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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
Commission File Number 0-22645
LAMALIE ASSOCIATES, INC.
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-2776441
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
200 Park Avenue
New York, New York
10166-0136
(Address of Principal Executive Offices)
(212) 953-7900
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
At July 8, 1997, the Registrant had outstanding 5,325,000 shares of $.01
par value common stock.
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LAMALIE ASSOCIATES, INC.
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Statements of Operations for the three-month
periods ended May 31, 1997 and 1996.................... 3
Condensed Balance Sheets at May 31, 1997 and February 28,
1997................................................... 4
Condensed Statements of Cash Flows for the three-month
periods ended May 31, 1997 and 1996.................... 5
Notes to Condensed Financial Statements................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 7
PART II. OTHER INFORMATION................................. 8
Signatures.................................................. 10
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LAMALIE ASSOCIATES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MAY 31,
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1997 1996
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Fee revenue, net............................................ $ 13,725 $ 11,107
Operating expenses:
Compensation and benefits................................. 10,544 9,548
General and administrative expenses....................... 1,804 1,428
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Total operating expenses.......................... 12,348 10,976
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Operating income............................................ 1,377 131
Interest expense, net....................................... 145 41
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Income before provision for income taxes.................... 1,232 90
Provision for income taxes.................................. 530 95
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Net income (loss)................................. $ 702 $ (5)
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Net income per common and common equivalent share........... $ .23 $ --
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Weighted average common and common equivalent shares
outstanding............................................... 3,042,000 3,311,000
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The accompanying notes are an integral part of these financial statements.
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LAMALIE ASSOCIATES, INC.
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
MAY 31, FEBRUARY 28,
1997 1997
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ASSETS
Current assets:
Cash and cash equivalents................................. $ 15 $ 1,662
Accounts receivable, less allowance of $1,340 and $890,
respectively........................................... 13,567 14,392
Prepaid expenses.......................................... 2,427 937
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Total current assets.............................. 16,009 16,991
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Property and equipment, net................................. 4,179 4,184
Deferred tax assets......................................... 1,800 1,958
Other assets................................................ 3,450 2,428
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Total assets...................................... $25,438 $25,561
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 819 $ 1,914
Accrued compensation...................................... 6,445 13,255
Deferred tax liabilities.................................. 1,800 643
Current maturities of long-term debt...................... 4,900 387
Other current liabilities................................. 45 175
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Total current liabilities......................... 14,009 16,374
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Accrued rent................................................ 1,028 1,038
Long-term debt, less current maturities..................... 1,605 1,650
Deferred compensation....................................... 5,429 3,872
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Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value; 3,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock; $0.01 par value; 35,000,000 shares
authorized; 3,025,000 and 3,075,000 shares issued and
outstanding, respectively.............................. 30 31
Additional paid-in capital................................ 4,011 4,087
Subscriptions receivable.................................. (38) (153)
Accumulated deficit....................................... (636) (1,338)
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Total stockholders' equity........................ 3,367 2,627
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Total liabilities and stockholders' equity........ $25,438 $25,561
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The accompanying notes are an integral part of these financial statements.
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LAMALIE ASSOCIATES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MAY 31,
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 702 $ (5)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization.......................... 194 213
Deferred income taxes.................................. 1,340 404
Changes in operating assets and liabilities............... (7,453) (5,747)
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Net cash used in operating activities............. (5,217) (5,135)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net................................. (189) (197)
Investment in whole life insurance........................ (746) (829)
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Net cash used in investing activities............. (935) (1,026)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit borrowings................................. 4,500 2,000
Other long-term (payments) borrowings..................... (109) 2,144
Payments received on subscriptions receivable............. 114 345
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Net cash provided by financing activities......... 4,505 4,489
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NET DECREASE IN CASH AND CASH EQUIVALENTS................... (1,647) (1,672)
CASH AND CASH EQUIVALENTS, at end of prior period........... 1,662 2,529
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CASH AND CASH EQUIVALENTS, at end of current period......... $ 15 $ 857
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The accompanying notes are an integral part of these financial statements.
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LAMALIE ASSOCIATES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. CONDENSED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited condensed
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of May 31, 1997 and February 28, 1997, and the results of operations
and cash flows for the three-month periods ended May 31, 1997 and 1996.
These financial statements, including the condensed balance sheet as of
February 28, 1997, which has been derived from audited financial statements, are
presented in accordance with the requirements of Form 10-Q and consequently may
not include all disclosures normally required by generally accepted accounting
principles or those normally made in the Company's Annual Report on Form 10-K.
The accompanying condensed financial statements and related notes should be read
in conjunction with the Company's Registration Statement on Form S-1 (File
#333-26027) as declared effective by the Securities and Exchange Commission on
July 1, 1997.
NOTE 2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is determined by dividing
the net income by the weighted average number of shares of common stock
outstanding during the period. There were no common equivalent shares
outstanding during the three-month periods ended May 31, 1997 and 1996. Pursuant
to Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 83,
shares of common stock issued by the Company during the 12 months preceding the
initial filing date have been included in the calculation of weighted average
shares of common stock outstanding, using the treasury stock method, as if the
shares were outstanding for all periods presented.
All share and per share information in the financial statements has been
adjusted to give effect to the 1,000 to one common stock split and par value
restatement which became effective June 3, 1997, in connection with the
reincorporation of the Company to Florida.
NOTE 3. LONG-TERM DEBT
The Company has obtained a commitment letter from a bank to provide various
credit facilities of $15 million. Outstanding borrowings under these facilities
will bear interest at various rates based on either a LIBOR index or the bank's
prime lending rate, as determined at the Company's option.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
FISCAL 1998 COMPARED TO FISCAL 1997
Fee revenue. Fee revenue increased $2.6 million, or 23.6%, to $13.7
million for the quarter-ended May 31, 1997, from $11.1 million for the
quarter-ended May 31, 1996. The increase in fee revenue was primarily a result
of a net increase of 7 search consultants since May 31, 1996, raising the total
number of consultants employed by LAI at May 31, 1997, to 63 from 56 at May 31,
1996. Also, there was an increase of 3.4% in the average fee revenue per
consultant employed for a full year to $213,000 for the quarter-ended May 31,
1997, from $206,000 for the quarter-ended May 31, 1996. The average first-year
cash compensation of positions for which LAI conducted searches increased by
3.6% to $231,000 for the quarter-ended May 31, 1997, from $223,000 for the
quarter-ended May 31, 1996. The Company also opened its Boston office in the
third quarter and its Stamford office in the fourth quarter of fiscal 1997.
Compensation and benefits. Compensation and benefits increased $1.0
million, or 10.4%, to $10.5 million for the quarter-ended May 31, 1997, from
$9.5 million for the quarter-ended May 31, 1996. As a percentage of fee revenue,
compensation and benefits decreased to 76.8% for the quarter-ended May 31, 1997,
from 86.0% for the quarter-ended May 31, 1996. This decrease was primarily the
result of changes to the Company's compensation system for consultants
implemented effective March 1, 1997.
General and administrative expenses. General and administrative expenses
increased $400,000, or 26.3%, to $1.8 million for the quarter-ended May 31,
1997, from $1.4 million for the quarter-ended May 31, 1996. As a percentage of
fee revenue, general and administrative expenses increased to 13.2% for the
quarter-ended May 31, 1997, from 12.9% for the quarter-ended May 31, 1996. These
increases were primarily due to increased costs associated with recruitment and
relocation of additional staff, an initiative to reduce search cycle time, and
the Company's training and development program.
Operating income. Operating income increased $1.3 million to $1.4 million
for the quarter-ended May 31, 1997, from $131,000 for the quarter-ended May 31,
1996. This change was primarily the result of the decreases in compensation and
benefits partially offset by increases in general and administrative expenses
discussed above.
Net interest expense. Net interest expense increased $104,000 to $145,000
for the quarter-ended May 31, 1997, from $41,000 for the quarter-ended May 31,
1996, primarily due to an increase in the accrued liability related to the
Company's deferred compensation plan as well as higher average line of credit
borrowings.
Provision for income taxes. The effective income tax rate for the
quarter-ended May 31, 1997 of 43% varied from the statutory rate of 35% due to
state and local income taxes and because certain expenses, including premiums on
keyperson life insurance policies, a portion of meals and entertainment, and
dues expense were non-deductible for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
On July 8, 1997, the Company completed an initial public offering covering
2.3 million shares of its common stock. Net proceeds from the offering were
approximately $25.0 million of which $3.9 million was used to repay all
outstanding indebtedness under the Company's credit facilities. The Company
intends to use approximately $3.0 million of the offering proceeds over the next
12 to 24 months for computer hardware and software purchases, upgrades, and
enhancements. The remaining proceeds will be used for general corporate
purposes, including expansion of the Company's client base, industry coverage,
and geographic reach through selective acquisitions.
The Company relies primarily upon cash flows from operations and available
borrowings under its credit facilities to finance its operations. During the
quarter-ended May 31, 1997, cash used in operations was $5.2 million. A
significant portion of the Company's compensation expense is accrued and paid
shortly after the end of the Company's fiscal year. Accordingly, amounts
outstanding under the Company's line of credit are highest during the first
quarter of the Company's fiscal year, with such amounts historically being
repaid by
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cash flows from operations during the remainder of such fiscal year. To provide
additional liquidity, the Company has obtained a commitment letter from a bank
to provide credit facilities of approximately $15.0 million. Outstanding
borrowings under these facilities will bear interest at various rates based on
either a LIBOR index or the bank's prime lending rate, as determined at the
Company's option.
Capital expenditures totaled approximately $189,000 for the quarter-ended
May 31, 1997. These expenditures consisted primarily of purchases of office
equipment, upgrades to information systems, and leasehold improvements.
Additionally, investments in whole life insurance policies intended to fund the
Company's deferred compensation plan were approximately $746,000.
The Company believes that funds from operations, its expanded credit
facilities, and the net proceeds from the offering will be sufficient to meet
its anticipated working capital, capital expenditures, and general corporate
requirements on both a short-term basis (i.e., during the 12 months following
the offering) and a long-term basis (i.e., after such 12-month period).
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Quarterly Report on Form 10-Q
contain forward-looking statements that are based on the current beliefs and
expectations of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Such statements
include those regarding general economic and executive search industry trends.
Because such statements involve risks and uncertainties, actual actions and
strategies and the timing and expected results thereof may differ materially
from those expressed or implied by such forward-looking statements, and the
Company's future results, performance, or achievements could differ materially
from those expressed in, or implied by, any such forward-looking statements.
Future events and actual results could differ materially from those set forth in
or underlying the forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted. These potential risks and
uncertainties include dependence on attracting and retaining qualified executive
search consultants, portability of client relationships, restrictions imposed by
blocking arrangements, competition, relationship with Amrop International
alliance of executive search firms, implementation of acquisition strategy,
reliance on information processing systems, and employment liability risk. In
addition to the factors noted above, other risks, uncertainties, assumptions,
and factors that could affect the Company's financial results are described in
the Company's Registration Statement on Form S-1 (File No. 333-26027),
originally filed with the Securities and Exchange Commission April 29, 1997, as
amended and as effective July 1, 1997.
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the period covered by this report, and effective May 30, 1997, the
Registrant's stockholders approved by unanimous written consent the adoption and
approval of actions related to the Registrant's initial public offering of
shares of its common stock. The matters approved included the reincorporation of
the Registrant from Delaware to Florida, the adoption of the Registrant's
Articles of Incorporation and Bylaws, the Registrant's Employee Stock Purchase
Plan and Omnibus Stock and Incentive Plan, and the ratification of all prior
issuances of common stock by the Registrant's Delaware predecessor corporation.
All 3,025,000 shares then outstanding (adjusted for a 1,000-for-1 stock split
effective June 3, 1997) were voted in favor of such matters, and such matters
were approved prior to the effectiveness of the registration of the Registrant's
common stock under the Securities Act of 1933 and prior to the effectiveness of
the registration of the Registrant's common stock under the Securities Exchange
Act of 1934.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
EXHIBIT
NUMBER DESCRIPTION
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10.1 -- 1997 Omnibus Stock and Incentive Plan*
10.2 -- Non-Employee Directors' Stock Option Plan*
10.3 -- Profit Sharing Plan*
10.4 -- 1997 Employee Stock Purchase Plan*
10.5 -- Form of Agreement for Deferred Compensation Plan*
10.6 -- Managing Partners' Compensation Plan*
10.7 -- Partners' Compensation Plan*
10.8 -- Employment Agreement for Mr. Gow*
10.10 -- Employment Agreement for Mr. Rothschild*
10.11 -- Form of Indemnification Agreement entered into with Messrs.
Philip R. Albright, Michael Brenner, Arthur J. Davidson,
Mark P. Elliott, David W. Gallagher, Joe D. Goodwin,
Roderick C. Gow, Ray J. Groves, Harold E. Johnson, John F.
Johnson, Robert L. Pearson, Richard W. Pogue, John C. Pope,
John S. Rothschild, Thomas M. Watkins III, Jack P. Wissman
10.12 -- Directors' Deferral Plan*
27 -- Financial Data Schedule (for SEC use only)
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* Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 333-26027),
originally filed April 29, 1997, as amended and as effective July 1, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, Registrant's principal financial officer, thereunto duly
authorized.
LAMALIE ASSOCIATES, INC.
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(Registrant)
August 8, 1997
/s/ JACK P. WISSMAN
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Jack P. Wissman
Executive Vice President
(Authorized officer of Registrant and
principal
financial officer)
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