1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------- Date of Report (Date of earliest event reported) - July 16, 1998 THE DWYER GROUP, INC. (Exact name of registrant as specified in its chapter) DELAWARE 0 - 15227 73-0941783 (State or other (Commission (IRS employer jurisdiction of file number) identification no.) incorporation or organization) 1010 N. UNIVERSITY PARKS DRIVE WACO, TEXAS 76707 (Address of principal executive offices) (254) 745-2400 (Registrant's telephone number, including area code) =============================================================================== 2 The Registrant hereby amends its Current Report on Form 8-K, dated July 16, 1998, for the purpose of filing pro forma financial information with regard to the sale of the majority of the assets of two of its subsidiaries, General Business Services, Inc. ("GBS") and Edwin K. Williams & Co. ("EKW"). ITEM 2. DISPOSITION OF ASSETS On July 16, 1998, The Dwyer Group, Inc. (the "Company"), a Delaware corporation, completed the sale of the majority of the assets of two of its subsidiaries, GBS and EKW, to Century Business Services, Inc. ("Century"), a Delaware corporation and a leading provider of outsourced business services to medium sized companies throughout the United States. The transaction was effected by means of an Asset Purchase Agreement by and among the Company, Century, GBS, EKW and GBS Acquisition Corp., an Ohio corporation and a subsidiary of Century ("Acquisition Sub"), by which substantially all of the assets of GBS and EKW were sold or assigned to Acquisition Sub. The Company received an aggregate of $3.8 million in cash and up to 47,407 unregistered shares of Century common stock (the "Stock") subject to certain contingencies. The Stock to be received is subject to a two-year lock-up agreement. One-half of the stock will be earned based on the renewal of certain GBS franchisees by December 31, 1998. Management believes that the Company will receive substantially all of this portion of the Stock by May of 1999. The other half of the Stock will be held in escrow for two years and 90 days from the date of the agreement in order to facilitate the payment to Century of any losses incurred by Century which are subject to indemnification by the Company. At this time management cannot estimate the amount of this portion of the Stock which will eventually be received by the Company. Consideration for the transaction was determined on the basis of arm's length negotiations by the parties. Item 7. Pro Forma Financial Information and Exhibits (a) Pro forma financial information The following unaudited pro forma condensed financial statements referenced under the following "Index to Financial Statements" are filed as part of this report: Index to Financial Statements Page 1. Pro Forma Condensed Balance Sheet as of June 30, 1998 (unaudited) F-1 2. Pro Forma Condensed Statement of Income For the Year Ended December 31, 1997 (unaudited) F-2 3. Pro Forma Condensed Statement of Income For the Six Months Ended June 30, 1998 (unaudited) F-3 The aforementioned pro forma financial statements reflect the financial results of the Company as if the transaction had been consummated at the beginning of each accounting period or at the balance sheet date, as applicable. These statements have been prepared by management of the Company for informational purposes only and are based upon the historical information included herein and other financial information. These pro forma statements do not purport to be indicative of the results which would have occurred had the acquisition been made at the beginning of each respective period or which may be expected to occur in the future. The pro forma statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997, and Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1998 and June 30, 1998. (b) Exhibits None 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE DWYER GROUP, INC. Date: October 19, 1998 \s\ Thomas J. Buckley ------------------------------------ Thomas J. Buckley Chief Financial Officer and Treasurer 4 THE DWYER GROUP, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998 (UNAUDITED) PRO FORMA HISTORICAL GBS EKW ADJUSTMENTS PRO FORMA -------------- -------------- -------------- -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 1,335,806 $ -- $ -- $ 3,600,000 (a) $ 4,935,806 Marketable securities, available-for-sale 2,121,396 -- -- -- 2,121,396 Trade accounts receivable, net 1,017,000 (168,789) (85,451) -- 762,760 Receivables from related parties 917,669 -- -- -- 917,669 Trade notes receivable, current portio 1,026,652 (85,212) -- -- 941,440 Other current assets 987,640 (228,322) (168,488) -- 590,830 ----------- ----------- ----------- ----------- ----------- Total current assets 7,406,163 (482,323) (253,939) 3,600,000 10,269,901 Property and equipment, net 1,235,901 (60,134) (16,644) -- 1,159,123 Notes and accounts receivable from related parties 1,042,004 -- -- -- 1,042,004 Assets held for sale 176,575 -- -- -- 176,575 Trade notes receivable, net 3,266,045 (158,450) (75,420) -- 3,032,175 Purchased franchise rights, net 2,143,646 (650,792) (390,785) -- 1,102,069 Investment, equity method 430,716 -- (430,716) -- -- Net deferred tax asset 448,959 -- -- -- 448,959 Other assets 206,171 -- -- 180,000 (b) 386,171 ----------- ----------- ----------- ----------- ----------- TOTAL ASSETS $16,356,180 $(1,351,699) $(1,167,504) $ 3,780,000 $17,616,977 =========== =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, trade $ 788,620 $ (120,596) $ (61,366) $ -- $ 606,658 Accounts payable to related parties 13,611 -- -- -- 13,611 Accrued liabilities 1,332,333 (40,542) (21,646) 600,000(c) 1,870,145 Current portion of long-term debt 169,891 (67,974) -- -- 101,917 ----------- ---------- ----------- ----------- ------------ Total current liabilities 2,304,456 (229,112) (83,012) 600,000 2,592,332 Long-term debt, less current portion 517,773 (82,672) -- -- 435,101 Deferred franchise sales revenue 1,229,198 -- -- -- 1,229,198 Stockholders' equity: Preferred stock -- -- -- -- -- Common stock 689,526 -- -- -- 689,526 Additional paid-in capital 9,020,358 -- -- -- 9,020,358 Retained earnings 2,683,684 -- -- 1,055,592(d) 3,739,276 Unrealized gain on available-for-sale securities 5,357 -- -- -- 5,357 Treasury stock, at cost (94,171) -- -- -- (94,171) ----------- ---------- ---------- ----------- ------------ Total stockholders' equity 12,304,754 -- -- 1,055,592 13,360,346 ----------- ---------- ---------- ----------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,356,181 $ (311,784) $ (83,012) $ 1,655,592 $ 17,616,977 =========== ========== ========== =========== ============ (a) To record net cash proceeds from transaction. (b) To record value of stock received in transaction. (c) To reflect income tax liability resulting from gain on sale of assets. (d) To record after-tax gain on sale of assets. F-1 5 THE DWYER GROUP, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) PRO FORMA HISTORICAL GBS (1) EKW (1) ADJUSTMENTS PRO FORMA -------------- -------------- -------------- -------------- -------------- REVENUES $ 15,510,352 $(2,710,265) $(1,846,177) $ 216,000 (a) $ 11,169,910 COSTS AND EXPENSES: General, administrative and selling 11,751,752 (1,736,277) (1,232,030) 100,000 (b) 8,883,445 Operating expenses 2,017,775 (1,040,765) (263,812) 713,198 Depreciation and amortization 556,642 (139,864) (25,697) 391,081 Interest 59,108 (9,302) -- 49,806 ------------ ----------- ----------- ----------- ------------ Total costs and expenses 14,385,277 (2,926,208) (1,521,539) 100,000 10,037,530 Income before taxes 1,125,075 215,943 (324,638) 116,000 1,132,380 Income tax (expense) benefit (378,299) (73,421) 110,377 (39,440)(c) (380,783) ------------ ----------- ----------- ----------- ------------ Net income $ 746,776 $ 142,522 $ (214,261) $ 76,560 $ 751,597 ============ =========== =========== =========== ============ Earnings per share - basic $ 0.11 $ 0.11 ============ ============ Earnings per share - diluted $ 0.11 $ 0.11 ============ ============ Weighted average common shares 6,774,323 6,774,323 ============ ============ Weighted average common shares and potential dilutive common shares 6,886,458 6,886,458 ============ ============ (1) Entries in this column reflect the elimination of revenues and expenses associated with assets sold. Pro Forma Adjustments: (a) To reflect the amount of interest earned on the cash portion of the sale proceeds ($3.6 million), calculated at the rate of 6% per annum. (b) Portion of general and administrative expenses previously allocated to GBS and EKW which could not be eliminated. (c) To reflect income tax expense for the net pro forma adjustments. F-2 6 THE DWYER GROUP, INC. AND SUBSIDIARIES PRO FORMA CONDENSED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) PRO FORMA HISTORICAL GBS (1) EKW (1) ADJUSTMENTS PRO FORMA -------------- -------------- -------------- -------------- -------------- REVENUES $ 7,902,285 $(1,490,053) $(786,576) $ 108,000 (a) $ 5,733,656 COSTS AND EXPENSES: General, administrative and selling 6,132,480 (780,428) (589,161) 50,000 (b) 4,812,891 Operating expenses 1,500,537 (558,371) (168,183) 773,983 Depreciation and amortization 339,705 (70,739) (54,369) 214,597 Interest 35,862 (21,645) (150) 14,067 ----------- ----------- --------- --------- ----------- Total costs and expenses 8,008,584 (1,431,183) (811,863) 50,000 5,815,538 Operating income (loss) (106,299) (58,870) 25,287 58,000 (81,882) Non-operating income: Gain on sale of securities 317,374 -- -- -- 317,374 ----------- ----------- --------- --------- ----------- Total non-operating income 317,374 -- -- -- 317,374 Income before income taxes 211,075 (58,870) 25,287 58,000 235,492 Income tax expense (benefit) (71,003) 20,016 (8,598) (19,720)(c) (79,305) ----------- ----------- --------- --------- ----------- Net income $ 140,072 $ (38,854) $ 16,689 $ 38,280 $ 156,187 =========== =========== ========= ========= =========== Earnings per share - basic $ 0.02 $ 0.02 =========== =========== Earnings per share - diluted $ 0.02 $ 0.02 =========== =========== Weighted average common shares 6,775,427 6,775,427 =========== =========== Weighted average common shares and potential dilutive common shares 6,974,166 6,974,166 =========== =========== (1) Entries in this column reflect the elimination of revenues and expenses associated with assets sold. Pro Forma Adjustments: (a) To reflect the amount of interest earned on the cash portion of the sale proceeds ($3.6 million), calculated at the rate of 6% per annum. (b) Portion of general and administrative expenses previously allocated to GBS and EKW which could not be eliminated. (c) To reflect income tax expense for the net pro forma adjustments. F-3