year. Translation adjustments
arising from the use of differing exchange rates from period to period are
included in the other comprehensive loss account in stockholders' equity. Gains
and losses resulting from foreign currency transactions are included in other
income (expense).
COMMISSIONS AND FEES RECOGNITION AND WORK-IN-PROCESS
The Company earns fees for the placement of job postings on the Internet,
primarily its careers Web site, Monster.com. Such website related fees are
recognized over the length of the underlying agreement, typically one to six
months. In addition, it earns fees for resume and other database access. The
amounts not recognized are reported on the balance sheet as deferred commissions
and fees. The Company also derives commissions and fees for job advertisements
placed in newspapers and other media, plus associated fees for related services.
Commissions and fees are generally recognized upon placement date for newspapers
and other media. For permanent placement services provided, a fee equal to
between 20% and 30% of a candidate's first year estimated annual cash
compensation is billed in equal installments over three consecutive months (the
average length of time needed to successfully complete an assignment). For
eResourcing's temporary contracting business, commission and fees are recorded
when the contracted services are performed.
F-15
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The amounts charged to clients for temporary contracting services are
reported in gross billings and commission and fees after deducting the costs of
the temporary contractors. The details for such amounts for both traditional and
interactive operations are (in thousands):
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Temporary contracting Revenue................. $697,126 $576,189 $458,937
Temporary contracting Costs................... 535,916 462,535 369,179
-------- -------- --------
Temporary contracting Billings/Commissions and
fees........................................ $161,210 $113,654 $ 89,758
======== ======== ========
The Company also earns fees for Executive Search services and these are
recognized as clients are billed. Billings begin with the client's acceptance of
a contract. A retainer equal to 33 1/3% of a candidate's first year estimated
annual cash compensation is billed in equal installments over three consecutive
months (at which time, in general, the retainer has been substantially earned).
A final invoice is issued in the event that the candidate's actual compensation
package exceeds the original estimate. The company also derives commissions and
fees from the placement of advertisements in telephone directories (yellow page
advertising). Commissions and fees for yellow pages are recognized on the
publication's closing dates.
The Company's quarterly commissions and fees are affected by the cyclical
nature of its operating segments. The Company's quarterly commissions and fees
for our Advertising & Communications Division are typically highest in the
second quarter and lowest in the fourth quarter; however, the cyclicality in the
economy and the Company's clients' employment needs have an overriding impact on
the Company's quarterly results in Advertising & Communications. The timing of
yellow page directory closings is currently concentrated in the third quarter.
However, yellow page publishers may change the timing of directory publications
which may have an effect on the Company's quarterly results. The Company's
Directional Marketing results are also affected by yellow page publisher
incentive commissions earned for the year, which are typically reported in the
fourth quarter. Amounts reported in the three months ended December 31, 2000,
1999 and 1998 for year-end incentive commissions were $1.5 million,
$0.1 million and $0.9 million, respectively.
Direct operating costs incurred that relate to future commissions and fees,
principally for yellow page advertisements, are deferred (recorded as
work-in-process in the accompanying consolidated balance sheets) and are
subsequently charged to expense when the directories are closed for publication
and the related commission is recognized as income.
INCOME TAXES
The provision for income taxes is computed on the pretax income (loss) based
on the current tax law. Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year-end based on
enacted tax laws and statutory tax rates.
F-16
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for its stock option awards under the intrinsic value
based method of accounting prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value
based method, compensation cost is the excess, if any, of the quoted market
price of the stock at grant date or other measurement date over the amount an
employee must pay to acquire the stock. The Company makes pro forma disclosures
of net income and earnings per share as if the fair value based method of
accounting had been applied as required by SFAS No. 123, "Accounting for
Stock-Based Compensation."
EARNINGS PER SHARE
Basic earnings per share includes no dilution and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect, in
periods in which they have a dilutive effect, the effect of common shares
issuable upon exercise of stock options and warrants.
A reconciliation of shares used in calculating basic and diluted earnings
per common and Class B common share follows (in thousands):
December 31, 2000:
Basic....................................................... 101,413
Effect of assumed conversion of stock options............... 6,490*
-------
Diluted..................................................... 107,903
=======
December 31, 1999:
Basic....................................................... 90,152
Effect of assumed conversion of stock options............... *
-------
Diluted..................................................... 90,152
=======
December 31, 1998:
Basic....................................................... 87,449
Effect of assumed conversion of stock options............... 1,856
-------
Diluted..................................................... 89,305
=======
- ------------------------
* Certain stock options were excluded from the computation of earnings per
share due to their antidilutive effect. The weighted average number of such
options is approximately 267 and 4,307 for 2000 and 1999, respectively.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
The Company's only item of other comprehensive income (loss) is foreign currency
translation adjustments, which relate to investments which are permanent
F-17
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in nature. To the extent that such amounts related to investments which are
permanent in nature, no adjustments for income taxes is made.
CAPITALIZED SOFTWARE COSTS
Capitalized software costs consist of costs to purchase and develop
software. The Company capitalizes certain incurred software development costs in
accordance with, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). Costs
incurred during the application-development stage for software bought and
further customized by outside vendors for the Company's use and software
developed by a vendor for the Company's proprietary use have been capitalized.
Costs incurred for the Company's own personnel who are directly associated with
software development are capitalized. Capitalized software costs are being
amortized over periods of 3 to 5 years.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which had an initial adoption
date by the Company of January 1, 2000. During the second quarter of 1999, the
FASB postponed the adoption date of SFAS No. 133 until January 1, 2001. The FASB
further amended SFAS No. 133 in June 2000. SFAS No. 133 requires that all
derivative financial instruments be recorded on the consolidated balance sheets
at their fair value. Changes in the fair value of derivatives will be recorded
each period in earnings or other comprehensive earnings, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Gains and losses on derivative instruments reported in
other comprehensive earnings will be reclassified as earnings in the periods in
which earnings are affected by the hedged item. The adoption of this statement
did not have a significant impact on the Company's results of operations,
financial position or cash flows.
In 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101 "Revenue Recognition in Financial Statements," which
became effective in the fourth quarter of 2000. The adoption of SAB No. 101 did
not have a material effect on the Company's financial statements.
In 2000, the Emerging Issues Task Force ("EITF") of the FASB issued EITF
Issue No. 00-2, "Website Development Costs," which established guidelines for
accounting for website development costs and became effective for quarters
beginning after June 30, 2000. The adoption of EITF Issue No. 00-2 did not have
a significant effect on the Company's financial statements.
F-18
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 3--ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
DECEMBER 31,
---------------------
2000 1999
---------- --------
Trade................................................. $578,511 $502,736
Earned commissions(a)................................. 11,474 11,422
-------- --------
589,985 514,158
Less: Allowance for doubtful accounts................. 38,739 26,270
-------- --------
Accounts receivable, net............................ $551,246 $487,888
======== ========
- ------------------------
(a) Earned commissions receivable represent commissions on advertisements
that have not been published, and relate to yellow page advertisements
only. Upon publication of the related yellow page directories, the earned
commissions plus the related advertising cost at December 31, 2000 and
1999 are recorded as accounts receivable of $63,143 and $66,648,
respectively, and the related advertising costs are recorded as accounts
payable of $51,669 and $55,226, respectively.
NOTE 4--PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
DECEMBER 31,
---------------------
2000 1999
---------- --------
Capitalized software costs............................. $ 44,005 $27,240
Buildings and improvements............................. 2,193 1,581
Furniture and equipment................................ 123,659 82,059
Leasehold improvements................................. 44,184 24,707
Transportation equipment............................... 4,529 6,182
Computer equipment..................................... 40,240 39,934
-------- -------
258,810 181,703
Less: Accumulated depreciation and amortization........ 115,060 96,837
-------- -------
Property and equipment, net.......................... $143,750 $84,866
======== =======
Property and equipment includes equipment under capital leases at
December 31, 2000 and 1999 with a cost of $17,294 and $9,074, respectively, and
accumulated amortization of $8,860 and $6,022, respectively.
F-19
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS
ACQUISITIONS ACCOUNTED FOR USING THE POOLING OF INTERESTS METHOD
During the period of January 1, 2000 through December 31, 2000, the Company
completed the following mergers (the "2000 Mergers") which provided for the
exchange of all of the outstanding stock of each entity for shares of TMP stock
and are accounted for as poolings of interests (See Note 1):
NUMBER OF TMP
ENTITY BUSINESS SEGMENT GEOGRAPHIC REGION ACQUISITION DATE SHARES ISSUED
- ------ ------------------- ------------------- ----------------- -------------
HW Group PLC......................... eResourcing United Kingdom February 16, 2000 715,769
Microsurf, Inc....................... Monstermoving.com North America February 16, 2000 684,462
Burlington Wells, Inc................ eResourcing North America February 29, 2000 52,190
Illsley Bourbonnais.................. Executive Search North America March 1, 2000 246,702
System One Services, Inc............. eResourcing North America April 3, 2000 1,022,257
GTR Advertising...................... Advertising & North America April 4, 2000 54,041
Communications
Virtual Relocation.com, Inc.......... Monstermoving.com North America May 9, 2000 947,916
Business Technologies Ltd............ Monster.com United Kingdom May 17, 2000 205,703
Simpatix, Inc........................ Monster.com North America May 31, 2000 155,480
Rollo Associates, Inc................ Executive Search North America May 31, 2000 110,860
Web Technology Partners, Inc......... Monster.com North America May 31, 2000 623,892
Rich, Gardner & Associates, Ltd...... Advertising & North America August 31, 2000 43,535
Communications
Stratascape, Inc..................... eResourcing North America August 31, 2000 311,978
Cashback2.com, Inc................... Monstermoving.com North America November 1, 2000 90,750
Jobtrak Corporation.................. Monster.com North America November 7, 2000 3,333,060
SPEC Group Holding, Inc.............. eResourcing North America December 6, 2000 357,782
People.com, Consultants, Inc......... eResourcing North America and December 8, 2000 1,764,677
Asia-Pacific
F-20
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
The effects of the retroactive restatement on the Company's 1999 and 1998
financial statements for the 2000 Mergers accounted for as pooling of interests
are summarized below:
YEAR ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
Commissions and fees:
TMP, as previously reported on Form 10-K for
the year ended December 31, 1999.......................... $765,805 $657,486
HW Group PLC.............................................. 41,708 46,774
Microsurf, Inc............................................ 5,040 1,543
Burlington Wells, Inc..................................... 2,705 2,101
Illsley Bourbonnais....................................... 7,997 5,568
System One Services, Inc.................................. 33,573 23,212
GTR Advertising........................................... 2,961 2,943
Virtual Relocation.com, Inc............................... 1,353 168
Business Technologies Ltd................................. 786 352
Simpatix, Inc............................................. 37 (5)
Rollo Associates, Inc..................................... 3,597 2,599
Web Technology Partners, Inc.............................. 3,645 1,776
Rich, Gardner & Associates, Ltd........................... 2,710 2,619
Stratascape, Inc.......................................... 2,583 987
Cashback2.com, Inc........................................ 17 --
Jobtrak Corporation....................................... 13,800 10,866
SPEC Group Holdings, Inc.................................. 13,076 9,628
People.com Consultants, Inc............................... 7,562 3,221
-------- --------
TMP, as restated............................................ $908,955 $771,838
======== ========
F-21
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
YEAR ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
Net income (loss) applicable to common and Class B common
shareholders:
TMP, as previously reported on Form 10-K for
the year ended December 31, 1999.......................... $ (7,405) $ 20,542
HW Group PLC.............................................. (3,664) 4,458
Microsurf, Inc............................................ 509 283
Burlington Wells, Inc..................................... 336 309
Illsley Bourbonnais....................................... 4,313 3,192
System One Services, Inc.................................. (82) 168
GTR Advertising........................................... 123 229
Virtual Relocation.com, Inc............................... (2,922) (480)
Business Technologies Ltd................................. 111 65
Simpatix, Inc............................................. (552) (473)
Rollo Associates, Inc..................................... 301 679
Web Technology Partners, Inc.............................. (122) 71
Rich, Gardner & Associates, Ltd........................... 662 595
Stratascape, Inc.......................................... 1,380 303
Cashback2.com, Inc........................................ (74) --
Jobtrak Corporation....................................... 2,872 2,542
SPEC Group Holdings, Inc.................................. (133) 649
People.com Consultants, Inc............................... 3,559 1,720
-------- --------
TMP, as restated............................................ $ (788) $ 34,852
======== ========
Net income (loss) per common and Class B common
shareholders:
Basic:
TMP, as previously reported on Form 10-K for
the year ended December 31, 1999.......................... $ (0.09) $ 0.27
TMP, as restated:........................................... $ (0.01) $ 0.40
Diluted:
TMP, as previously reported on Form 10-K for
the year ended December 31, 1999.......................... $ (0.09) $ 0.26
TMP, as restated:........................................... $ (0.01) $ 0.39
MERGER & INTEGRATION COSTS INCURRED WITH POOLING OF INTERESTS TRANSACTIONS
In connection with pooling of interests transactions, the Company expensed
merger & integration costs of $64,604 for the twelve months ended December 31,
2000. Of this amount $31,910 is for merger costs and $32,694 is for integration
costs.
The merger costs of $31,910 for the year ended December 31, 2000 consist of
(1) $8,652 of non-cash employee stay bonuses, amortization which relates to
$9,761 recorded as prepaid compensation and a corresponding long-term liability,
being expensed over the course of a year from the date of grant for TMP shares
set aside for key personnel of acquired companies who must remain employees of
the Company for a full year in order to earn such shares, (2) $536 paid in cash
to key personnel of pooled companies as employee stay bonuses, (3) $15,865 of
transaction related costs, including legal, accounting, printing and
F-22
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
advisory fees and the costs incurred for the subsequent registration of shares
issued in the acquisitions, (4) $2,568 in severance costs for managers and staff
of pooled companies, and (5) $4,289 for payments made in connection with the
repayment of debt of a pooled company pursuant to change in control provisions
of such debt. The $32,694 of integration costs consist of: (a) $6,229 for
assumed lease obligations of closed facilities, net of $2.1 million of
obligations subsequently cancelled, (b) $26,814 for consolidation of acquired
facilities and associated write-offs, (c) $400 for severance, relocation and
other employee costs, partially offset by a $749 recovery of a reserve for
receivables. See schedule in Accrued Integration and Restructuring Costs below.
The Company expensed merger and integration costs of $63,054 for the year
ended December 31, 1999. Of this amount, $27,442 is for merger costs and $35,612
is for integration costs. The $27,442 of merger costs consists of (1) $5,944 of
non-cash employee stay bonuses, which include (a) $4,826 for the amortization of
$16,437 recorded as prepaid compensation and a corresponding long-term
liability, being expensed over the course of a year from the date of grant for
TMP shares set aside for key personnel of acquired companies who must remain
employees of the Company for a full year in order to earn such shares, (b) $351
which is related to an option grant to employees of a pooled company and which
represents the difference between the option price and the stock price on the
day the options were granted and (c) $767 for TMP shares given to key personnel
of a pooled company as employee stay bonuses, (2) $2,466 paid in cash to key
personnel of pooled companies as employee stay bonuses, (3) $12,606 of
transaction related costs, including legal, accounting, printing and advisory
fees and the costs incurred for the subsequent registration of shares issued in
the acquisitions and (4) $6,426 in severance costs for managers of pooled
companies. The $35,612 of integration costs consist of: (a) $9,221 for assumed
lease obligations of closed facilities, (b) $20,392 for consolidation of
acquired facilities and associated write-offs, (c) $3,172 for severance,
relocation and other employee costs and (d) a $2,827 provision for uncollectible
accounts receivable. See schedule in Accrued Integration and Restructuring Costs
below.
In connection with the pooling of interests transactions completed during
1998, the Company expensed merger related costs of $22,412. The $22,412 of
merger costs for the year ended December 31, 1998 consists of (1) $11,934 of
non-cash employee stay bonuses, which included (a) $3,622 for the amortization
of $5,986, recorded as prepaid compensation and a corresponding long-term
liability, being expensed over the eighteen months from April 1, 1998 to
September 30, 1999 for TMP shares set aside for key personnel of pooled
companies who must remain employees of the Company for a full year in order to
earn such shares and (b) $8,312 for TMP shares to key personnel of pooled
companies as employee stay bonuses and (2) $1,461 of stay bonuses paid as cash
to key personnel of the pooled companies and (3) $9,017 of transaction related
costs, including legal, accounting and advisory fees and the costs incurred for
the subsequent registration of shares issued in the acquisitions.
ACQUISITIONS ACCOUNTED FOR USING THE PURCHASE METHOD
In addition to the pooling of interests transactions discussed above, the
Company has acquired 55 businesses between January 1, 1998 and December 31, 2000
which have been accounted for under the purchase method of accounting.
Accordingly, operations of these businesses have been included in the
consolidated financial statements from their acquisition dates.
F-23
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
The summarized unaudited pro forma results of operations set forth below for
the years ended December 31, 2000 and 1999 assume the acquisitions in 2000 and
1999 occurred as of the beginning of the year of acquisition and the beginning
of the preceding year.
YEAR ENDED
DECEMBER 31,
-----------------------
2000 1999
---------- ----------
Total commissions and fees.................................. $1,346,307 $1,029,629
Net income (loss) applicable to common and Class B common
stockholders.............................................. 54,870 180
Net income (loss) per common and Class B common share:
Basic..................................................... $ 0.54 $ --
Diluted................................................... $ 0.50 $ --
The unaudited pro forma results of operations are not necessarily indicative
of what actually would have occurred if the acquisitions had been completed at
the beginning of each of the years presented, nor are the results of operations
necessarily indicative of the results that will be attained in the future.
ACCRUED INTEGRATION AND RESTRUCTURING COSTS
Pursuant to the conclusions reached by the Emerging Issues Task Force
("EITF") of the FASB in EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)," and No. 95-3, "Recognition of
Liabilities in Connection with a Purchase Business Combination," in connection
with the acquisitions and mergers made in 1997, 1998, 1999 and 2000 the Company
formulated plans to integrate the operations of such companies. Such plans
involve the closure of certain offices of the acquired and merged companies and
the termination of certain management and employees. The objectives of the plans
are to eliminate redundant facilities and personnel, and to create a single
brand in the related markets in which the Company operates.
In connection therewith the Company expensed $32,694 and $35,612 in 2000 and
1999, respectively, relating to integration activities which are included in
merger and integration expenses. In addition, in 1999 LAI Worldwide, Inc.
("LAI") formulated plans to close its London England and Hong Kong offices.
F-24
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
In connection with these office closings, LAI charged earnings for the year
ended December 31, 1999 and 1998 for $2,789 and $3,543, respectively. These
costs and liabilities include:
ADDITIONS DEDUCTIONS
----------------------- ------------------------
BALANCE CHARGED APPLIED BALANCE
DECEMBER 31, TO EXPENSED AGAINST DECEMBER 31,
YEAR ENDED DECEMBER 31, 2000 1999 GOODWILL (RECOVERY) RELATED ASSET PAYMENTS 2000
- ---------------------------- ------------- ---------- ---------- ------------- -------- -------------
Assumed lease obligations on
closed facilities........ $ 9,564 $ 1,164 $ 6,229 $ -- $ (4,411) $12,546(a)
Consolidation of acquired
facilities............... 8,715 5,694 26,814 (6,662) (24,216) 10,345(b)
Contracted lease payments
exceeding current market
costs.................... 562 298 -- -- (346) 514(c)
Severance, relocation and
other employee costs..... 954 8,118 400 -- (6,352) 3,120(d)
Provision for uncollectible
receivable............... -- 470 (749) 279 -- --
Pension obligations........ 1,658 -- -- -- (169) 1,489(e)
------- ------- ------- -------- -------- -------
Total...................... $21,453 $15,744 $32,694 $ (6,383) $(35,494) $28,014
======= ======= ======= ======== ======== =======
ADDITIONS DEDUCTIONS
--------------------- ------------------------
BALANCE CHARGED APPLIED BALANCE
DECEMBER 31, TO AGAINST DECEMBER 31,
YEAR ENDED DECEMBER 31, 1999 1998 GOODWILL EXPENSED RELATED ASSET PAYMENTS 1999
- ---------------------------- ------------- ---------- -------- ------------- -------- -------------
Assumed lease obligations on
closed facilities........ $ 9,590 $ 705 $ 9,737 $ (1,872) $ (8,596) $ 9,564
Consolidation of acquired
facilities............... 2,745 1,317 21,427 (6,704) (10,070) 8,715
Contracted lease payments
exceeding current market
costs.................... 707 -- -- -- (145) 562
Severance, relocation and
other employee costs..... 1,952 1,359 4,410 (1,780) (4,987) 954
Provision for uncollectible
receivable............... -- -- 2,827 (2,827) -- --
Pension obligations........ 1,753 -- -- -- (95) 1,658
------- ------- ------- -------- -------- -------
Total...................... $16,747 $ 3,381 $38,401* $(13,183) $(23,893) $21,453
======= ======= ======= ======== ======== =======
* Comprised of $35,612 for integration costs plus $2,789 for LAI
restructuring.
F-25
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
ADDITIONS DEDUCTIONS
--------------------- ------------------------
BALANCE CHARGED APPLIED BALANCE
DECEMBER 31, TO AGAINST DECEMBER 31,
YEAR ENDED DECEMBER 31, 1998 1997 GOODWILL EXPENSED RELATED ASSET PAYMENTS 1998
- ---------------------------- ------------ ---------- -------- ------------- -------- -------------
Assumed lease obligations on
closed facilities........ $ 7,830 $ 767 $ 2,423 $ -- $ (1,430) $ 9,590
Consolidation of acquired
facilities............... 2,521 5,720 -- -- (5,496) 2,745
Contracted lease payments
exceeding current market
costs.................... 783 73 -- -- (149) 707
Severance, relocation and
other employee costs..... 4,017 3,357 1,120 -- (6,542) 1,952
Provision for uncollectible
receivable............... -- -- -- -- -- --
Pension obligations........ 1,650 103 -- -- -- 1,753
------- ------- ------- -------- -------- -------
Total...................... $16,801 $10,020 $ 3,543 $ -- $(13,617) $16,747
======= ======= ======= ======== ======== =======
- ------------------------
(a) Accrued liabilities for surplus property in the amount of $12,546 as of
December 31, 2000 relate to 58 leased office locations of the acquired
companies that were either under-utilized prior to the acquisition date or
have been or will be closed by December 31, 2001 in connection with the
integration plans. The amount is based on the present value of minimum
future lease obligations, net of estimated sublease income.
(b) Other costs associated with the consolidation of existing offices of
acquired companies in the amount of $10,345 as of December 31, 2000 relate
to termination costs of contracts relating to billing systems, external
reporting systems and other contractual arrangements with third parties.
(c) Above market lease costs in the amount of $514 as of December 31, 2000
relate to the present value of contractual lease payments in excess of
current market lease rates.
(d) Estimated severance payments, employee relocation expenses and other
employee costs in the amount of $3,120 as of December 31, 2000 relate to
estimated severance for terminated employees at closed locations, costs
associated with employees transferred to continuing offices and other
related costs. Employee groups affected include sales, service,
administrative and management personnel at duplicate corporate headquarters
and administrative personnel. As of December 31, 2000 the accrual related to
approximately 52 employees including senior management, sales, service and
administrative personnel. During the year ended December 31, 2000, payments
of $6,352 were made to 143 members of senior management and employees for
severance and charged against the reserve.
(e) Pension obligations in the amount of $1,489 were assumed in connection with
the acquisition of Austin Knight Limited.
The Company continues to evaluate and assess the impact of duplicate
responsibilities and office locations. In connection with the finalization of
preliminary plans relating to purchased entities, additions to restructuring
reserves within one year of the date of acquisition are treated as additional
purchase price;
F-26
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
costs incurred resulting from plan revisions made after the first year will be
charged to operations in the period in which they occur.
NOTE 6--INTANGIBLES, NET
Intangibles, net consists of the following:
DECEMBER 31, AMORTIZATION
------------------- PERIOD
2000 1999 (YEARS)
-------- -------- ------------
Client lists, net of accumulated amortization of $8,567 and
$6,455 respectively....................................... $ 14,825 $ 16,207 5 to 30
Covenants not to compete, net of accumulated amortization of
$3,205 and $2,905, respectively........................... 1,491 1,880 2 to 6
Excess of cost of investments over fair value of net assets
acquired, net of accumulated amortization of $43,446 and
$31,704, respectively..................................... 499,110 305,901 5 to 30
Other, net of accumulated amortization of $2,445 and $2,206,
respectively.............................................. 5,662 281 4 to 10
-------- --------
$521,088 $324,269
======== ========
NOTE 7--SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes amounted to the following:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Interest...................................... $ 4,998 $ 17,286 $ 15,313
Income taxes.................................. 21,569 14,360 13,702
In conjunction with business acquisitions, the Company used cash as follows:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Fair value of assets acquired, excluding
cash........................................ $153,098 $ 47,675 $ 61,800
Less: liabilities assumed and created upon
acquisition................................. (40,503) (19,034) (14,086)
-------- -------- --------
Net cash paid................................. $112,595 $ 28,641 $ 47,714
======== ======== ========
Capital lease obligations incurred............ $ 5,113 $ 931 $ 588
======== ======== ========
F-27
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 8--FINANCING AGREEMENT
The Company obtains its primary financing from a financial institution under
a five year financing agreement as amended on November 5, 1998 (the
"Agreement"). Subsequent to the five year term, which expires on November 4,
2003, the Agreement provides for one year extensions subject to bank approval
unless terminated by either party at least 90 days prior to expiration of the
initial term or any renewal term. The Agreement provides for borrowings of up to
$185,000 at the Company's choice of either (1) the higher of (a) prime rate or
(b) Federal Funds rate plus 1/2 of 1% or (2) LIBOR plus a margin determined by
the ratio of the Company's debt to earnings before interest, taxes, depreciation
and amortization (EBITDA) as defined in the Agreement. At December 31, 2000 the
margin equaled 0.50%. Borrowings under the Agreement are based on 90% of
eligible accounts receivable, which are amounts billed under 120 days old and
amounts to be billed as defined in the Agreement. Substantially all of the
assets of the Company are pledged as collateral for borrowings under the
Agreement. The Agreement contains certain covenants which restrict, among other
things, the ability of the Company to borrow, pay dividends, acquire businesses,
guarantee debts of others and lend funds to affiliated companies and contains
criteria on the maintenance of certain financial statement amounts and ratios,
all as defined in the Agreement. The Agreement also provides for a fee on any
unused portion of the commitment based upon a rate determined by the ratio of
the Company's debt to EBITDA. At December 31, 2000, this rate equaled 0.20%. At
December 31, 2000, the outstanding principal under this agreement is
approximately $34.9 million of which $25.8 million is reflected as a reduction
to accounts receivable, $2.1 million is for Canadian operations and
$7.0 million is for letters of credit. In addition, approximately
$150.1 million was unused and accounts receivable is sufficient to allow for the
draw-down of the entire amount. At December 31, 2000, the prime rate, Federal
Funds rate and one month LIBOR were 9.50%, 6.75% and 6.50% respectively.
F-28
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 9--LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
-------------------
2000 1999
-------- --------
Borrowings under financing agreement (see Note 8)........ $ 2,137 $ 58,664
Borrowings under other financing agreements, interest
payable at rates varying from 5.0% to 9.2%, and
collateralized by certain assets....................... 3,709 24,691
Senior subordinated promissory note issued by a pooled
company with interest at 16%, paid upon merger......... -- 18,164
Pooled Company's line of credit collateralized by its
assets, paid upon merger............................... -- 10,738
Acquisition notes payable, non-interest bearing, interest
imputed at rates ranging from 5.0% to 9.5%, due in
varying installments through 2006...................... 19,295 5,252
Capitalized lease obligations, payable with interest from
9% to 15%, in varying installments through 2006 (see
Note 13)............................................... 10,219 9,387
Notes payable, in varying monthly installments maturing
through 2001, with interest at rates ranging from 6.5%
to 9.5%................................................ 899 364
------- --------
36,259 127,260
Less: Current portion.................................... 8,225 21,250
------- --------
$28,034 $106,010
======= ========
Long-term debt matures as follows:
DECEMBER 31,
2000
-------------
2002........................................................ $11,913
2003........................................................ 7,251*
2004........................................................ 4,534
2005........................................................ 3,456
Thereafter.................................................. 880
-------
$28,034
=======
- ------------------------
* Of this amount, $2,137 is subject to one year extensions subsequent to 2003.
See Note 8.
NOTE 10--JOINT VENTURES
During the year ended December 31, 2000, the Company entered into joint
venture agreements with NineMSN and Ecorp to facilitate the expansion of
Monster.com in Australia and key Asia/Pacific regions. Under the terms of the
agreements, Monster.com has become the exclusive job search and career content
provider on NineMSN's Internet portal site and gains access to Ecorp's
pre-established internet markets in
F-29
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 10--JOINT VENTURES (CONTINUED)
Singapore, Hong Kong, India, Thailand and the Philippines. The Company is a 50%
shareholder in the Australian venture and a 65% shareholder in the Asia/Pacific
venture. Both ventures are consolidated to reflect the managerial and operating
control by TMP.
NOTE 11--STOCKHOLDERS' EQUITY
(A) COMMON AND CLASS B COMMON STOCK
Common and Class B common stock have identical rights except that each share
of Class B common stock is entitled to ten votes and is convertible, at any
time, at the option of the stockholder into one share of common stock.
Effective February 29, 2000, a 2-for-1 stock split in the form of a stock
dividend was paid. All share and per share amounts in the accompanying
consolidated financial statements have been restated to give effect to the stock
split.
(B) STOCK OPTIONS
In January 1996, the Company's Board of Directors (the "Board") adopted the
1996 Employee Stock Option Plan (the "Stock Option Plan"), which provides for
the issuance of both incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified
stock options, to purchase an aggregate of up to 1,800,000 shares (amended to
6,000,000 on April 27, 1998) of the common stock of the Company. The Stock
Option Plan permits the granting of options to officers, employees and
consultants of the Company, its subsidiaries and affiliates.
Under the Stock Option Plan, the exercise price of an incentive stock option
must be at least equal to 100% of the fair market value of the common stock on
the date of grant (110% of the fair market value in the case of options granted
to employees who hold more than ten percent of the voting power of the Company's
capital stock on the date of grant). The exercise price of a nonqualified stock
option must be not less than the par value of a share of the common stock on the
date of grant. The term of an incentive or nonqualified stock option is not to
exceed ten years (five years in the case of an incentive stock option granted to
a ten percent holder). The Stock Option Plan provides that the maximum option
grant which may be made to an executive officer in any calendar year is 90,000
shares (amended to 300,000 on June 25, 1997). At December 31, 2000,
approximately 1,475,037 options were exercisable and 1,513,845 options are
available for future grants.
In January 1996, the Company also adopted a stock option plan for
non-employee directors (the "Directors' Plan"), pursuant to which options to
acquire a maximum aggregate of 360,000 shares of common stock may be granted to
non-employee directors. Options granted under the Directors' Plan do not qualify
as incentive stock options within the meaning of Section 422 of the Code. The
Directors' Plan provides for an automatic grant to each of the Company's
non-employee directors of an option to purchase 22,500 shares of common stock on
the date of such director's initial election or appointment to the Board. The
options will have an exercise price of 100% of the fair market value of the
common stock on the date of grant, have a ten-year term and become exercisable
in accordance with a vesting schedule determined by the Board of Directors. At
December 31, 2000, approximately 66,740 options were exercisable and 270,000
options were available for future grants
F-30
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11--STOCKHOLDERS' EQUITY (CONTINUED)
In December 1998, the Company also adopted, subject to stockholder approval,
a long-term incentive plan (the "1999 Plan"), pursuant to which stock options,
stock appreciation rights, restricted stock and other equity based awards may be
granted. Stock options which may be granted may be incentive stock options and
nonqualified stock options within the meaning of the Code. The total number of
shares of the common stock of the Company which may be granted under the 1999
Plan is the sum of 30,000,000 and the number of shares available for new awards
under the Stock Option Plan. At December 31, 2000, approximately 3,378,520
options were exercisable and 13,679,828 options are available for future grants.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) and related Interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The fair
value for these options was estimated at the date of grant using the Black-
Scholes option pricing model with the following weighted average assumptions;
risk-free interest rates of approximately 6.3%, 6.1%, and 4.6% in 2000, 1999 and
1998, respectively; volatility factor of the expected market price of the
Company's common stock of 80%, 46% and 24% in 2000, 1999 and 1998, respectively;
a weighted average expected life of the options of 8 years in 2000, 1999 and
1998; and no dividend yield in 2000, 1999 and 1998.
Under the accounting provisions of SFAS 123, the Company's net income (loss)
and net income (loss) per share would have been reduced to the pro forma amounts
indicated below:
2000 1999 1998
-------- -------- --------
Net income (loss) applicable to common and
Class B common stockholders................... $ 7,934 $(33,608) $27,875
Net income (loss) per common and
Class B common share:
Basic......................................... $ 0.08 $ (0.37) $ 0.32
Diluted....................................... $ 0.07 $ (0.37) $ 0.31
F-31
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11--STOCKHOLDERS' EQUITY (CONTINUED)
A summary of the status of the Company's fixed stock option plans as of
December 31, 2000, 1999 and 1998, and changes during the years ending on those
dates is presented.
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------------- ----------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ---------------- ---------- ---------------- --------- ----------------
Outstanding at
beginning of year... 15,957,342 $24.43 8,615,402 $12.12 5,659,600 $ 9.76
Granted............... 3,907,862 57.49 10,724,025 30.53 4,088,951 18.10
Exercised............. (2,130,956) 16.29 (2,330,990) 8.75 (419,898) 3.60
Forfeited/cancelled... (874,769) 34.29 (1,051,095) 20.50 (713,251) 35.83
---------- ---------- ---------
Outstanding at end of
year................ 16,859,479 $31.44 15,957,342 $24.43 8,615,402 $12.12
========== ========== =========
Options exercisable at
year-end............ 4,920,297 $21.75 3,251,747 $12.16 768,594 $10.03
========== ========== =========
Weighted average fair
value of options
granted during the
year................ $44.57 $18.74 $ 5.86
The following table summarizes information about stock options outstanding
at December 31, 2000.
WEIGHTED AVERAGE
NUMBER REMAINING NUMBER
RANGE OF OUTSTANDING AT WEIGHTED AVERAGE CONTRACTUAL LIFE EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICES DECEMBER 31, 2000 EXERCISE PRICE (YEARS) DECEMBER 31, 2000 EXERCISE PRICE
- --------------------- ------------------ ---------------- ---------------- ------------------ ----------------
$0.00 to $10.00...... 1,631,226 $ 5.87 6.2 1,353,980 $ 6.18
10.01 to 20.00...... 3,017,059 15.24 7.6 1,293,866 15.14
20.01 to 26.00...... 5,071,119 23.06 8.5 821,008 23.10
26.01 to 50.00...... 4,572,977 42.96 8.7 1,380,836 40.54
50.01 to 81.38...... 2,567,098 61.20 9.4 70,607 58.31
---------- ------ --------- ------
Total............ 16,859,479 $31.44 4,920,297 $21.75
========== ====== ========= ======
F-32
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 12--PROVISION (BENEFIT) FOR INCOME TAXES
The components of income (loss) before the provision (benefit) for income
taxes, minority interests and equity in losses of affiliates are as follows:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Domestic........................................ $104,688 $(6,130) $14,058
Foreign......................................... 9,331 14,173 38,644
-------- ------- -------
Total income before provision for income taxes,
minority interests and equity in losses of
affiliates.................................... $114,019 $ 8,043 $52,702
======== ======= =======
The provision (benefit) for income taxes is as follows:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Current tax provision:
U.S. Federal................................... $24,195 $ 946 $ 1,775
State and local................................ 8,341 1,200 1,749
Foreign........................................ 7,397 10,401 15,507
------- ------- -------
Total current................................ 39,933 12,547 19,031
------- ------- -------
Deferred tax provision (benefit):
U.S. Federal................................... 16,484 (371) 2,468
State and local................................ 8,350 (1,289) (686)
Foreign........................................ (7,165) (2,463) (3,387)
------- ------- -------
Total deferred............................... 17,669 (4,123) (1,605)
------- ------- -------
Total provision.............................. $57,602 $ 8,424 $17,426
======= ======= =======
F-33
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 12--PROVISION (BENEFIT) FOR INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to the Company's
deferred tax asset (liability) are below:
DECEMBER 31,
-------------------
2000 1999
-------- --------
Current deferred tax assets (liabilities):
Earned commissions.................................... $ (4,422) $ (4,945)
Allowance for doubtful accounts....................... 12,138 8,261
Work-in-process....................................... (5,588) (5,668)
Prepaid and other..................................... (170) (121)
Accrued expenses and other liabilities................ 7,703 6,596
Accrued compensation.................................. 6,737 2,746
Tax loss carryforwards................................ 17,912 3,405
-------- --------
Total current deferred tax asset.................... 34,310 10,274
-------- --------
Noncurrent deferred tax assets (liabilities):
Property and equipment................................ (4,348) (2,166)
Intangibles........................................... 12,806 12,596
Accrued expenses and other liabilities................ 158 1,069
Deferred compensation................................. 3,994 3,899
Tax loss carryforwards................................ 471 20,611
-------- --------
Total noncurrent deferred tax asset................. 13,081 36,009
-------- --------
Valuation allowance................................... (12,238) (11,852)
-------- --------
Net deferred tax asset.................................. $ 35,153 $ 34,431
======== ========
At December 31, 2000, the Company has net operating loss carryforwards for
U.S. Federal tax purposes of approximately $15.8 million which expire through
2019 and operating loss carryfowards in the United Kingdom and Australia of
approximately $31.2 million and $7.3 million, respectively. The Company has
concluded that, based on expected future results, the future reversals of
existing taxable temporary differences, the tax benefits derived from the
exercise of nonqualified employee stock options, the amortization of benefits
from taxable poolings and the loss carryforwards of certain subsidiaries, which
are only usable by such subsidiary, there is no reasonable assurance that the
entire tax benefit can be used. Accordingly, a valuation allowance has been
established. In addition, the deferred tax benefits from taxable poolings and
those derived from the exercise of nonqualified stock options were recorded net
of the valuation allowance as additional paid-in capital. As such amounts are
used, the valuation allowance will be reduced and the benefit will be recorded
as additional paid-in capital.
F-34
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 12--PROVISION (BENEFIT) FOR INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount computed using the
Federal statutory income tax rate as follows:
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Provision at Federal statutory rate............... $39,907 $2,815 $18,446
State income taxes, net of Federal income tax
effect.......................................... 6,785 (58) 691
Nondeductible expenses(1)......................... 13,907 9,151 5,462
Nondeductible special charge...................... -- -- 438
Foreign income taxes at other than the Federal
statutory rate.................................. 742 (511) (1,656)
Profits of pooled entities taxed directly to
owners.......................................... (5,005) (5,559) (5,476)
Increase in valuation allowance................... 386 2,009 173
Other............................................. 880 577 (652)
------- ------ -------
Income tax provision.............................. $57,602 $8,424 $17,426
======= ====== =======
- ------------------------
(1) Primarily due to nondeductible (i) merger costs of $27.1 million,
$12.5 million and $6.9 million, respectively, which at the Federal statutory
rate would have equated to a tax benefit of $9.5 million, $4.4 million and
$2.4 million, respectively, (ii) amortization of intangible assets and
(iii) meals & entertainment expenses.
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries. Such earnings have been and will
continue to be reinvested but could become subject to additional tax if they
were remitted as dividends, or were loaned to the Company or a U.S. affiliate,
or if the Company should sell its stock in the foreign subsidiaries. It is not
practicable to determine the amount of additional tax, if any, that might be
payable on the undistributed foreign earnings; however, the Company believes
that foreign tax credits would substantially offset any U.S. tax. At
December 31, 2000, the cumulative amount of reinvested earnings was
approximately $44 million.
F-35
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 13--COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company leases its facilities and certain equipment under operating
leases and certain equipment under capital leases. Future minimum lease
commitments under both noncancellable operating leases and capital leases at
December 31, 2000 are as follows:
CAPITAL OPERATING
LEASES LEASES
-------- ---------
2001..................................................... $ 4,511 $ 57,353
2002..................................................... 3,393 53,258
2003..................................................... 1,586 46,504
2004..................................................... 584 41,690
2005..................................................... 532 38,492
Thereafter............................................... 531 200,583
------- --------
11,137 $437,880
========
Less: Amount representing interest....................... 918
-------
Present value of minimum lease payments.................. 10,219
Less: Current portion.................................... 4,021
-------
$ 6,198
=======
Rent and related expenses under operating leases amounted to $59,903,
$45,987, and $31,884 for the years ended December 31, 2000, 1999 and 1998,
respectively. Operating lease obligations after 2005 relate primarily to
building leases expiring through 2015.
(B) CONSULTING, EMPLOYMENT AND NON-COMPETE AGREEMENTS
The Company has entered into various consulting, employment and non-compete
agreements with certain management personnel, executive search consultants and
former owners of acquired businesses. These agreements are generally two to five
years in length, with one for a term of fifteen years and two providing
aggregate annual lifetime payments of approximately $135.
Such agreements provide for the following aggregate annual payments,
inclusive of the Company's agreement with Andrew J. McKelvey as described below:
DECEMBER 31,
2000
-------------
2001........................................................ $ 9,877
2002........................................................ 5,439
2003........................................................ 3,270
2004........................................................ 2,298
2005........................................................ 1,302
Thereafter.................................................. 2,055
-------
$24,241
=======
F-36
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 13--COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has entered into an amended employment agreement with Andrew J.
McKelvey, effective November 15, 1996, for a term ending on November 14, 2001.
The agreement provides for automatic renewal for successive one year terms
unless either party notifies the other to the contrary at least 90 days prior to
the expiration of the then current term. The agreement also provides that
Mr. McKelvey will serve as Chairman of the Board and CEO of the Company and will
be nominated for election as a director during all periods of his employment.
Under the agreement, Mr. McKelvey was entitled to a base salary of $1,500 per
year and until November 1998, when his agreement was amended, was entitled to
mandatory quarterly bonuses of $375. Mr. McKelvey waived such bonuses. On
May 1, 1999, the Company and Mr. McKelvey further amended the employment
agreement to provide for an annual base salary of $500 and an annual bonus,
based on exceeding earnings per share targets, not to exceed $500. Under the
agreement, Mr. McKelvey may terminate his employment upon 90 days' prior written
notice for any reason. The agreement also provides that in the event
Mr. McKelvey's employment is terminated by the Company prior to its expiration
for reasons other than for "cause," the Company shall pay Mr. McKelvey his base
salary for the remaining term of the agreement at the times it would have been
payable had he remained employed. The agreement further provides that in the
event of Mr. McKelvey's voluntary resignation, termination of his employment by
the Company for cause or nonrenewal of the agreement, Mr. McKelvey shall not be
entitled to any severance, and in the event of his disability or death he or his
estate shall be paid his base salary for a period of 180 days after any such
termination at the times it would have been payable had he remained employed.
The agreement also contains confidentially provisions, whereby Mr. McKelvey
agrees not to disclose any confidential information regarding the Company and
its affiliates.
(C) EMPLOYEE BENEFIT PLANS
The Company has a 401(k) profit sharing plan covering all eligible
employees. Employer matching contributions, which are primarily a maximum of 2%
of payroll of participating employees, and paid by a contribution of TMP shares
and cash, amounted to $2,573, $1,342 and $1,085 for the years ended
December 31, 2000, 1999 and 1998, respectively.
Outside of the United States, the Company has employee benefit plans in the
countries in which it operates. The cost of these plans amounted to $11,553,
$6,234 and $5,102 for the years ended December 31, 2000, 1999 and 1998,
respectively.
LAI maintained a defined contribution profit sharing plan covering
substantially all employees. In August 1998, the plan was amended to add a
401(k) savings and company matching feature. LAI profit sharing and matching
contributions are discretionary and are funded annually as approved by the LAI
Board of Directors. For the year ended December 31, 1999, employer matching
contributions for LAI amounted to $437. Effective January 1, 2000, LAI employees
began contributing to the TMP plan. The LAI plan was combined with the TMP plan
during 2000.
LAI also had deferred compensation agreements with 53 employees and former
employees. Under the terms of the agreements, employees were eligible to make
annual elections, on calendar year basis, to defer a portion of their
compensation. This compensation, together with accrued interest, is paid upon
termination of the agreements, as defined. Effective January 1, 1999, the plan
was amended to prohibit future deferrals of compensation to the plan. The
present value of these obligations is recorded as a long-term liability in the
accompanying consolidated balance sheets and was $9,764 and $9,786 at
F-37
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 13--COMMITMENTS AND CONTINGENCIES (CONTINUED)
December 31, 2000 and 1999, respectively. Interest is earned on deferred amounts
at 6.25% for active employees and 4.1% for retirees. At December 31, 2000,
$6.7 million related to active employees and $3.1 million related to retirees.
(D) LITIGATION
The Company is subject to various claims, suits and complaints arising in
the ordinary course of business. Although the outcome of these legal matters
cannot be determined, it is the opinion of management that the final resolution
of these matters will not have a material adverse effect on the Company's
financial condition, operations or liquidity.
Morgan & Banks Limited ("M & B") has had proceedings issued against it in
New Zealand for an amount of $3,400. These proceedings relate to the acquisition
of the claimant's business in New Zealand prior to Morgan & Banks New Zealand
Limited becoming a controlled entity of the M & B. The parties have engaged in
significant discovery. The directors of M & B are of the opinion that the claim
is without substance and, accordingly, the action is being vigorously defended.
(E) AOL MARKETING AGREEMENT
On December 1, 1999, the Company entered into a content and marketing
arrangement with America Online, Inc. Pursuant to this arrangement, the
Company's flagship Interactive property, Monster.com(sm), for the payment of
$100 million over four years, would be the exclusive provider of career search
services in the United States and Canada for four years to AOL members,
currently over 27 million. The $100 million is being expensed pro rata over the
four year life of the agreement pursuant to the number of impressions contracted
per year as a percent of the total impressions anticipated over the life of the
agreement.
(F) OTHER
The Company is contingently liable on a note of the Principal Stockholder in
the amount of approximately $1,600.
NOTE 14--RELATED PARTY TRANSACTIONS
(A) The Company charged management and other fees to affiliates for services
provided of approximately $931, $1,257 and $651 for the years ended
December 31, 2000, 1999, and 1998, respectively. Such fees are reflected as a
reduction of salaries and related costs in the accompanying consolidated
statements of operations.
(B) The Company leases an office from an entity in which the Principal
Stockholder and other stockholders have a 90% ownership interest. Annual rent
expense under the lease, which expires in the year 2004, amounts to
approximately $554.
(C) Beginning in June 1999, the Company periodically used the services of an
aircraft from a company owned by the Principal Stockholder, and in connection
therewith, $561 and $215 was paid during the years ended December 2000 and 1999,
respectively.
F-38
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 15--SEGMENT AND GEOGRAPHIC DATA
The Company operates in five business segments: Interactive (including
Monster-Registered Trademark-.com and Monstermoving(sm).com), Advertising &
Communications, eResourcing, Executive Search and Directional Marketing.
Operations are conducted in the following geographic regions: North America, the
Asia/Pacific Region (primarily Australia and New Zealand), the United Kingdom
and Continental Europe. The following is a summary of the Company's operations
by business segment and by geographic region, for the years ended December 31,
2000, 1999 and 1998. Overhead is allocated based on retroactively restated
commissions and fees.
INTERACTIVE ADVERTISING
INFORMATION BY --------------------------------------------------------- & EXECUTIVE
BUSINESS SEGMENT MONSTER-REGISTERED TRADEMARK-.COM MONSTERMOVING(SM).COM COMMUNICATIONS ERESOURCING SEARCH
- ---------------- --------------------------------- --------------------- --------------- ----------- ---------
Year ended December
31, 2000
Commissions and fees:
Traditional sources.. $ -- $ -- $ 193,951 $386,666 $178,399
Interactive.......... 361,950 10,867 31,776 21,720 30
-------- -------- ---------- -------- --------
Total commissions and
fees............... 361,950 10,867 225,727 408,386 178,429
-------- -------- ---------- -------- --------
Operating expenses:
Traditional(a)....... -- -- 171,717 343,575 157,006
Interactive(a)....... 291,195 21,567 25,673 17,509 25
Merger & integration
costs.............. 4,668 5,618 2,448 33,743 17,252
Amortization of
intangibles........ 445 617 6,097 6,417 1,367
-------- -------- ---------- -------- --------
Total operating
expenses........... 296,308 27,802 205,935 401,244 175,650
-------- -------- ---------- -------- --------
Operating income
(loss):
Traditional sources.. -- -- 13,689 2,931 2,774
Interactive.......... 65,642 (16,935) 6,103 4,211 5
-------- -------- ---------- -------- --------
Total operating
income (loss)...... $ 65,642 $(16,935) $ 19,792 $ 7,142 $ 2,779
======== ======== ========== ======== ========
Total other income,
net................ * * * * *
Income before
provision for
income taxes,
minority interests
and equity in
losses of
affiliates......... * * * * *
Total assets......... $200,544 $ 22,319 $1,009,051 $413,594 $228,523
======== ======== ========== ======== ========
INFORMATION BY DIRECTIONAL
BUSINESS SEGMENT MARKETING TOTAL
- ---------------- ----------- ----------
Year ended December
31, 2000
Commissions and fees:
Traditional sources.. $ 97,538 $ 856,554
Interactive.......... 8,840 435,183
-------- ----------
Total commissions and
fees............... 106,378 1,291,737
-------- ----------
Operating expenses:
Traditional(a)....... 80,635 752,933
Interactive(a)....... 7,291 363,260
Merger & integration
costs.............. 875 64,604
Amortization of
intangibles........ 1,593 16,536
-------- ----------
Total operating
expenses........... 90,394 1,197,333
-------- ----------
Operating income
(loss):
Traditional sources.. 14,435 33,829
Interactive.......... 1,549 60,575
-------- ----------
Total operating
income (loss)...... $ 15,984 94,404
========
Total other income,
net................ * 19,615
----------
Income before
provision for
income taxes,
minority interests
and equity in
losses of
affiliates......... * $ 114,019
==========
Total assets......... $117,812 $1,991,843
======== ==========
- ------------------------------
(a) Is comprised of salaries & related, office & general, marketing & promotion
and allocated overhead.
* Not allocated.
F-39
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 15--SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
INTERACTIVE ADVERTISING
INFORMATION BY --------------------------------------------------------- & EXECUTIVE
BUSINESS SEGMENT MONSTER-REGISTERED TRADEMARK-.COM MONSTERMOVING(SM).COM COMMUNICATIONS ERESOURCING SEARCH
- ---------------- --------------------------------- --------------------- --------------- ----------- ---------
Year ended
December 31, 1999
Commissions and fees:
Traditional
sources............ $ -- $ -- $183,938 $292,231 $173,277
Interactive.......... 126,121 6,410 13,352 6,447 --
-------- ------- -------- -------- --------
Total commissions and
fees............... 126,121 6,410 197,290 298,678 173,277
-------- ------- -------- -------- --------
Operating expenses:
Traditional(a)....... -- -- 160,114 253,070 173,105
Interactive(a)....... 112,674 8,877 11,414 5,085 13,806
Merger & integration
costs.............. -- -- 13,442 10,082 36,791
Restructuring
charges............ -- -- -- -- 2,789
Amortization of
intangibles........ 236 17 6,226 2,900 971
-------- ------- -------- -------- --------
Total operating
expenses........... 112,910 8,894 191,196 271,137 227,462
-------- ------- -------- -------- --------
Operating income
(loss):
Traditional
sources............ -- -- 4,156 26,179 (40,379)
Interactive.......... 13,211 (2,484) 1,938 1,362 (13,806)
-------- ------- -------- -------- --------
Total operating
income (loss)...... $ 13,211 $(2,484) $ 6,094 $ 27,541 $(54,185)
======== ======= ======== ======== ========
Total other expense,
net................ * * * * *
Income before
provision for
income taxes,
minority interests
and equity in
losses of
affiliates......... * * * * *
Total assets......... $ 99,920 $ 6,502 $414,912 $271,872 $ 90,547
======== ======= ======== ======== ========
INFORMATION BY DIRECTIONAL
BUSINESS SEGMENT MARKETING TOTAL
- ---------------- ----------- ----------
Year ended
December 31, 1999
Commissions and fees:
Traditional
sources............ $101,294 $ 750,740
Interactive.......... 5,885 158,215
-------- ----------
Total commissions and
fees............... 107,179 908,955
-------- ----------
Operating expenses:
Traditional(a)....... 61,189 647,478
Interactive(a)....... 5,826 157,682
Merger & integration
costs.............. 2,739 63,054
Restructuring
charges............ -- 2,789
Amortization of
intangibles........ 2,544 12,894
-------- ----------
Total operating
expenses........... 72,298 883,897
-------- ----------
Operating income
(loss):
Traditional
sources............ 34,822 24,778
Interactive.......... 59 280
-------- ----------
Total operating
income (loss)...... $ 34,881 25,058
========
Total other expense,
net................ * (17,015)
----------
Income before
provision for
income taxes,
minority interests
and equity in
losses of
affiliates......... * $ 8,043
==========
Total assets......... $215,012 $1,098,765
======== ==========
- ------------------------------
(a) Is comprised of salaries & related, office & general, marketing & promotion
and allocated overhead.
* Not allocated.
F-40
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 15--SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
INTERACTIVE ADVERTISING
INFORMATION BY --------------------------------------------------------- & EXECUTIVE
BUSINESS SEGMENT MONSTER-REGISTERED TRADEMARK-.COM MONSTERMOVING(SM).COM COMMUNICATIONS ERESOURCING SEARCH
- ---------------- --------------------------------- --------------------- --------------- ----------- ---------
Year ended
December 31, 1998
Commissions and fees:
Traditional
sources............ $ -- $ -- $183,393 $221,864 $195,268
Interactive.......... 59,410 1,711 2,436 245 --
------- ------- -------- -------- --------
Total commissions and
fees............... 59,410 1,711 185,829 222,109 195,268
------- ------- -------- -------- --------
Operating expenses:
Traditional(a)....... -- -- 163,887 192,023 182,497
Interactive(a)....... 57,916 1,943 1,979 69 --
Merger & Integration
Costs.............. -- -- 2,004 9,445 10,367
Restructuring
charges............ -- -- -- -- 3,543
Amortization of
intangibles........ 234 10 5,626 1,542 965
------- ------- -------- -------- --------
Total Operating
Expenses........... 58,150 1,953 173,496 203,079 197,372
------- ------- -------- -------- --------
Operating income
(loss):
Traditional
sources............ -- -- 11,876 18,854 (2,104)
Interactive.......... 1,260 (242) 457 176 --
------- ------- -------- -------- --------
Total operating
income (loss)...... $ 1,260 $ (242) $ 12,333 $ 19,030 $ (2,104)
======= ======= ======== ======== ========
Total other expense,
net................ * * * * *
Income before
provision for
income taxes,
minority interests
and equity in
losses of
affiliates......... * * * * *
Total assets......... $38,775 $ 424 $265,422 $181,941 $148,894
======= ======= ======== ======== ========
INFORMATION BY DIRECTIONAL
BUSINESS SEGMENT MARKETING TOTAL
- ---------------- ----------- ----------
Year ended
December 31, 1998
Commissions and fees:
Traditional
sources............ $106,455 $ 706,980
Interactive.......... 1,056 64,858
-------- ----------
Total commissions and
fees............... 107,511 771,838
-------- ----------
Operating expenses:
Traditional(a)....... 65,066 603,473
Interactive(a)....... 766 62,673
Merger & Integration
Costs.............. 596 22,412
Restructuring
charges............ -- 3,543
Amortization of
intangibles........ 2,904 11,281
-------- ----------
Total Operating
Expenses........... 69,332 703,382
-------- ----------
Operating income
(loss):
Traditional
sources............ 37,889 66,515
Interactive.......... 290 1,941
-------- ----------
Total operating
income (loss)...... $ 38,179 68,456
========
Total other expense,
net................ * (15,754)
----------
Income before
provision for
income taxes,
minority interests
and equity in
losses of
affiliates......... * $ 52,702
==========
Total assets......... $298,417 $ 933,873
======== ==========
- ------------------------------
(a) Is comprised of salaries & related, office & general, marketing & promotion,
CEO special bonus and allocated overhead.
* Not allocated.
F-41
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 15--SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
UNITED CONTINENTAL
INFORMATION BY GEOGRAPHIC REGION NORTH AMERICA ASIA/PACIFIC KINGDOM EUROPE TOTAL
- -------------------------------- -------------- ------------ -------- ----------- ----------
Year ended December 31, 2000:
Commissions and fees........................... $803,382 $178,868 $166,266 $143,221 $1,291,737
Income (loss) before taxes, minority interests
and equity in earnings of affiliates......... 108,202 20,192 (21,499) 7,124 114,019
Long-lived assets.............................. 384,955 45,603 99,089 135,191 664,838
Year ended December 31, 1999:
Commissions and fees........................... $521,723 $163,134 $132,594 $ 91,504 $ 908,955
Income (loss) before taxes, minority interests
and equity in earnings of affiliates......... 3,458 9,959 (9,712) 4,338 8,043
Long-lived assets.............................. 182,354 38,555 108,797 79,429 409,135
Year ended December 31, 1998:
Commissions and fees........................... $446,691 $131,906 $135,571 $ 57,670 $ 771,838
Income before taxes, minority interests and
equity in earnings of affiliates............. 32,652 16,085 2,211 1,754 52,702
Long-lived assets.............................. 170,696 32,918 110,656 48,089 362,359
F-42
QD GROUP LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE 2000 AND 30 JUNE 1999
2000 2000
CONTINUING DISCONTINUED
NOTES BUSINESSES BUSINESSES 2000 1999
-------- ---------- ------------ -------- --------
L'000'S L'000'S L'000'S L'000'S
TURNOVER........................................ 2 10,752 9 10,761 7,361
Cost of sales................................... (2,172) (64) (2,236) (1,878)
------ --- ------ ------
GROSS PROFIT/(LOSS)............................. 8,580 (55) 8,525 5,483
Net operating expenses.......................... (6,747) (15) (6,762) (5,020)
------ --- ------ ------
OPERATING PROFIT/(LOSS)......................... 1,833 (70) 1,763 463
------ ------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION... 1,763 463
Tax on profit on ordinary activities............ 3 (529) (180)
------ ------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION.... 1,234 283
====== ======
The attached notes to the financial statements form an integral part of these
financial statements.
F-43
QD GROUP LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2000 AND 30 JUNE 1999
NOTES 2000 1999
--------- -------- --------
L'000'S L'000'S
FIXED ASSETS
Tangible assets............................................. 4 917 822
Investments................................................. 5 936 900
----- -----
1,853 1,722
----- -----
CURRENT ASSETS
Debtors..................................................... 4,545 3,862
Cash at bank and in hand.................................... 2,196 1,608
----- -----
6,741 5,470
Creditors................................................... 3,277 3,392
----- -----
NET ASSETS.................................................. 5,317 3,800
===== =====
CAPITAL AND RESERVES
Called-up share capital..................................... 50 50
Share premium account....................................... 31 31
Capital redemption reserve.................................. 1 1
Profit and loss account..................................... 5,235 3,714
----- -----
EQUITY SHAREHOLDERS' FUNDS.................................. 5,317 3,796
Minority interests--equity.................................. -- 4
----- -----
TOTAL CAPITAL AND RESERVES.................................. 5,317 3,800
===== =====
The attached notes to the financial statements form an integral part of these
financial statements.
F-44
QD GROUP LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2000 AND 30 JUNE 1999
2000 1999
NOTES L'000'S L'000'S
-------- -------- --------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES......... 6 1,146 (363)
----- ----
TAXATION
UK corporation tax paid..................................... (118) (110)
----- ----
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTS
Purchase of tangible fixed assets........................... (200) (115)
Sale of tangible fixed assets............................... 14 6
----- ----
FINANCING................................................... (186) (109)
Repayment of loan........................................... (24) (24)
Capital element of finance lease repayments................. (82) (82)
----- ----
(106) (106)
----- ----
INCREASE/(DECREASE) IN CASH IN THE PERIOD................... 736 (688)
===== ====
The attached notes to the financial statements form an integral part of these
financial statements.
F-45
QD GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1 BASIS OF PRESENTATION
The consolidated condensed interim financial statements included herein have
been prepared according to accounting principles generally accepted in the
United Kingdom (UK GAAP). These principles differ in certain respects from those
generally accepted in the United States (US GAAP). The significant areas of
difference are shown in note 7.
The financial statements have been prepared without audit, pursuant to the
rules and regulations of the US Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the Group
believes that the disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments that, in the opinion of management, are necessary for fair
presentation of the information contained herein. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Group's annual report for
the year ended September 30, 1999. The Group follows the same accounting
policies in preparation of interim reports.
2 ANALYSIS BY GEOGRAPHICAL AREA/BUSINESS SEGMENT
Turnover is generated wholly from the group's principal activities.
The analysis of the group's turnover by destination and origin is set out
below:
2000 1999
L'000'S L'000'S
-------- --------
TURNOVER
United Kingdom.............................................. 9,218 6,957
Europe...................................................... 557 122
Far East.................................................... 898 136
Rest of the World........................................... 88 146
------ -----
10,761 7,361
====== =====
The analysis of the group's turnover by business segment is set out below:
2000 1999
L'000'S L'000'S
-------- --------
TURNOVER
Recruitment................................................. 10,176 6,432
Business services........................................... 576 355
Discontinued businesses..................................... 9 574
------ -----
10,761 7,361
====== =====
F-46
QD GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3 TAXATION
2000 1999
L'000'S L'000'S
-------- --------
UK corporation tax
Current @ 30% (1999:30.5%).................................. 529 180
=== ===
4 TANGIBLE FIXED ASSETS
The net book values as at 30 June 2000 are summarised below:
L'000'S
--------
Computers................................................... 520
Motor vehicles.............................................. 37
Fixtures, fittings and equipment............................ 360
---
TOTAL NET BOOK VALUE AT 30 JUNE 2000........................ 917
===
5 FIXED ASSET INVESTMENTS
ESOT INVESTMENT
IN OWN ORDINARY
SHARES
L'000'S
---------------
At 30 June 2000............................................. 936
===
6 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES
2000 1999
L'000'S L'000'S
-------- --------
Operating profit............................................ 1,763 463
Depreciation................................................ 210 180
Profit on sale of tangible fixed assets..................... (7) (14)
Increase in debtors......................................... (817) (1,507)
(Decrease)/increase in creditors............................ (3) 515
----- ------
Net cash inflow/(outflow) from operating activities......... 1,146 (363)
===== ======
7 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles in the United Kingdom ("UK GAAP") which
differ in certain respects from those generally
F-47
QD GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
accepted in the United States ("US GAAP"). The significant areas of difference
affecting the financial statements of the Group are described below:
RECONCILIATIONS
The following is a summary of the material adjustments to net income and
shareholders' equity which would have been required if US GAAP had been applied
instead of UK GAAP:
2000 1999
NOTE L'000'S L'000'S
-------- -------- --------
NET INCOME IN ACCORDANCE WITH UK GAAP................. 1,234 283
ADJUSTMENT TO CONFORM WITH US GAAP
Deferred taxation..................................... (b) 20 (35)
----- ------
NET INCOME IN ACCORDANCE WITH US GAAP................. 1,254 248
===== ======
2000 1999
L'000'S L'000'S
-------- --------
SHAREHOLDERS' FUNDS IN ACCORDANCE WITH UK GAAP........ 5,317 3,800
ADJUSTMENTS TO CONFORM WITH US GAAP
Reclassification of investment held by ESOT........... (936) (900)
Deferred tax liability................................ (22) (35)
----- -----
Shareholders' funds in accordance with US GAAP........ 4,359 2,865
===== =====
A) DISCONTINUED OPERATIONS
The effect of discontinued operations on the 1999 results were as follows:
CONTINUING DISCONTINUED
BUSINESSES BUSINESSES TOTAL
L'000'S L'000'S L'000'S
---------- ------------ --------
TURNOVER...................................... 6,787 574 7,361
Cost of sales................................. (1,459) (419) (1,878)
------ ---- ------
Gross profit.................................. 5,328 155 5,483
Net operating expenses........................ (4,478) (542) (5,020)
------ ---- ------
OPERATING PROFIT.............................. 850 (387) 463
====== ==== ======
F-48
QD GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
Net liabilities of discontinued operations
2000 1999
L'000'S L'000'S
-------- --------
Fixed assets................................................ -- 28
Debtors..................................................... 32 166
Cash........................................................ 3 66
Creditors................................................... (1,155) (1,005)
------ ------
(1,120) (745)
====== ======
B) INCOME TAXES
Under UK GAAP, the Group provides for deferred taxation using the partial
liability method on all timing differences to the extent that it is considered
probable that the liabilities will crystallise in the foreseeable future.
Deferred tax assets are recognised to the extent that they are recoverable
without replacement in the foreseeable future.
Under US GAAP, income taxes are accounted for under Statement of Financial
Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes." In
accordance with SFAS No. 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax basis of
assets and liabilities and are measured using enacted tax rates and laws that
are expected to be in effect when the difference is reversed. The effect on
deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Income before the provision for taxes consisted of the following:
2000 1999
L'000'S L'000'S
-------- --------
Domestic.................................................... 1,467 609
Foreign..................................................... 296 (146)
----- ----
INCOME BEFORE INCOME TAXES UNDER US GAAP.................... 1,763 463
===== ====
C) EMPLOYEE SHARE OWNERSHIP TRUST
Under UK GAAP, shares in the company which are held by the ESOT are shown as
fixed asset investments and the related dividends receivable and gain or loss on
sale of shares are included in operating income. Under US GAAP, the shares held
by the ESOT are shown as treasury shares and the dividends and gains or losses
on sales of shares are not recognised.
F-49
QD GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
D) CASH FLOWS
Set out below is a summary consolidated statement of cash flows for the
Group under US GAAP.
2000 1999
L'000'S L'000'S
-------- --------
Net cash provided by/(used in) operating activities......... 1,028 (473)
Net cash used in investing activities....................... (186) (109)
Net cash used in financing activities....................... (106) (106)
----- -----
NET DECREASE IN CASH UNDER US GAAP.......................... 736 (688)
===== =====
F-50
AUDITORS' REPORT
TO THE SHAREHOLDERS OF QD GROUP LIMITED
We have audited the financial statements on pages F-52 to F-73 which have
been prepared under the historical cost convention and accounting policies set
out on pages F-56 and F-57.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the financial
statements in accordance with applicable United Kingdom law and accounting
standards. Our responsibilities, as independent auditors, are established in the
United Kingdom by statute, the Auditing Practices Board and by our profession's
ethical guidance.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
United Kingdom Auditing Practices Board, which are substantially consistent with
generally accepted auditing standards in the United States. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the circumstances of the company and of the group, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the company and of the group as at 30 September 1998 and
1999 and of the group's profits and cash flows for the two years then ended and
have been properly prepared in accordance with the Companies Act 1985.
Certain accounting practices of the Group used in preparing the accompanying
financial statements conform with generally accepted accounting principles in
the United Kingdom, but do not conform with accounting principles generally
accepted in the United States. A description of these differences and the
adjustments required to conform the financial statements to accounting
principles generally accepted in the United States are set forth in note 26.
Arthur Andersen
Chartered Accountants and Registered Auditors
20 Old Bailey
London
EC4M 7AN
5 April 2000 (except with respect to note 26 which is as of 14 July 2000).
F-51
QD GROUP LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
1999 1999
CONTINUING DISCONTINUED
NOTES BUSINESSES BUSINESSES 1999 1998
-------- ----------- ------------- ----------- ----------
L L L L
TURNOVER.......................... 2 13,141,901 1,196,080 14,337,981 11,900,838
Cost of sales..................... (2,428,478) (919,624) (3,348,102) (2,303,809)
---------- --------- ----------- ----------
GROSS PROFIT...................... 10,713,423 276,456 10,989,879 9,597,029
Net operating expenses............ (9,584,757) (936,495) (10,521,252) (8,701,664)
Other income...................... 3 125,219 -- 125,219 60,494
---------- --------- ----------- ----------
OPERATING PROFIT.................. 1,253,885 (660,039) 593,846 955,859
Interest receivable............... 72,458 108,575
Interest payable.................. 7 (11,456) (3,651)
----------- ----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION................. 4 654,848 1,060,783
Tax on profit on ordinary
activities...................... 8 (254,262) (328,842)
----------- ----------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION.................. 400,586 731,941
Minority interests................ 19 3,658 5,292
----------- ----------
PROFIT FOR THE FINANCIAL YEAR..... 9 404,244 737,233
Dividends--equity shareholders.... 10 (200,000) (400,000)
----------- ----------
RETAINED PROFIT FOR THE FINANCIAL
YEAR............................ 17 204,244 337,233
=========== ==========
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
PROFIT FOR THE FINANCIAL YEAR........... 404,244 737,233
Loss on currency translation............ (8,873) --
----------- ----------
TOTAL RECOGNISED GAINS AND LOSSES....... 395,371 737,233
=========== ==========
The attached notes to the accounts form an integral part of these financial
statements.
F-52
QD GROUP LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
NOTES 1999 1998
--------- ---------- ----------
L L
FIXED ASSETS
Tangible assets............................................ 11 949,816 736,470
Investments................................................ 12 894,200 900,300
---------- ----------
1,844,016 1,636,770
---------- ----------
CURRENT ASSETS
Debtors.................................................... 13 4,131,727 3,084,443
Cash at bank and in hand................................... 1,289,810 2,039,693
---------- ----------
5,421,537 5,124,136
CREDITORS: amounts falling due within one year............. 14 (3,231,327) (3,185,562)
---------- ----------
NET CURRENT ASSETS......................................... 2,190,210 1,938,574
---------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES...................... 4,034,226 3,575,344
CREDITORS: amounts falling due after more than one year.... 15 (267,169) --
---------- ----------
NET ASSETS................................................. 3,767,057 3,575,344
========== ==========
CAPITAL AND RESERVES
Called-up share capital.................................... 16 49,806 49,806
Share premium account...................................... 17 30,895 30,895
Capital redemption reserve................................. 17 944 944
Profit and loss account.................................... 17 3,685,412 3,490,041
---------- ----------
EQUITY SHAREHOLDERS' FUNDS................................. 18 3,767,057 3,571,686
Minority interests--equity................................. 19 -- 3,658
---------- ----------
TOTAL CAPITAL AND RESERVES................................. 3,767,057 3,575,344
========== ==========
The attached notes to the accounts form an integral part of these financial
statements.
F-53
QD GROUP LIMITED
COMPANY BALANCE SHEET
AS AT 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
NOTES 1999 1998
--------- ---------- ----------
L L
FIXED ASSETS
Investments................................................ 12 941,818 931,287
---------- ----------
CURRENT ASSETS
Debtors.................................................... 13 9,082,608 2,291,624
Cash at bank and in hand................................... 842,060 1,711,028
---------- ----------
9,924,668 4,002,652
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR............. 14 (5,843,394) (3,033,297)
---------- ----------
Net current assets......................................... 4,081,274 969,355
---------- ----------
NET ASSETS................................................. 5,023,092 1,900,642
========== ==========
CAPITAL AND RESERVES
Called-up share capital.................................... 16 49,806 49,806
Share premium account...................................... 17 30,895 30,895
Capital redemption reserve................................. 17 944 944
Profit and loss account.................................... 17 4,941,447 1,818,997
---------- ----------
EQUITY SHAREHOLDERS' FUNDS................................. 5,023,092 1,900,642
========== ==========
The financial statements were approved by the Board on 5 April 2000.
GD Quarry
Director
The attached notes to the accounts form an integral part of these financial
statements.
F-54
QD GROUP LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
NOTES 1999 1998
-------- -------- ---------
L L
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES......... 20 (265,434) 1,770,844
-------- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received........................................... 72,458 108,575
Interest paid............................................... (2,648) (5,227)
Interest element of finance lease rental payments........... (8,808) --
-------- ---------
61,002 103,348
TAXATION
UK corporation tax paid..................................... (581,455) (401,708)
ACT repayment............................................... 100,000 163,733
-------- ---------
(481,455) (237,975)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTS
Purchase of tangible fixed assets........................... (12,877) (634,175)
Purchase of investments..................................... -- (67,100)
Sale of tangible fixed assets............................... 52,355 62,148
-------- ---------
39,478 (639,127)
EQUITY DIVIDENDS PAID....................................... -- (397,885)
-------- ---------
Cash (outflow)/inflow before financing...................... (646,409) 599,205
FINANCING
New loan.................................................... 175,750 --
Repayment of loan........................................... (64,563) --
Capital element of finance lease rental payments............ (214,661) --
-------- ---------
CASH OUTFLOW FROM FINANCING................................. (103,474) --
-------- ---------
(DECREASE)/INCREASE IN CASH IN THE YEAR..................... 21 (749,883) 599,205
======== =========
The attached notes to the accounts form an integral part of these financial
statements.
F-55
QD GROUP LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
1 ACCOUNTING POLICIES
The principal accounting policies are summarised below:
A) BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention and in
accordance with applicable accounting standards.
B) BASIS OF CONSOLIDATION
The consolidated accounts include the accounts of the company and all its
subsidiary undertakings. The results of subsidiaries acquired or disposed of
during the year are included in the consolidated profit and loss account from
the date of their acquisition or up to the date of their disposal. Intra-group
sales and profits are eliminated on consolidation.
C) TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at cost less depreciation.
Depreciation is calculated so as to write off the cost of tangible fixed
assets less their estimated residual values, on a straight line basis, over the
expected useful economic lives of the assets concerned. The principal annual
rates used for this purpose are:
Motor vehicles.............................................. -- 25%
Computers................................................... -- 33%
Fixtures, fittings and equipment............................ -- 20%
D) FINANCE AND OPERATING LEASES
Costs in respect of operating leases are charged on a straight line basis
over the lease term. Where fixed assets are financed by leasing agreements,
which transfer to the company substantially all the benefits and risks of
ownership, the assets are treated as if they had been purchased outright and are
included in tangible fixed assets. The capital element of the leasing
commitments is shown as obligations under finance leases. The lease rentals are
treated as consisting of capital and interest elements. The capital element is
applied to reduce the outstanding obligations and the interest element is
charged against profit in proportion to the reducing capital element
outstanding. Assets held under finance leases are depreciated over the shorter
of the lease term and their useful lives.
E) FOREIGN CURRENCIES
Assets and liabilities expressed in foreign currencies at the balance sheet
date are translated into sterling at rates of exchange prevailing at the end of
the financial year. Transactions carried out during the year are translated at
the rate of exchange ruling at the date of the transaction. The results of
overseas operations are translated at the average rates of exchange during the
year and their balance sheets at the rates ruling at the balance sheet date.
Exchange differences arising on translation of the opening net assets and
results of overseas operations are dealt with through reserves. All other
exchange differences are included in the profit and loss account in the year in
which they arise.
F-56
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
1 ACCOUNTING POLICIES (CONTINUED)
F) TURNOVER
Turnover, which excludes value added tax and trade discounts, represents the
invoiced value of services supplied. Turnover is recognised at the date the
recruit commences employment, the date instructions for an advertising campaign
have been confirmed, when certain discrete stages of management consultancy
assignments have been completed, when conferences are actually held, or when
publications are issued.
G) DEFERRED TAXATION
Tax deferred or accelerated is accounted for in respect of all material
timing differences to the extent that it is probable that a liability or asset
will crystallise.
H) PENSION SCHEME ARRANGEMENTS
The company operates a defined contribution pension scheme. The fund is
administered by pension fund managers. Pension costs are accounted for on the
basis of charging the profit and loss account with the pension costs payable in
the year. The company provides no other post retirement benefits to its
employees.
I) EMPLOYEE SHARE OWNERSHIP TRUSTS
The company is deemed to have control of the assets, liabilities, income and
costs of The Quarry Dougall Employee Share Ownership Trust (ESOT). The ordinary
shares held by the ESOT are included in fixed asset investments and written down
to the option price over the minimum period of service to which the conditions
attached to the shares relate. No dividends have been waived in respect of these
shares and the dividends receivable are set off against the administrative costs
of running the ESOT.
2 ANALYSIS BY GEOGRAPHICAL AREA/BUSINESS SEGMENT
Turnover is generated wholly from the group's principal activities.
The analysis of the group's turnover by destination and origin is set out
below:
1999 1998
---------- ----------
L L
TURNOVER
United Kingdom....................................... 12,619,873 10,236,245
Europe............................................... 525,573 34,820
Far East............................................. 814,192 1,120,667
Rest of the World.................................... 378,343 509,106
---------- ----------
14,337,981 11,900,838
========== ==========
F-57
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
2 ANALYSIS BY GEOGRAPHICAL AREA/BUSINESS SEGMENT (CONTINUED)
The analysis of the group's turnover by business segment is set out below:
1999 1998
---------- ----------
L L
TURNOVER
Recruitment.......................................... 11,862,403 10,947,035
Training and development............................. 243,835 837,858
Business services.................................... 1,035,663 115,945
Discontinued businesses.............................. 1,196,080 --
---------- ----------
14,337,981 11,900,838
========== ==========
3 OTHER INCOME
1999 1998
-------- --------
L L
Dividends receivable....................................... 74,433 60,494
Provision no longer required............................... 50,786 --
------- ------
125,219 60,494
======= ======
4 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is stated after
charging/(crediting):
1999 1998
-------- --------
L L
Depreciation of tangible fixed assets
- -owned.................................................... 195,478 170,928
- -leased................................................... 165,818 10,275
Auditors' remuneration.................................... 17,675 14,500
Operating lease rental for
- -office equipment......................................... 7,827 12,108
- -land and buildings....................................... 297,936 247,054
Profit on disposal of tangible fixed assets............... (20,026) (14,140)
Profit on disposal of fixed asset investments............. (3,600) (77,710)
Exchange (gains)/ losses.................................. (18,319) 23,345
F-58
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
5 DIRECTORS' EMOLUMENTS AND TRANSACTIONS
1999 1998
-------- --------
L L
Directors' emoluments..................................... 335,000 335,000
Benefits in kind.......................................... 9,535 9,535
Contributions to defined contribution pension scheme...... 9,323 9,323
Emoluments of the highest paid director:
Remuneration.............................................. 344,535 344,535
Contributions to a defined contribution pension scheme.... 9,323 9,323
There is 1 (1998: 1) director in the defined contribution pension scheme.
DIRECTORS' TRANSACTIONS
During the year, Gareth Quarry let a villa owned by him to employees of the
group. The rents due to him were at commercial rates and were settled by Quarry
Dougall Recruitment Limited. Rents amounting to L6,736 were payable by the
company for the year ended 30 September 1999 (1998: L9,274). During the year he
also let a property for use as a training facility and as office premises for QD
Conferencing Limited. Rents amounting to L2,500 were payable by the company for
the year ended 30 September 1999 (1998: L10,000).
6 EMPLOYEE INFORMATION
The average number of persons employed by the company during the year was:
1999 1998
NUMBER NUMBER
-------- --------
Selling and marketing....................................... 94 77
Administration.............................................. 58 40
--- ---
152 117
=== ===
Employment costs--all employees including executive directors:
1999 1998
--------- ---------
L L
- -wages and salaries.................................... 6,476,404 4,958,982
- -social security costs................................. 535,962 376,633
- -pension costs......................................... 56,744 54,406
--------- ---------
7,069,110 5,390,021
========= =========
F-59
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
7 INTEREST PAYABLE
1999 1998
-------- --------
L L
Bank loans and overdrafts................................... 2,648 381
Finance leases.............................................. 8,808 3,270
------ -----
11,456 3,651
====== =====
8 TAXATION
1999 1998
-------- --------
L L
UK corporation tax
Current @ 30.5% (1998: 31%)............................... 260,025 170,366
(Over)/under provision in respect of prior years.......... (55,025) 59,642
Overseas taxation......................................... 49,262 98,834
------- -------
254,262 328,842
======= =======
9 PROFIT FOR THE FINANCIAL YEAR
As permitted by section 230 of the Companies Act 1985, the holding company's
profit and loss account has not been included in these financial statements. The
profit for the financial year dealt with in the accounts of the holding company
was L3,322,450 (1998: L165,776).
10 DIVIDENDS--EQUITY SHAREHOLDERS
1999 1998
-------- --------
L L
Interim dividend declared of L0.23 per share (1998: L0.47)
Founder shares............................................ 142,194 284,388
Ordinary shares........................................... 57,806 115,612
------- -------
200,000 400,000
======= =======
F-60
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
11 TANGIBLE FIXED ASSETS
FIXTURES,
MOTOR FITTINGS AND
COMPUTERS VEHICLES EQUIPMENT TOTAL
--------- -------- ------------ ---------
L L L L
COST
At 1 October 1998................... 576,927 256,444 465,773 1,299,144
Additions........................... 386,886 17,286 193,099 597,271
Disposals........................... -- (83,187) (705) (83,892)
------- ------- ------- ---------
At 30 September 1999................ 963,813 190,543 658,167 1,812,523
======= ======= ======= =========
DEPRECIATION
At 1 October 1998................... 133,030 134,188 295,456 562,674
Charge for year..................... 244,364 49,817 67,115 361,296
Disposals........................... -- (60,558) (705) (61,263)
------- ------- ------- ---------
At 30 September 1999................ 377,394 123,447 361,866 862,707
======= ======= ======= =========
NET BOOK VALUE
At 30 September 1999................ 586,419 67,096 296,301 949,816
======= ======= ======= =========
At 30 September 1998................ 443,897 122,256 170,317 736,470
======= ======= ======= =========
The net book value of computers includes L408,306 (1998: Lnil) in respect of
assets held under finance leases, comprising cost of L584,399 (including
L356,725 accrued at 30 September 1998) less depreciation of L176,093 (including
L10,275 on the accrued assets at 30 September 1998).
12 FIXED ASSET INVESTMENTS
ESOT INVESTMENT
IN OWN ORDINARY
SHARES
---------------
L
GROUP
At 1 October 1998........................................... 900,300
Disposals................................................... (6,100)
-------
At 30 September 1999........................................ 894,200
=======
ESOT
INVESTMENT INTEREST
IN OWN ORDINARY IN GROUP
SHARES UNDERTAKING TOTAL
--------------- ----------- --------
L L L
COMPANY
At 1 October 1998......................... 900,300 30,987 931,287
Additions................................. -- 16,631 16,631
Disposals................................. (6,100) -- (6,100)
------- ------ -------
At 30 September 1999...................... 894,200 47,618 941,818
======= ====== =======
EMPLOYEE SHARE OWNERSHIP TRUST
An Employee Share Ownership Trust (ESOT) was established on 30 March 1990.
At 30 September 1999, the ESOT held 132,000 20p ordinary shares at a cost of
L894,200 (1998: 133,220 ordinary shares
F-61
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
12 FIXED ASSET INVESTMENTS (CONTINUED)
at a cost of L900,300). The ESOT is a discretionary trust for the benefit of
employees (including certain directors).
SUBSIDIARY UNDERTAKINGS
PROPORTION OF
NOMINAL VALUE OF
SHARES HELD
NAME OF COMPANY AND COUNTRY OF DESCRIPTION OF --------------------
INCORPORATION AND OPERATION SHARES HELD GROUP COMPANY PRINCIPAL ACTIVITY
- ------------------------------------ ------------------ -------- --------- ------------------------------------
% %
Quarry Dougall Recruitment Limited Ordinary L1 shares 100 100 Recruitment and advertising services
(England and Wales) for the legal profession
QD Consulting Group Limited Ordinary L1 shares 100 100 Recruitment and advertising services
(England and Wales) for the legal profession, retail,
sales, marketing, banking and
finance sectors, career counselling
and outplacement services
Quarry Dougall Recruitment North Ordinary L1 shares 85 0.2 Recruitment and advertising services
Limited (England and Wales) for the legal profession
The Quarry Dougall Employee Ordinary 20p 100 100 Settlement to facilitate the
Share Ownership Trust shares in the acquisition of shares by employees
(England and Wales) company of the company
QD Conferencing Limited (England and Ordinary L1 shares 87.5 87.5 Provision of conferences for the
Wales) legal profession, retail, sales,
marketing, banking and finance
sectors
New City Media Limited Ordinary L1 shares 90 90 Production of various publications
(England and Wales) and yearbooks for the legal
profession
QD Asia Limited Ordinary HK$10 100 100 Recruitment and advertising services
(Hong Kong) Shares for the legal sector in
Asia-Pacific. The company commenced
trading on 23 February 1999
QD Technology Limited Ordinary L1 shares 90 90 Recruitment and advertising services
(England and Wales) for the information technology
sector
QD Legal Consulting GmbH Ordinary 1DM 100 100 Recruitment and advertising services
(Germany) shares for the legal profession in Germany
JuVe Verlag Fur Juristische Ordinary 1DM 90 90 Production of various publications
Information GmbH Shares and yearbooks for the legal
(Germany) profession in Germany
All the above companies operate principally in their country of
incorporation or settlement. Quarry Dougall Recruitment Limited also operates in
Canada and operated in Hong Kong until 22 February 1999 when the trade was
transferred to QD Asia Limited.
The group has incentivised key managers through deemed minority interests
which would become payable in shares or cash following a crystallising event.
Had the event taken place at the year end the directors believe that the amount
payable would not have materially affected the accounts.
F-62
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
13 DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
GROUP COMPANY
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
L L L L
Trade debtors..................................... 3,703,587 2,758,727 -- --
Dividend receivable from subsidiary undertaking... -- -- 3,223,935 --
Amounts owed by group undertakings................ -- -- 5,757,085 2,089,363
Other debtors..................................... 205,187 129,114 101,588 102,261
Prepayments and accrued income.................... 222,953 96,602 -- --
ACT recoverable................................... -- 100,000 -- 100,000
--------- --------- --------- ---------
4,131,727 3,084,443 9,082,608 2,291,624
========= ========= ========= =========
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
GROUP COMPANY
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
L L L L
Obligations under finance leases.................. 164,340 -- -- --
Term loan......................................... 49,416 -- -- --
Trade creditors................................... 1,255,395 1,155,003 -- --
Amounts owed to group undertakings................ -- -- 5,621,860 2,826,883
Corporation tax................................... 235,208 562,401 21,534 204,299
Other taxes and social security................... 533,402 386,901 -- --
Dividends payable................................. 200,000 2,115 200,000 2,115
Accruals and deferred income...................... 793,566 1,079,142 -- --
--------- --------- --------- ---------
3,231,327 3,185,562 5,843,394 3,033,297
========= ========= ========= =========
F-63
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
15 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
GROUP
-------------------
1999 1998
-------- --------
L L
FINANCE LEASES
- between one and two years............................. 164,319 --
- between two and five years............................ 41,079 --
------- -------
205,398 --
------- -------
TERM LOAN
- between one and two years............................. 49,416 --
- between two and five years............................ 12,355 --
------- -------
61,771 --
------- -------
TOTAL BORROWINGS INCLUDING FINANCE LEASES
- between one and two years............................. 213,735 --
- between two and five years............................ 53,434 --
------- -------
267,169 --
On demand or within one year.............................. 213,756 --
------- -------
480,925 --
======= =======
16 CALLED UP SHARE CAPITAL
ORDINARY FOUNDER ORDINARY FOUNDER
SHARES OF SHARES OF SHARES OF SHARES OF
20P EACH 0.1P EACH 20P EACH 0.1P EACH
1999 1999 1998 1998
--------------- --------------- --------------- ---------------
AUTHORISED
- value........................................... L100,000 L 750 L100,000 L 750
- number.......................................... 500,000 750,000 500,000 750,000
ALLOTTED, CALLED UP AND FULLY PAID
- value........................................... L 49,200 L 606 L 49,200 L 606
- number.......................................... 246,000 605,123 246,000 605,123
The founder shares of 0.1p each rank PARI PASSU with the ordinary shares of
20p each.
At 30 September 1999, options over 40,000 (1998: 100,000) ordinary shares of
20p each had been granted at L3 per share and over a further 4,000 (1998: 4,000)
ordinary shares of 20p each had been granted at L10 per share. The options are
exercisable on a crystallising event as a result of which there is a change of
control in the company. The option periods expire on 16 December 2001 and 21
October 2003 respectively.
F-64
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
17 SHARE PREMIUM ACCOUNT AND RESERVES
SHARE CAPITAL PROFIT
PREMIUM REDEMPTION AND LOSS
ACCOUNT RESERVE ACCOUNT TOTAL
--------- ---------- --------- ---------
L L L L
GROUP
At 1 October 1998................................. 30,895 944 3,490,041 3,521,880
Foreign exchange adjustment....................... -- -- (8,873) (8,873)
Retained profit for the year...................... -- -- 204,244 204,244
--------- --------- --------- ---------
At 30 September 1999.............................. 30,895 944 3,685,412 3,717,251
========= ========= ========= =========
COMPANY
At 1 October 1998................................. 30,895 944 1,818,997 1,850,836
Retained profit for the year...................... -- -- 3,122,450 3,122,450
--------- --------- --------- ---------
At 30 September 1999.............................. 30,895 944 4,941,447 4,973,286
========= ========= ========= =========
18 RECONCILIATION OF MOVEMENT IN GROUP SHAREHOLDERS' FUNDS
1999 1998
--------- ---------
L L
Profit for the financial year.......................... 404,244 737,233
Loss on currency translation........................... (8,873) --
Dividends.............................................. (200,000) (400,000)
--------- ---------
Net additions to shareholders' funds................... 195,371 337,233
Opening shareholders' funds............................ 3,571,686 3,234,453
--------- ---------
Closing shareholders' funds............................ 3,767,057 3,571,686
========= =========
19 MINORITY INTERESTS
1999 1998
-------- --------
L L
At 1 October 1998........................................... 3,658 127
Share of loss for the year.................................. (3,658) (5,292)
Minority interest in reserves............................... -- 6,503
Minority interest in share capital.......................... -- 2,320
------ ------
At 30 September 1999........................................ -- 3,658
====== ======
F-65
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
20 RECONCILIATION OF OPERATING PROFIT TO NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
1999 1998
---------- ---------
L L
Operating profit...................................... 593,846 955,859
Depreciation.......................................... 361,296 181,203
Profit on sale of tangible fixed assets............... (20,026) (14,140)
Profit on sale of investments......................... (3,600) (77,710)
Increase in debtors................................... (1,147,284) (968,314)
(Decrease)/increase in creditors...................... (49,666) 1,618,123
Bonus paid as shares.................................. -- 67,000
Decrease in minority interest......................... -- 8,823
---------- ---------
Net cash (outflow)/inflow from operating activities... (265,434) 1,770,844
========== =========
21 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
L L
-------- ----------
Decrease in net cash in the period.......................... (749,883)
Cash outflow from increase in debt and lease financing...... 103,474
--------
Change in net debt resulting from cash flows................ (646,409)
New finance leases.......................................... (584,399)
----------
Movement in net debt in the period.......................... (1,230,808)
Net funds at 1 October 1998................................. 2,039,693
----------
Net funds at 30 September 1999.............................. 808,885
==========
22 ANALYSIS OF CHANGES IN NET DEBT
AT AT
1 OCTOBER NON CASH 30 SEPTEMBER
1998 CASH FLOWS FLOW CHANGES 1999
--------- ---------- ------------ ------------
L L L L
Cash in hand and at bank........................ 2,039,693 (749,883) -- 1,289,810
Debt due within one year........................ -- (49,416) -- (49,416)
Debt due after more than one year............... -- (61,771) -- (61,771)
Finance leases.................................. -- 214,661 (584,399) (369,738)
--------- -------- -------- ---------
2,039,693 (646,409) (584,399) 808,885
========= ======== ======== =========
23 FINANCIAL COMMITMENTS
GROUP
The group no longer holds non-cancellable operating leases for office
equipment. The group leases certain properties on short and long term leases.
The rents payable under these leases, which are subject to
F-66
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
23 FINANCIAL COMMITMENTS (CONTINUED)
renegotiation at various intervals specified in the leases and in respect of
which the group pays all insurance, maintenance and repairs, in the next year
are as follows:
1999 1998
--------- ---------
L L
Date of lease termination:
Within one year........................................ 205,009 216,631
In two to five years................................... 539,680 858,071
More than five years................................... 313,650 --
--------- ---------
1,058,339 1,074,702
========= =========
Other capital commitments:
The group had no contracted capital commitments at the year end (1998:
L300,000).
24 PENSION OBLIGATIONS
The group participates in a defined contribution pension scheme. The assets
of the scheme are held separately from those of the group. The total pension
cost for the year was L56,744 (1998: L54,406).
25 CONTINGENT LIABILITIES
The group has incentivised key management through deemed minority interests
which would become payable in shares or cash following a crystallising event.
Had the event taken place at the year end, the directors believe that the amount
payable would not have been significant.
26 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles in the UK ("UK GAAP") which differ in
certain respects from those generally accepted in the
F-67
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
26 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
United States ("US GAAP"). The significant areas of difference affecting the
financial statements of the Group are described below:
RECONCILIATIONS
The following is a summary of the material adjustments to net income and
shareholders' equity which would have been required if US GAAP had been applied
instead of UK GAAP:
NOTE 1999 1998
-------- --------- ---------
L L
NET INCOME IN ACCORDANCE WITH UK GAAP....................... 404,244 737,233
ADJUSTMENTS TO CONFORM WITH US GAAP
Dividends receivable on shares held by ESOT................. (a) (74,433) (60,494)
Profit on sale of shares held by ESOT....................... (a) (3,600) (77,710)
Deferred tax (charge)/benefit............................... (c) (69,156) 16,773
--------- ---------
NET INCOME IN ACCORDANCE WITH US GAAP....................... 257,055 615,802
========= =========
1999 1998
--------- ---------
L L
SHAREHOLDERS' FUNDS IN ACCORDANCE WITH UK GAAP.............. 3,767,057 3,571,686
ADJUSTMENTS TO CONFORM WITH US GAAP
Dividends proposed but not approved or paid................. (d) 125,567 --
Reclassification of investment held by ESOT................. (a) (894,200) (900,300)
Deferred tax asset.......................................... (c) -- 16,773
Deferred tax liability...................................... (c) (52,383) --
--------- ---------
SHAREHOLDERS' FUNDS IN ACCORDANCE WITH US GAAP.............. 2,946,041 2,688,159
========= =========
This note has been modified with respect to the one included in the 1998 and
1999 financial statements of QD Group Limited in the Form S-1 of TMP Worldwide
Inc. previously filed on 21 July 2000.
A) EMPLOYEE SHARE OWNERSHIP TRUST
Under UK GAAP, shares in the company which are held by the ESOT are shown as
fixed asset investments and the related dividends receivable and gain or loss on
sale of shares are included in operating income. Under US GAAP, the shares held
by the ESOT are shown as treasury shares and the dividends and gains or losses
on sales of shares are not recognised.
F-68
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
26 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
B) DISCONTINUED OPERATIONS
The effect of discontinued operations on the 1998 results were as follows:
CONTINUING DISCONTINUED
BUSINESSES BUSINESSES TOTAL
---------- ------------ ----------
L L L
TURNOVER................................................. 11,345,155 555,683 11,900,838
Cost of sales............................................ (1,872,541) (431,268) (2,303,809)
---------- ---------- ----------
Gross profit............................................. 9,472,614 124,415 9,597,029
Net operating expenses................................... (8,067,016) (634,648) (8,701,664)
Other income............................................. 60,494 -- 60,494
---------- ---------- ----------
OPERATING PROFIT......................................... 1,466,092 (510,233) 955,859
========== ========== ==========
NET LIABILITIES OF DISCONTINUED OPERATIONS
1999 1998
---------- --------
L L
Tangible assets........................................ 29,438 35,399
Debtors................................................ 946,698 47,121
Cash at bank........................................... 48,132 5,927
Creditors: amounts falling due within one year......... (1,962,813) (597,680)
---------- --------
Net liabilities........................................ (938,545) (509,233)
========== ========
C) INCOME TAXES
Under UK GAAP, the Group provides for deferred taxation using the partial
liability method on all timing differences to the extent that it is considered
probable that the liabilities will crystallise in the foreseeable future.
Deferred tax assets are recognised to the extent that they are recoverable
without replacement in the foreseeable future.
Under US GAAP, income taxes are accounted for under Statement of Financial
Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes." In
accordance with SFAS No. 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax basis of
assets and liabilities and are measured using enacted tax rates and laws that
are expected to be in effect when the difference is reversed. The effect on
deferred income tax assets and liabilities of a change in tax rates is
recognised in income in the period that includes the enactment date.
F-69
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
26 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
Income before the provision for taxes consisted of the following:
1999 1998
-------- --------
L L
Domestic.................................................. 571,521 439,349
Foreign................................................... 5,294 483,230
------- -------
INCOME/(LOSS) BEFORE INCOME TAXES UNDER US GAAP........... 576,815 922,579
======= =======
The following table reconciles the income tax provision/(benefit) at the
United Kingdom statutory rate to that in the financial statements:
1999 1998
-------- --------
L L
Taxes computed at 30.5% (1998: 31%)....................... 175,929 285,999
Permanent differences..................................... 42,806 33,947
Prior years' adjustments.................................. 35,527 8,896
Deferred tax charge (benefit)............................. 69,156 (16,773)
------- -------
Income tax charge......................................... 323,418 312,069
======= =======
Details of the provision for income taxes in the consolidated statements of
operations are as follows:
1999 1998
-------- --------
L L
CURRENT TAXES
Domestic.................................................. 205,000 230,008
Foreign................................................... 49,262 98,834
------- -------
Total current............................................. 254,262 328,842
DEFERRED TAX (BENEFIT)
Domestic.................................................. 69,156 (16,773)
Foreign................................................... -- --
------- -------
Total deferred............................................ 69,156 (16,773)
------- -------
TOTAL PROVISION FOR INCOME TAXES.......................... 323,418 312,069
======= =======
The components of the Group's deferred tax assets and liabilities under US
GAAP are as follows:
1999 1998
-------- --------
L L
CURRENT DEFERRED TAX ASSET................................ -- 16,773
CURRENT DEFERRED TAX LIABILITIES.......................... (40,678) --
NON-CURRENT DEFERRED TAX LIABILITIES...................... (11,705) --
------- -------
NET DEFERRED TAX (LIABILITIES)/ASSETS..................... (52,383) 16,773
======= =======
F-70
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
26 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
All of the Group's deferred tax assets and liabilities relate to temporary
differences in accounting and tax depreciation of tangible fixed assets.
D) DIVIDENDS
Under UK GAAP, the Group recognises a liability in respect of dividends when
proposed. Under US GAAP, dividends are only recognised when dividends are
approved or paid.
1999 1998
-------- --------
L L
Amount of dividends approved or paid following US GAAP.... -- 397,885
Amount of dividends proposed following UK GAAP............ 200,000 400,000
E) STATEMENT OF CASH FLOWS
Under UK GAAP, cash flows are presented separately for operating activities,
return on investments and servicing of finance, taxation, capital investment and
financial investments, equity dividends and financing activities. Cash and cash
equivalents represents cash in hand and deposits repayable on demand with any
qualifying financial institution, less overdrafts from any qualifying financial
institution repayable on demand. Deposits are repayable on demand if they can be
withdrawn at any time without notice and without penalty or if a maturity or
period of notice of not more than 24 hours or one working day has been agreed.
Cash includes cash in hand and deposits denominated in foreign currencies.
Liquid resources are current asset investments held as readily disposable stores
of value. A readily disposable investment is one that is disposable by the
reporting entity without curtailing or disrupting its business; and is either
readily convertible into known amounts of cash at or close to its carrying
amount, or traded in an active market.
Under US GAAP, cash flows are reported as operating activities, investing
activities and financing activities. Cash flow from taxation and returns on
investments and servicing of finance would, with the exceptions of dividends
paid, be included in operating activities. The payment of dividends would be
included under financing activities. Cash and cash equivalents represents all
highly liquid investments with original maturities of three months or less. Cash
and cash equivalent balances consist of deposits with banks and financial
institutions, which are unrestricted as to withdrawal or use.
Set out below is a summary consolidated statement of cash flows for the
Group under US GAAP.
1999 1998
-------- ---------
L L
Net cash (used in)/provided by operating activities..... (685,887) 1,636,795
Net cash provided by/(used in) investing activities..... 39,478 (572,027)
Net cash used in financing activities................... (103,474) (465,563)
-------- ---------
Net (decrease)/increase in cash under US GAAP........... (749,883) 599,205
======== =========
F) FIXED ASSETS
Under UK GAAP, fixed assets are assessed for impairment when there is some
indication that the carrying value of a fixed asset may exceed its recoverable
amount. Impairment is determined and measured
F-71
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
26 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
by comparing the carrying value of the fixed asset with its recoverable amount.
The recoverable amount is the higher of the amounts that can be obtained from
selling the fixed asset (net realisable value) or using the fixed asset (value
in use which is normally determined by reference to discounted cash flows).
Under US GAAP, the determination of whether an impairment has occurred is by
reference to undiscounted cash flows. If this indicates an impairment the
writedown is based upon the fair value of the asset which is usually determined
by reference to discounted cash flows. As a result impairment writedowns are
less likely to be recognised under US GAAP.
The Group has not recorded any fixed asset impairments under UK or US GAAP
during the years ended 30 September 1999 and 1998.
G) USE OF ESTIMATES
The preparation of financial statements in conformity with both US and UK
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
H) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Group to a concentration
of credit risk consist of cash and cash equivalents and accounts receivable. The
Group performs ongoing credit evaluations of customers and generally does not
require collateral on accounts receivable. The Group maintains allowances for
potential credit losses and such losses have been within management's
expectations. The allowances were L65,000 and L43,726 at 30 September 1999 and
1998 respectively.
The fair market value of cash and cash equivalents, accounts receivable and
debt instruments at 30 September 1999 and 1998 approximate their carrying
amounts because of their short maturity.
I) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or a liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognised currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows gains and losses on a derivative to offset related results on the hedged
item in the income statement, and requires that a Group formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
years beginning after 15 June 2000 and cannot be applied retroactively. The
Group does not expect the impact of this new statement on its balance sheet or
income statement to be material.
F-72
QD GROUP LIMITED
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1999 AND 30 SEPTEMBER 1998
26 SUMMARY OF RELEVANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
In March 2000, Emerging Issues Task Force issued EITF 00-02 "Accounting for
Web Site Development Costs." EITF 00-02 requires that certain costs incurred by
a company in developing its own website be capitalised and that certain other
costs should be expensed as incurred. The Group has not incurred significant
costs in developing its own website.
F-73
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following Pro Forma Condensed Consolidated Financial Information
reflects financial information with respect to the acquisition, effective
August 1, 2000, by TMP Worldwide Inc. and subsidiaries ("TMP" or the "Company")
of all the outstanding stock of QD Group Limited ("QD Group") for a purchase
price of approximately $62.6 million, consisting of approximately $15.9 million
in cash, $12.2 million in seller notes, payable over two years plus interest at
LIBOR plus 0.5% and approximately $34.5 million in TMP stock, representing
475,853 shares of TMP common stock. The acquisition of QD Group was accounted
for under the purchase method. The Unaudited Pro Forma Condensed Consolidated
Financial Information is derived from the consolidated financial statements of
TMP included herein and the historical financial statements of QD Group included
herein.
The Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss)
for the year ended December 31, 2000 gives effect to the acquisition of
QD Group as if it had occurred on January 1, 2000. The consolidated financial
statements of QD Group were translated from British pounds to U.S. dollars at
the rate of 1.60 with respect to the December 2000 statement of income (loss).
The QD Group acquisition occurred prior to December 31, 2000, and, accordingly
is already reflected in TMP's balance sheet as of December 31, 2000 included
elsewhere herein.
For purposes of the unaudited pro forma financial statement, TMP's
consolidated statement of income (loss) for the year ended December 31, 2000 has
been combined with the statement of operations of QD Group for the seven months
ended July 31, 2000.
The Unaudited Pro Forma Condensed Consolidated Financial Information gives
effect to the acquisition of QD Group based upon actual allocation of the
purchase price, and includes all adjustments described in the notes thereto. The
pro forma adjustments are based on certain assumptions that TMP's management
believes are reasonable under the circumstances and do not reflect any potential
cost savings. The Unaudited Pro Forma Condensed Consolidated Information is not
necessarily indicative of the results that would have been reported if such
events had occurred on the date specified nor is it intended to project TMP's
results of operations or financial position for any future period or date. The
Unaudited Pro Forma Condensed Consolidated Information set forth should be read
in conjunction with the audited consolidated financial statements of TMP as of
December 31, 2000 and 1999 and for the three years in the period ended
December 31, 2000, the audited financial statements of QD Group as of and for
the years ended September 30, 1999 and 1998 and the unaudited financial
statements as of June 30, 2000 and for the six months ended June 30, 2000 and
1999 for QD Group all included herein.
F-74
TMP WORLDWIDE INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
QD GROUP
BUSINESSES
TMP NOT
WORLDWIDE, QD GROUP ACQUIRED
INC. LIMITED (A) ADJUSTMENTS TOTAL
---------- -------- ---------- ----------- ----------
Commissions and fees........................................ $1,291,737 $14,809 $ (92) $ -- $1,306,454
---------- ------- ------- ------- ----------
Operating expenses:
Salaries & related........................................ 667,398 8,101 (876) -- 674,623
Office & general.......................................... 287,428 3,763 (1,048) -- 290,143
Marketing & promotion..................................... 161,367 1,062 (22) -- 162,407
Merger & integration...................................... 64,604 -- -- -- 64,604
Amortization of intangibles............................... 16,536 -- -- 1,085 (b) 17,621
---------- ------- ------- ------- ----------
Total operating expenses................................ 1,197,333 12,926 (1,946) 1,085 1,209,398
---------- ------- ------- ------- ----------
Operating income (loss)..................................... 94,404 1,883 1,854 (1,085) 97,056
Total other income (expense), net....................... 19,615 921 (818) (466)(c) 19,252
---------- ------- ------- ------- ----------
Income (loss) before provision (benefit) for income taxes
and minority interests.................................... 114,019 2,804 1,036 (1,551) 116,308
Provision (benefit) for income taxes........................ 57,602 842 263 (177)(d) 58,530
---------- ------- ------- ------- ----------
Income (loss) before minority interests..................... 56,417 1,962 773 (1,374) 57,778
Minority interests.......................................... (442) -- -- -- (442)
---------- ------- ------- ------- ----------
Net income (loss) applicable to common and Class B common
stockholders.............................................. $ 56,859 $ 1,962 $ 773 $(1,374) $ 58,220
========== ======= ======= ======= ==========
Net income (loss) per common and Class B common share:
Basic..................................................... $ 0.56 $ 0.57
========== ==========
Diluted................................................... $ 0.53 $ 0.54
========== ==========
Weighted average shares outstanding:
Basic..................................................... 101,413 102,134 (e)
========== ==========
Diluted................................................... 107,903 108,624 (e)
========== ==========
- ------------------------------
(a) Adjustments reflect income and expense balances of certain businesses of QD
Group which were not acquired by the Company. TMP acquired QD Group's base
selection business, excluding certain media divisions from the transaction.
(b) Adjustment reflects amortization expense, calculated on goodwill of
$55.8 million related to the acquisition of QD Group, based on an estimated
useful life of 30 years.
(c) Adjustment to record interest at 6.55% on $12.2 million in seller notes
issued in connection with the acquisition of QD Group.
(d) Adjustment to record the tax benefit at 38% of $466 in interest expense.
(e) Weighted average shares outstanding reflects the effect of the issuance of
476 shares and the presumed issuance of 245 shares relating to the funding
of $15.9 million in cash both paid in connection with the acquisition of QD
Group. Shares presumed to be issued were considered to be outstanding from
January 1, 2000 through January 27, 2000, the date of TMP's follow on
offering.
F-75
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
accounts and commissions) are estimated to be as follows:
SEC Registration Fee........................................ $122,915.00
Accountants' Fees and Expenses.............................. 20,000.00
Legal Fees and Expenses..................................... 20,000.00
Printer fees................................................ 20,000.00
Miscellaneous............................................... 17,085.00
-----------
Total....................................................... $200,000.00
===========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware permits
indemnification of directors, officers and employees of a corporation under
certain conditions and subject to certain limitations. Article VI of the By-Laws
of the Registrant contains provision for the indemnification of directors,
officers and employees within the limitations permitted by Section 145. In
addition, the Company has entered into Indemnity Agreements with its directors
and officers which provide the maximum indemnification allowed by Section 145.
The Company's officers and directors are insured against losses arising from any
claim against them as such for wrongful acts or omissions, subject to certain
limitations.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
1. On May 6, 1998, we issued 1,542,706 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Johnson,
Smith & Knisely Inc.
2. On August 31, 1998, we issued 3,407,788 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of TASA Holding AG.
3. On September 30, 1998, we issued 1,014,164 shares of our common stock in
a private placement transaction pursuant to Section 4(2) of the Securities Act
of 1933, as amended, in exchange for all of the outstanding shares of
Stackig Inc.
4. On October 2, 1998, we issued 208,084 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Recruitment
Solutions, Inc.
5. On November 2, 1998, we issued 619,404 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding units in SunQuest, LLC
d/b/a The SMART Group.
6. On December 2, 1998, we issued 493,212 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of The Consulting Group (International) Limited.
II-1
7. On January 28, 1999, we issued 10,296,582 shares of our common stock
pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, in
exchange for all of the outstanding shares of Morgan & Banks Limited.
8. On March 5, 1999, we issued 146,828 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding stock
of Van Ram Associates International B.V.
9. On April 30, 1999, we issued 353,390 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Interquest Pty Limited.
10. On May 19, 1999, we issued 225,212 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of LIDA
Advertising, Inc.
11. On May 20, 1999, we issued 220,000 shares of our common stock in a
private placement transaction pursuant to Regulation S of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Maes & Lunau.
12. On May 28, 1999 we issued 578,062 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of IN2, Inc.
13. On May 28, 1999, we issued 245,816 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Lemming &
Levan, Inc.
14. On May 28, 1999, we issued 178,000 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Yellow Pages
Unlimited, Inc.
15. On August 2, 1999, we issued 840,000 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of
Cameron-Newell Adversting, Inc.
16. On August 3, 1999, we issued 261,800 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Brook Street Bureau Pty, Ltd.
17. On August 30, 1999, we issued 259,280 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Fox
Advertising, Inc.
18. On August 31, 1999, we issued 826,192 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated of the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Lampen Group Limited.
19. On October 21, 1999, we issued 1,398,666 shares of our common stock in
a private placement transaction pursuant to Section 4(2) of the Securities Act
of 1933, as amended, in exchange for all of the outstanding units of Highland
Search Group, LLC.
20. On October 27, 1999, we issued 118,560 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding stock
of TMC S.r.l.
II-2
21. On February 10, 2000, we issued 169,764 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding stock
in Baumgartner & Partner GmbH & Co. KG.
22. On February 16, 2000, we issued 715,769 shares of our common stock
pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, in
exchange for all of the outstanding stock of HW Group PLC.
23. On February 16, 2000, we issued 689,090 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding stock of Mircrosurf,
Inc., and in connection with issuances of stock related stay bonuses.
24. On February 29, 2000, we issued 52,190 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding stock in Burlington
Wells, Inc., Burlington Wells Information Systems, Inc. and Burlington Wells
South Florida, Inc.
25. On February 29, 2000, we issued 54,940 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding stock
in Medios Publicitaros Activos MPS, S.A.
26. On March 1, 2000, we issued 246,702 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding stock
of 577139 Ontario Ltd., d/b/a Illsley Bourbannais.
27. On March 21, 2000, we issued 13,080 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding stock
in Curriculum S.A., Kerguelen, S.A. and Syntagme, S.A. (collectively, the
"Curriculum Group").
28. On April 3, 2000, we issued 1,022,257 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding stock in System One
Services, Inc.
29. On April 4, 2000 we issued 54,041 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding stock in GTR
Advertising, Inc.
30. On May 9, 2000 we issued 947,916 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding stock in Virtual
Relocation.com, Inc.
31. On May 12, 2000 we issued 51,906 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of NIBO Holding B.V.
32. On May 17, 2000 we issued 205,703 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Business Technologies Limited.
33. On May 31, 2000 we issued 164,833 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Simpatix
Inc., and in connection with issuances of stock related stay bonuses.
34. On May 31, 2000 we issued 623,892 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Web
Technology Partners, Inc.
II-3
35. On May 31, 2000 we issued 144,601 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Rollo
Associates, Inc., and in connection with issuances of stock related stay
bonuses.
36. On June 5, 2000 we issued 23,817 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Management Resources International B.V.
37. On August 31, 2000 we issued 43,535 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Rich, Gardner
& Associates, Ltd.
38. On August 31, 2000 we issued 311,978 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in an exchange for all of the issued and outstanding shares of
Stratascape, Inc.
39. On September 4, 2000 we issued 475,853 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933 as amended, in exchange for all of the outstanding shares
of QD Group Limited.
40. On October 2, 2000 we issued 198,271 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Accounting
Solutions.
41. On October 13, 2000 we issued 44,810 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of SCI Search Competence International Aktiebolag.
42. On November 1, 2000 we issued 90,750 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of
Cashback2.com, Inc.
43. On November 7, 2000 we issued 3,333,060 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Jobtrak
Corporation.
44. On November 28, 2000 we issued 67,505 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Craighead
Inc.
45. On December 6, 2000 we issued 357,782 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of SPEC Group
Holdings, Inc.
46. On December 8, 2000 we issued 1,764,677 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of People.com
Consultants, Inc.
47. On December 15, 2000 we issued 47,728 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Synapse S.A.
48. On December 15, 2000 we issued 45,065 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Lacey Lee Limited.
II-4
49. On December 18, 2000 we issued 87,644 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Simon Franco Recursos Humanos S/A, Opportunity Ltda. Consultoria em
Recursos Humanos and Simon Franco e Associados S/C Ltda.
50. On January 10, 2001 we issued 201,621 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, and other consideration, in exchange for all of the
outstanding shares of ADEPT, Inc.
51. On March 1, 2001 we issued 809,558 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of
JWG Associates Inc. and Careerbay.com LLC.
52. On March 9, 2001 we issued 86,575 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of
HiringTools.com, Inc.
53. On March 9, 2001 we issued 31,368 shares of our common stock in a
private placement transaction pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended, in exchange for all of the outstanding
shares of Coe & Company International Inc.
54. On March 30, 2001 we issued 383,781 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Management
Solutions, Inc.
55. On April 4, 2001 we issued 25,314 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding shares of Corporate
Communications, Inc.
II-5
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
2.1 Scheme Implementation Agreement, dated August 17, 1998,
between Morgan & Banks Limited and TMP Worldwide Inc.*****
2.2 Agreement and Plan of Merger, dated as of March 11, 1999, by
and among TMP Worldwide Inc., TMP Florida Acquisition Corp.
and LAI Worldwide, Inc.********
3.1 Certificate of Incorporation.****
3.2 Bylaws.****
3.3 First Amendment to Bylaws.**
4.1 Form of Common Stock Certificate.****
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding legality.*
10.1 Form of Employee Confidentiality and Non-Solicitation
Agreement.****
10.2 Form on Indemnification Agreement.****
10.3 1996 Stock Option Plan.****
10.4 Form of Stock Option Agreement under 1996 Stock Option
Plan.****
10.5 1996 Stock Option Plan for Non-Employee Directors.****
10.6 Form of Stock Option Agreement under 1996 Stock Option Plan
for Non-Employee Directors.****
10.7 Lease, dated as of October 31, 1978, between Telephone
Marketing Programs, Inc. and PDC Realty Inc. as agent for
MRI Broadway Rental, Inc., as modified by modifications
dated January, 1979 and June 20, 1999.****
10.8 Amendment and Restated Accounts Receivable Management and
Security Agreement, dated as of June 27, 1996, between TMP
Worldwide, Inc. and BNY Financial Corporation as amended by
Amendment No. 1 to Amended and Restated Accounts Receivable
Management and Security Agreement, dated as of August 29,
1996.****
10.9 Lease Agreement, dated as of June 1, 1996 by and between TPH
and AJM, a partnership, and Telephone Directory Advertising,
Inc.****
10.10 Agreement, dated as of March 17, 1998, between TMP Worldwide
Inc. and George Eisele, as amended by Amendment 1 to
Agreement, dated as of September 5, 1996.****
10.11 Management Agreement, dated as of January 1, 1996, between
Cala Services Inc. and Cala H.R.C. Ltd.****
10.12 Lease Agreement, dated May 15, 1993, between 12800 Riverside
Drive Corporation and TMP Worldwide Inc. as amended by
Amendment No. 1 to Lease Agreement, dated June 1, 1993.***
10.13 Indenture, dated April 29, 1998, between International
Drive, L.P. and Telephone Marketing Programs, Inc.****
10.14 Amended and Restated Employment Agreement, dated as of
September 11, 1996, between TMP Interactive Inc. and Jeffrey
C. Taylor.****
10.15 Second Amended and Restated Employment Agreement, dated
November 2, 1999, by and among TMP Worldwide, Inc., TMP
Interactive Inc. and Jeffrey C. Taylor.+++++
10.16 Amendment No. 1 to the Employment Agreement, dated
October 21, 1996, between TMP Worldwide Inc. and James J.
Treacy.+
10.17 Amendment No. 2 to Employment Agreement between TMP
Worldwide Inc. and James J. Treacy, effective as of
October 1, 1999.******
10.18 Amendment No. 1 to Employment Agreement, dated November 15,
1998, between TMP Worldwide Inc. and Andrew J. McKelvey.+
10.19 Amendment No. 2 to Employment Agreement, dated May 1, 1999,
between TMP Worldwide Inc. and Andrew J. McKelvey.++++
10.20 Employment Agreement, dated October 21, 1999, by and between
TMP Worldwide Inc. and Steven B. Potter.
II-6
10.21 Warrant Agreement, dated October 13, 1993, between TMP
Worldwide Inc. and BNY Financial Corporation, as amended by
an amendment dated December 31, 1995.****
10.22 Form of Option Agreement, dated as of January 1, 1995,
relating to options issued to shareholders and/or principals
of Kidd, Schneider & Dersch, Inc.****
10.23 Amendment No. 3 to Amended and Restated Accounts Receivable
Management and Security Agreement, dated as of May 15, 1997,
between BNY Financial Corporation and TMP Worldwide Inc.***
10.24 Management Agreement, dated June 1, 1997, between Dir-Ad
Services Inc./Les Services Dir-Ad Inc. and TMP Worldwide
Ltd.***
10.25 Third Amended and Restated Accounts Receivable Management
and Security Agreement, dated as of November 5, 1998,
between BNY Financial Corporation and TMP Worldwide Inc.+
10.26 Amendment No. 1 to Third Amended and Restated Accounts
Receivable Management and Security Agreement.*******
10.27 Amendment No. 2 to Third Amended and Restated Accounts
Receivable Management and Security Agreement.*******
10.28 Content License and Interactive Marketing Agreement, dated
as of December 1, 1999, between America Online, Inc. and TMP
Interactive Inc.******
10.29 Indenture of Lease, dated December 13, 1999, between the 622
Building Company LLC and TMP Worldwide Inc.******
10.30 Warranty and Indemnity Agreement, dated July 18, 2000,
relating to the entire issued share capital of QD Group
Limited, between Mr. G. Quarry and TMP Worldwide Inc.**
10.31 Agreement and Plan of Merger, dated August 31, 2000, by and
among TMP Worldwide Inc., Rich, Gardner & Associates, Ltd.,
Fred Rich and Furman Gardner.**
10.32 Stock Purchase Agreement, dated August 31, 2000, by and
among TMP Worldwide Inc., Stratascape, Inc. and the
shareholders listed on Schedule A thereto.**
10.33 Stock Purchase Agreement, dated June 19, 2000, among TMP
Worldwide Inc., MoveCentral, Inc., MoveCentral Company and
the beneficial owners of MoveCentral Company listed on
Schedule A thereto.++++++
21 Subsidiaries of the Company.***
23.1 Consent of Fulbright & Jaworski L.L.P. (included in 5.1).*
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of Pannell Kerr and Forster.
23.4 Consent of Arthur Andersen LLP.
23.5 Consent of Arthur Andersen.
24 Power of Attorney.*
(b) Financial Statements and Schedules
The following financial statement schedules are filed herewith:
Report of Independent Certified Public Accountants.......... S-1
Report of Independent Certified Public Accountants (with
respect to LAI Worldwide, Inc.)............................ S-2
Schedule II--Valuation and Qualifying accounts for the years
ended December 31, 2000, 1999 and 1998..................... S-3
II-7
All other schedules are omitted because they are not required or are not
applicable or the information is included in the financial statements or notes
thereto.
- ------------------------
* Previously filed.
** Incorporated by reference to Exhibits to the Registration
Statement on Form S-1 (Registration No. 333-41996)
*** Incorporated by reference to Exhibits to the Registration
Statement on Form S-1 (Registration No. 333-31657).
**** Incorporated by reference to Exhibits to the Registration
Statement on Form S-1 (Registration No. 333-12471).
***** Incorporated by reference to Exhibits to the Registration
Statement on Form S-3 (Registration No. 333-63499).
****** Incorporated by reference to Exhibits to the Registration
Statement on Form S-3 (Registration No. 333-93065).
******* Incorporated by reference to Exhibits to the Registration
Statements on Form S-3 (Registration No. 333-82531).
******** Incorporated by reference to Exhibits to the Registration
Statement on Form S-4 (Registration No. 333-82531).
+ Incorporated by reference to Exhibits to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998 (Registration No. 000-21571).
++ Incorporated by reference to Exhibits to the Company's
Annual Report on Form 10-K/A for the year ended
December 31, 1997 (Registration No. 000-21571).
+++ Incorporated by reference to Exhibits to the Company's
Current Report on Form 8-K dated March 17, 1999.
++++ Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1999
(Commission File No 000-21571).
+++++ Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30,
1999 (Commission File No 000-21571).
++++++ Incorporated by reference to Exhibits to the Company's
Current Report on Form 8-K dated June 30, 2000.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement; notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range
II-8
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement of
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Rule 3-19.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person of the Registrant in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on April 10, 2001.
TMP WORLDWIDE INC.
By: /s/ ANDREW J. MCKELVEY
-----------------------------------------
Andrew J. McKelvey
CHAIRMAN AND CEO
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANDREW J. MCKELVEY Chairman, CEO and Director
------------------------------------------- (PRINCIPAL EXECUTIVE April 10, 2001
Andrew J. McKelvey OFFICER)
/s/ JAMES J. TREACY Executive Vice President,
------------------------------------------- Chief Operating Officer April 10, 2001
James J. Treacy and Director
/s/ BART W. CATALANE Chief Financial Officer
------------------------------------------- (PRINCIPAL FINANCIAL AND April 10, 2001
Bart W. Catalane ACCOUNTING OFFICER)
*
------------------------------------------- Director April 10, 2001
George R. Eisele
*
------------------------------------------- Director April 10, 2001
Michael Kaufman
*
------------------------------------------- Director April 10, 2001
John Swann
*
------------------------------------------- Director April 10, 2001
Ronald J. Kramer
*By: /s/ ANDREW J. MCKELVEY
--------------------------------------
Andrew J. McKelvey
ATTORNEY IN FACT
II-10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
The audits referred to in our report dated February 16, 2001, relating to
the consolidated financial statements of TMP Worldwide Inc. and Subsidiaries,
included the audit of the consolidated financial statement schedule listed in
the accompanying index. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statement schedule based upon our audits.
We did not audit the financial statement schedule of LAI Worldwide, Inc. and
subsidiaries which was combined with the Company's financial statement schedule.
That financial statement schedule was audited by another auditor whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for LAI Worldwide, Inc. and subsidiaries for 1998 is based solely on
the report of the other auditor.
In our opinion, based on our audits and the report of the other auditor, the
consolidated financial statement schedule presents fairly, in all material
respects, the information set forth therein.
/s/ BDO SEIDMAN, LLP
---------------------------------------------
BDO Seidman, LLP
New York, New York
February 16, 2001
S-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To LAI Worldwide, Inc.:
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of LAI Worldwide, Inc.
(not presented separately herein) and have issued our report thereon dated April
7, 1999. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 16(b) of the
index of exhibits and financial statement schedules is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule, as it pertains to the 1998
data related to LAI Worldwide, Inc., has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Tampa, Florida
April 7, 1999
S-2
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
COLUMN C--
COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E
-------- ------------- ------------------------- ----------- ---------
BALANCE
BALANCE AT CHARGED TO CHARGED TO AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTIONS PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ ------------- ----------- ----------- ----------- ---------
Allowance for doubtful
accounts
Year ended December 31,
1998...................... $14,748 $ 6,734 $ 1,780(1) $ 4,123 $19,139
Year ended December 31,
1999...................... $19,139 $14,735 $ 283(1) $ 7,887 $26,270
Year ended December 31,
2000...................... $26,270 $25,990 $ 468(1) $13,989 $38,739
Accrued integration and
restructuring reserves
Year ended December 31,
1998...................... $16,801 $ 3,543 $10,020 $13,617 $16,747
Year ended December 31,
1999...................... $16,747 $38,401 $ 3,381 $37,076 $21,453
Year ended December 31,
2000...................... $21,453 $32,694 $15,744 $41,877 $28,014
- ------------------------
(1) Initial reserves of companies acquired in purchase business combinations.
S-3