1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 27, 1998
LAMALIE ASSOCIATES, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
FLORIDA
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(State of Other Jurisdiction of Incorporation)
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59-2776441
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(Commission File Number) (I.R.S. Employer Identification Number)
200 Park Avenue, New York, New York 10166-0136
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(Address of principal executive offices) (Zip Code)
(212) 953-7900
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(Registrant's Telephone Number, Including Area Code)
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2
This Report on Form 8-K contains 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.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Ward Howell International, Inc.
On February 27, 1998, the Company completed the acquisition by merger of Ward
Howell International, Inc. ("WHI"), the eighth largest executive search firm in
the United States. WHI was merged into a wholly-owned subsidiary of the Company
and WHI was the surviving corporation in the merger. The purchase price was
determined through arms-length negotiations by the parties and is subject to
adjustment based on transaction expenses and certain other items as detailed in
the plan of merger. Prior to this transaction, neither the Company, WHI nor any
of their affiliates had a material relationship. In connection with the merger,
the Company entered into employment agreements with substantially all of the
former WHI shareholders.
The purchase consideration was valued at approximately $20 million and consisted
of $8.7 million in cash, $7.6 million in notes payable over three years with
interest payable at 5 percent per annum, and approximately 190,000 shares of the
Company's common stock. Approximately $8.7 million of the purchase consideration
was derived from the proceeds of the Company's initial public offering which had
been invested in short-term investment securities since July 1997. The
acquisition was accounted for as a stock purchase.
Chartwell Partners International, Inc.
On January 13, 1998, the Company filed a report on Form 10-Q with respect to the
acquisition of Chartwell Partners International, Inc. ("CPI"). At that time, the
Company was in the process of compiling financial statements and related
information to determine whether the assets acquired from CPI constituted a
"significant amount of assets" within the meaning of Item 2 of Form 8-K. The
Company stated in such Form 10-Q that it intended to file any required financial
statements under applicable regulations as soon as practicable, but in any
event, no later than 60 days after January 20, 1998, the date on which a Current
Report on Form 8-K would have been due to have been filed in respect of the CPI
acquisition. The Company has determined that the assets acquired from CPI
constitute a "significant amount of assets" within the meaning of Item 2 of Form
8-K and is therefore including the required financial statements and pro forma
financial information in this Form 8-K.
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
WHI AUDITED HISTORICAL FINANCIAL STATEMENTS
Independent Auditors' Report
Balance Sheets as of December 31, 1996 and 1995
Statements of Operations for the years ended December 31, 1996,
1995 and 1994
Statements of Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994
Notes to Financial Statements
WHI UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Balance Sheets as of September 30, 1997
and December 31, 1996
Condensed Statements of Operations for the nine months
ended September 30, 1997 and 1996
Condensed Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996
Notes to Condensed Financial Statements
CPI AUDITED HISTORICAL FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants
Balance Sheet as of December 31, 1996
Statement of Income for the year ended December 31, 1996
Statement of Stockholder's Equity for the year
ended December 31, 1996
Statement of Cash Flows for the year ended December 31, 1996
Notes to Financial Statements
CPI UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Balance Sheets as of September 30, 1997
and December 31, 1996
Condensed Statements of Income for the nine months
ended September 30, 1997 and 1996
Condensed Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996
Notes to Condensed Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
Introduction to Unaudited Pro Forma Combined Financial
Statements
Unaudited Pro Forma Combined Balance Sheet as
of November 30, 1997
Unaudited Pro Forma Combined Statement of Operations for the
year ended February 28, 1997
Unaudited Pro Forma Combined Statement of Operations for the
nine months ended November 30, 1997
Notes to Unaudited Pro Forma Combined Financial Statements
4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(Continued)
(c) EXHIBITS.
Exhibit Number Description
-------------- -----------
2.1 Agreement and Plan of Merger dated February 27, 1998,
by and among Lamalie Associates, Inc., LAI Mergersub,
Inc. and Ward Howell International, Inc.
2.2 Asset Purchase Agreement dated December 29, 1997, by
and among Lamalie Associates, Inc., Chartwell
Partners International, Inc. and David M. DeWilde
10.14 Form of Employment Agreement for former Ward Howell
International, Inc. Shareholders
23.9 Consent of Arthur Andersen LLP
23.10 Consent of KPMG Peat Marwick LLP
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ward Howell International, Inc.:
We have audited the accompanying balance sheets of Ward Howell International,
Inc. (the "Company") as of December 31, 1996 and 1995, and the related
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ward Howell International, Inc.
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
August 1, 1997
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WARD HOWELL INTERNATIONAL, INC.
Balance Sheets
December 31, 1996 and 1995
ASSETS 1996 1995
---- ----
Current assets:
Cash and cash equivalents $ 1,437,234 149,487
Accounts receivable including client
disbursements, net of allowance for
doubtful accounts of approximately
$726,000 in 1996 and $512,000 in 1995 7,226,873 4,636,791
Employee advances 346,149 338,800
Due from joint venture -- 29,600
Deferred income taxes (note 6) 136,817 436,451
Prepaid income taxes 107,984 142,780
Prepaid expenses and other current assets 107,174 45,835
------------ ---------
Total current assets 9,362,231 5,779,744
------------ ---------
Fixed assets, at cost:
Furniture, fixtures and equipment 1,598,374 1,564,232
Computers and related costs 1,821,307 1,682,682
Leasehold improvements 262,769 250,023
Assets acquired under capital leases 103,746 110,156
------------ ---------
3,786,196 3,607,093
Less accumulated depreciation and amortization (3,179,067) (2,965,279)
------------ ---------
Net fixed assets 607,129 641,814
Investment in joint ventures 67,028 52,693
Noncurrent deferred income taxes -- --
Other 344,698 301,731
------------ ---------
Total assets $ 10,381,086 6,775,982
============ =========
7
WARD HOWELL INTERNATIONAL, INC.
Balance Sheets, Continued
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
---- ----
Current liabilities:
Current portion of notes payable to related
parties (note 2) $ 33,021 85,337
Current portion of installment notes
payable (note 2) 50,069 57,636
Due to joint venture (note 2) 25,022 109,799
Accounts payable and accrued liabilities 1,608,144 358,404
Accrued profit-sharing contribution
and bonuses (note 4) 3,578,531 2,408,181
Accrued commissions 3,117,336 2,538,013
Current portion of obligations under capital leases -- 10,107
------------ ---------
Total current liabilities 8,412,123 5,567,477
Notes payable to related parties, net of current
portion (note 2) 42,967 75,987
Installment notes payable, net of current
portion (note 2) 78,565 131,268
Deferred rent (note 3) 305,418 338,796
Noncurrent deferred income taxes (note 6) 52,104 15,077
Other long-term liabilities -- 3,227
------------ ---------
Total liabilities 8,891,177 6,131,832
Shareholders' equity:
Common stock, $1 par value; 5,000 shares
authorized; 2,136 shares and 1,664 shares issued
and outstanding in 1996 and 1995, respectively (note 7) 2,136 1,664
Additional paid-in capital 1,170,248 681,728
Retained earnings 487,599 149,662
------------ ---------
1,659,983 833,054
Less:
Shareholders' notes receivable (note 5) (170,074) (188,904)
------------ ---------
Total shareholders' equity 1,489,909 664,150
Commitments and contingencies (notes 3 and 8)
------------ ---------
Total liabilities and shareholders'
equity $ 10,381,086 6,775,982
============ =========
See accompanying notes to financial statements.
8
WARD HOWELL INTERNATIONAL, INC.
Statements of Operations
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Fee revenues $ 25,137,840 17,063,083 16,484,312
Operating expenses:
Compensation and benefits 22,370,604 15,318,795 14,191,257
General and administrative expenses
(notes 3 and 4) 2,078,613 2,271,293 2,144,007
------------ ---------- ----------
Total operating expenses 24,449,217 17,590,088 16,335,264
------------ ---------- ----------
Earnings (loss) from operations 688,623 (527,005) 149,048
Equity in net income of joint ventures 14,335 8,193 70,548
Other income (expense):
Interest income (note 5) 33,936 31,021 22,595
Interest expense (note 2) (16,512) (5,868) (48,240)
------------ ---------- ----------
17,424 25,153 (25,645)
------------ ---------- ----------
Earnings (loss) before income taxes 720,382 (493,659) 193,951
Income tax expense (benefit) (note 6) 382,445 (111,980) 133,720
------------ ---------- ----------
Net earnings (loss) $ 337,937 (381,679) 60,231
============ ========== ==========
See accompanying notes to financial statements.
9
WARD HOWELL INTERNATIONAL, INC.
Statements of Shareholders' Equity
Years ended December 31, 1996, 1995 and 1994
Additional Shareholders' Total
Common paid-in Retained Treasury notes shareholders'
stock capital earnings stock receivable equity
------- --------- -------- -------- ------------ ------------
Balance at December 31, 1993 $1,612 625,178 471,110 (22,134) (215,487) 860,279
Repurchase of 116 shares of
treasury stock -- -- -- (120,176) 101,231 (18,945)
Issuance of 140 shares of
treasury stock -- -- -- 142,310 (136,539) 5,771
Issuance of 52 shares of
common stock 52 56,550 -- -- -- 56,602
Net earnings -- -- 60,231 -- -- 60,231
------ ------- ------- ------ -------- ---------
Balance at December 31, 1994 1,664 681,728 531,341 -- (250,795) 963,938
Repurchase of 320 shares of
treasury stock -- -- -- (331,520) 219,483 (112,037)
Issuance of 320 shares of
treasury stock -- -- -- 331,520 (200,000) 131,520
Payment from shareholders -- -- -- -- 42,408 42,408
Net loss -- -- (381,679) -- -- (381,679)
------ --------- ------- ------ -------- ---------
Balance at December 31, 1995 1,664 681,728 149,662 -- (188,904) 644,150
Payment from shareholders -- -- -- -- 60,270 60,270
Issuance of 472 shares of
common stock 472 488,520 -- -- (41,440) 447,552
Net earnings -- -- 337,937 -- -- 337,937
------ --------- ------- ------ -------- ---------
Balance at December 31, 1996 $2,136 1,170,248 487,599 -- (170,074) 1,489,909
====== ========= ======= ====== ======== =========
See accompanying notes to financial statements.
10
WARD HOWELL INTERNATIONAL, INC.
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
---------- -------- --------
Cash flows from operating activities:
Net earnings (loss) $ 337,937 (381,679) 60,231
---------- -------- --------
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating
activities:
Equity in net income of joint venture (14,335) (8,193) (70,548)
Depreciation and amortization 213,787 233,514 230,610
Provision for doubtful accounts 965,625 361,564 684,421
Deferred rent (78,971) 30,210 86,353
Deferred income taxes 336,661 (203,430) 19,056
Changes in operating assets and liabilities:
Accounts receivable (3,555,707) (1,145,366) (548,326)
Employee advances (7,349) (49,121) 53,610
Due from joint venture 29,600 (29,600) --
Prepaid expenses and other current assets (61,339) 80,189 (56,296)
Prepaid income taxes 34,796 (67,252) (75,528)
Other (42,967) (25,445) (119,099)
Accounts payable and accrued liabilities 1,295,333 57,643 (254,744)
Accrued commissions 579,323 769,694 322,425
Accrued profit sharing contribution
and bonuses 1,170,350 159,535 518,962
Income taxes payable -- -- (164,526)
Due to joint ventures (84,777) (161,881) 211,482
Other long-term liabilities (3,227) (67,162) (67,162)
---------- ---------- --------
Total adjustments 776,803 (65,101) 770,690
---------- ---------- --------
Net cash provided by (used in)
operating activities 1,114,740 (446,780) 830,921
---------- ---------- --------
Cash flows from investing activities:
Distributions from ventures -- -- 56,048
Purchases of fixed assets (179,102) (175,082) (397,120)
---------- -------- --------
Net cash used in investing activities (179,102) (175,082) (341,072)
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WARD HOWELL INTERNATIONAL, INC.
Statements of Cash Flows, Continued
1996 1995 1994
---- ---- ----
Cash flows from financing activities:
Sales of treasury stock $ -- 131,520 5,771
Purchases of stock for treasury -- (112,037) (18,945)
Payments on notes payable, net (145,606) (51,215) 43,921
Shareholders' payment on notes receivable 18,830 42,408 --
Payments on capital lease obligations (10,107) (10,737) (20,267)
Sale of common stock 488,992 -- 56,602
----------- ------- -------
Net cash provided by (used in)
financing activities 352,109 (61) 67,082
----------- ------- -------
Net increase (decrease) in cash and
cash equivalents 1,287,747 (621,923) 556,931
Cash and cash equivalents, beginning of year 149,487 771,410 214,479
----------- ------- -------
Cash and cash equivalents, end of year $ 1,437,234 149,487 771,410
=========== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 18,170 9,424 25,000
=========== ======= =======
Taxes $ 71,062 177,600 355,000
=========== ======= =======
Noncash financing activities:
Shareholder notes receivable, net $ (41,440) 19,483 --
=========== ======= =======
See accompanying notes to financial statements.
12
WARD HOWELL INTERNATIONAL, INC.
Notes to Financial Statements
December 31, 1996, 1995 and 1994
(1) ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Ward Howell International, Inc. (the "Company") was incorporated in 1951
in the State of Connecticut. The Company is part of the Ward Howell
International Group, which unites 20 autonomous firms worldwide into one
organization for the purpose of sharing resources, information and
conducting international executive searches. These searches relate to all
management disciplines in business, industry, government, education,
health care and foundations. The Company has offices in New York,
Barrington, Chicago, Dallas, Encino, Houston, Stamford, Atlanta, Phoenix
and Wisconsin.
During 1993, the Company entered into two corporate joint ventures, Ward
Howell Russia, Inc. and Ward Howell Technologies, Inc., in which it
initially acquired a 33% and a 50% equity interest, respectively. These
two join ventures were established to penetrate the Eastern Europe and
high-tech markets for executive search. The Company accounts for its
investments in joint ventures using the equity method of accounting. At
December 31, 1996, 1995 and 1994, the Company had a 30% interest in Ward
Howell Russia, Inc. Ward Howell Technologies, Inc. had been dissolved and
the Company's investment was written off in 1994.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company generates substantially all of its revenues from fees for
professional services, which are recognized as fee revenue as clients are
billed, generally over a 60- to 90-day period commencing with the initial
acceptance of a search. Fee revenue is presented net of adjustments to
original billings.
DEPRECIATION AND AMORTIZATION
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets, which generally approximate five
years.
Leasehold improvements are amortized over the terms of the related leases
or the estimated useful lives of the improvements, whichever is less.
INCOME TAXES
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
13
WARD HOWELL INTERNATIONAL, INC.
Notes to Financial Statements, Continued
(1), CONTINUED
CASH EQUIVALENTS
The Company considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make a number of
estimates and assumptions that affect the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
(2) RELATED PARTY TRANSACTIONS
Notes payable to related parties represent amounts due to former
shareholders for repurchases of common stock. The notes are payable in
annual installments with maturities from 1996 through 2000, and bear
interest at rates ranging from 5.8% to 7.94% at December 31, 1996.
Interest expense on notes payable aggregated approximately $8,000, $6,000
and $21,000 in 1996, 1995 and 1994, respectively, including approximately
$3,000, $5,000 and $9,000 that was accrued at December 31, 1996, 1995 and
1994, respectively. In addition, the Company has outstanding installment
notes payable that have been guaranteed by certain shareholders. These
notes are payable in monthly installments through 1999 and bear interest
at the prime rate plus one and one-half percent. At December 31, 1996,
the prime rate was 8.25%.
Aggregate future maturities of notes payable as of December 31, 1996 are
approximately as follows:
Year ending December 31 Amount
----------------------- ------
1997 $ 83,000
1998 69,000
1999 48,000
2000 5,000
--------
$205,000
========
Included in due to joint ventures are commissions owed to the joint
ventures and fees collected on behalf of the joint ventures.
14
WARD HOWELL INTERNATIONAL, INC.
Notes to Financial Statements, Continued
(3) RENT EXPENSE AND COMMITMENTS
The Company leases its office facilities under agreements that provide
for scheduled rent increases and rent abatements. Rent expense is
recognized on a straight-line basis, rather than in accordance with lease
payment schedules, for purposes of recognizing a consistent annual rent
expense. Scheduled base rent increases and the effects of rent abatements
are spread evenly over the terms of the respective leases in order to
effect a straight-line rent expense amount over the term of the related
leases.
Noncancelable leases for office space expire on various dates through
2003. The following is a schedule of approximate future minimum lease
payments:
Year Amount
---- -------
1997 $ 955,000
1998 810,000
1999 758,000
2000 635,000
2001 535,000
Thereafter 669,000
----------
$4,362,000
==========
The leases provide for additional payments for real estate taxes and
other costs.
In 1996, 1995 and 1994, rent expense aggregated approximately $1,028,000,
$1,057,000, and $1,039,000, respectively.
(4) PROFIT SHARING 401(K) PLAN
The Company has a profit-sharing 401(k) plan that covers substantially
all employees. Contributions to the plan by the Company are limited to
15% of participants' aggregate annual compensation with limitations on
contributions for each participant of 25% of compensation not to exceed
$30,000. Excess amounts (amounts in excess of $30,000) may be paid in the
form of bonuses. Profit-sharing expense pertaining to the 401(k) plan for
1996, 1995 and 1994, net of forfeitures, was approximately $1,156,600,
$1,057,000 and $1,386,000, respectively, and is included in the
accompanying statements of operations in profit sharing contribution and
general and administrative expenses.
(5) SHAREHOLDERS' NOTES RECEIVABLE
Shareholders' notes receivable represent amounts due for the purchase by
shareholders of common stock. The notes are due in annual installments
with maturities from 1995 through 1998, and bear interest at 5.88% per
annum.
15
WARD HOWELL INTERNATIONAL, INC.
Notes to Financial Statements, Continued
(6) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1996 and
1995 is composed of the following components:
1996 1995 1994
---- ---- ----
Current:
Federal $ 9,734 -- 95,087
State 36,050 66,900 19,577
Deferred 336,661 (178,880) 19,056
--------- -------- -------
$ 382,445 (111,980) 133,720
========= ======== =======
Deferred income taxes included in the respective balance sheets reflect
the net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the
amounts reported for income tax purposes. A schedule of the temporary
differences and the related tax effect follows:
1996 1995
---- ----
Allowance for doubtful accounts $ 148,830 104,960
Depreciation and amortization (52,104) (20,500)
Accrued lease termination costs 1,323 27,134
Tax credit/other carryforward (13,336) 309,780
--------- -------
$ 84,713 421,374
========= =======
The Company's deferred tax assets and liabilities as of December 31, 1996
and 1995 consist of the following:
1996 1995
----------------------- -----------------------
Current Noncurrent Current Noncurrent
------- ---------- ------- ----------
Assets $150,153 -- 436,451 126,658
Liabilities (13,336) (52,104) -- (141,735)
-------- ------- ------- --------
Net deferred tax assets
(liabilities) $136,817 (52,104) 436,451 (15,077)
======== ======= ======= ========
In 1996 and 1995, the difference between the effective tax rate and the
Federal statutory rate is due primarily to Federal graduated rates, state
and local taxes and certain meals and entertainment expenses that are not
deductible for tax purposes.
16
WARD HOWELL INTERNATIONAL, INC.
Notes to Financial Statements, Continued
(7) COMMON STOCK
Common stock is issued at a price of $1,036 per share or book value per
share, as defined, whichever is greater. The book value per share at
December 31, 1996 and 1995 was $777 and $501, respectively. For purposes
of calculating book value per share, shareholders' notes receivable are
not deducted from shareholders' equity. Upon a shareholder's termination
of employment or the occurrence of certain other events, the Company has
the first right and option to purchase the common stock held by the
shareholder at a price of $1,036 per share or book value per share, as
defined, whichever is greater.
(8) SHORT-TERM BORROWINGS
The Company had available a line of credit with a bank in the amount of
$800,000. Borrowings under this line of credit were secured by the
Company's accounts receivable and carried interest at the rate of prime
plus 1%. There were no such borrowings at December 31, 1996 and 1995.
17
WARD HOWELL INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
(unaudited)
As of
------------------------------
ASSETS 9/30/97 12/31/96
------------- -------------
Current assets:
Cash and cash equivalents $ 1,002,443 $ 1,437,234
Accounts receivable 8,139,765 7,226,873
Employee advances 993,716 346,149
Deferred income taxes 136,817 136,817
Prepaid income taxes 120,494 107,984
Prepaid expenses and other current assets 43,618 107,174
------------- -------------
Total current assets 10,436,853 9,362,231
Fixed assets, net 956,870 607,129
Investment in joint venture 99,728 67,028
Other assets 345,345 344,698
------------- -------------
Total assets $ 11,838,796 $ 10,381,086
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable to related parties $ 33,021 $ 33,021
Current portion of installment notes payable 50,069 50,069
Due to joint venture 53,588 25,022
Accounts payable and accrued liabilities 617,430 1,608,144
Accrued compensation 9,017,403 6,695,867
------------- -------------
Total current liabilities 9,771,511 8,412,123
Notes payable to related parties, net of current portion 50,350 42,967
Installment notes payable, net of current portion 36,037 78,565
Deferred rent 273,463 305,418
Deferred income taxes 52,104 52,104
------------- -------------
Shareholders' equity:
Common stock, $1 par value; 5,000 shares authorized; 2,146 and
2,136 shares issued and outstanding, respectively 2,146 2,136
Additional paid-in capital 1,180,598 1,170,248
Retained earnings 558,693 487,599
Less: subscriptions receivable (86,106) (170,074)
------------- -------------
Total shareholders' equity 1,655,331 1,489,909
------------- -------------
Total liabilities and shareholders' equity $ 11,838,796 $ 10,381,086
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
18
WARD HOWELL INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(unaudited)
1997 1996
------------- -------------
Fee revenue, net $ 19,394,195 $ 18,611,302
Operating expenses:
Compensation and benefits 16,958,109 16,259,327
General and administrative expenses 2,383,985 1,793,215
------------- -------------
Total operating expenses 19,342,094 18,052,542
------------- -------------
Income from operations 52,101 558,760
Equity in net income from joint venture 37,303 10,751
Other income (expense):
Interest income 49,179 15,849
Interest expense (9,581) (10,448)
------------- -------------
Income before income taxes 129,002 574,912
Income tax expense 57,908 305,255
------------- -------------
Net income $ 71,094 $ 269,657
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
19
WARD HOWELL INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(unaudited)
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 71,094 $ 269,657
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 213,788 151,831
Equity in net income of joint venture (37,303) (10,751)
Changes in operating assets and liabilities (178,024) 1,329,967
------------ ------------
Net cash provided by operating activities 69,555 1,740,704
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (563,529) (70,891)
------------ ------------
Net cash used in investing activities (563,529) (70,891)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt (35,145) (87,911)
Proceeds from issuance of common stock 94,328 507,821
------------ ------------
Net cash provided by financing activities 59,183 419,910
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (434,791) 2,089,723
CASH AND CASH EQUIVALENTS, at beginning of period 1,437,234 149,487
------------ ------------
CASH AND CASH EQUIVALENTS, at end of period $ 1,002,443 $ 2,239,210
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
20
WARD HOWELL INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 1.
Interim Financial Information
The interim financial data is unaudited; however, in the opinion of Ward Howell
International, Inc. ("WHI"), the interim data includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair statement of
the results of the interim periods. The results of operations for the nine
months ended September 30, 1997, are not necessarily indicative of the results
that can be expected for the entire fiscal year ending December 31, 1997.
21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholder of
Chartwell Partners International, Inc.:
We have audited the accompanying balance sheet of Chartwell Partners
International, Inc. (a California corporation) as of December 31, 1996, and the
related statements of income, stockholder's equity and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chartwell Partners
International, Inc. as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Tampa, Florida,
February 27, 1998
22
CHARTWELL PARTNERS INTERNATIONAL, INC.
BALANCE SHEET -- DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,664
Accounts receivable 591,247
--------
Total current assets 605,911
PROPERTY AND EQUIPMENT, net 119,165
OTHER ASSETS 6,259
--------
Total assets $731,335
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 33,017
Accrued compensation 274,867
Current maturities of long-term debt 20,000
--------
Total current liabilities 327,884
--------
LONG-TERM DEBT, less current maturities 31,667
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, no par value, 100,000 shares authorized, 10,000 shares issued
and outstanding 100,000
Retained earnings 271,784
--------
Total stockholder's equity 371,784
--------
Total liabilities and stockholder's equity $731,335
========
The accompanying notes are an integral part of this balance sheet.
23
CHARTWELL PARTNERS INTERNATIONAL, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
FEE REVENUE, net $2,618,264
OPERATING EXPENSES:
Compensation and benefits 1,896,098
General and administrative expenses 547,030
----------
Total operating expenses 2,443,128
----------
OPERATING INCOME 175,136
INTEREST INCOME, net 19,850
----------
INCOME BEFORE PROVISION FOR INCOME TAXES 194,986
PROVISION FOR INCOME TAXES 6,300
----------
NET INCOME $ 188,686
==========
NET INCOME PER SHARE $18.87
==========
WEIGHTED AVERAGE SHARES OUTSTANDING 10,000
==========
The accompanying notes are an integral part of this statement.
24
CHARTWELL PARTNERS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
Common Stock Total
----------------------- Retained Stockholder's
Shares Amount Earnings Equity
------ -------- --------- ------------
BALANCE, December 31, 1995 10,000 $100,000 $ 278,012 $ 378,012
Dividends -- -- (194,914) (194,914)
Net income -- -- 188,686 188,686
------ -------- --------- ---------
BALANCE, December 31, 1996 10,000 $100,000 $ 271,784 $ 371,784
====== ======== ========= =========
The accompanying notes are an integral part of this statement.
25
CHARTWELL PARTNERS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $188,686
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization 12,194
Changes in assets and liabilities-
Accounts receivable (73,695)
Other current assets 8,058
Accounts payable and accrued liabilities 25,897
Other current liabilities (2,667)
Accrued compensation 134,495
--------
Net cash provided by operating activities 292,968
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (103,541)
--------
Net cash used in investing activities (103,541)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (20,000)
Dividends paid (194,914)
--------
Net cash used in financing activities (214,914)
--------
NET DECREASE IN CASH AND CASH EQUIVALENTS (25,487)
CASH AND CASH EQUIVALENTS, beginning of year 40,151
--------
CASH AND CASH EQUIVALENTS, end of year $ 14,664
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 6,153
Income taxes $ 6,300
The accompanying notes are an integral part of this statement.
26
CHARTWELL PARTNERS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Organization
Chartwell Partners International, Inc. (the Company) is an executive search firm
specializing in the recruitment of executives on behalf of its clients. The
Company contracts with its clients, primarily on a retainer basis, to provide
consulting advice on the identification, evaluation, attraction, and
recommendation of qualified candidates for specific positions.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investment instruments with original
maturities of three months or less to be cash equivalents.
Property and Equipment
Office furniture and equipment is stated at cost less accumulated depreciation
using the straight-line method of depreciation over its estimated useful lives
of five years. Computer equipment is stated at cost less accumulated
depreciation using the straight-line method of depreciation over its estimated
useful lives of two and one-half years. Repair and maintenance costs which do
not extend the useful lives of the related assets are expensed as incurred.
Revenue Recognition
The Company derives substantially all of its revenues from professional
services, which are recognized as fee revenue as clients are billed, generally
over a 60- to 90-day period commencing with the initial acceptance of a search.
Fee revenue is presented net of adjustments to original billings.
27
Income Taxes
The Company reports its earnings under the provisions of Subchapter S of the
Internal Revenue Code. Accordingly, net income is reported through the
stockholder's individual income tax return, and the resulting federal tax
liability is the responsibility of the individual stockholder.
The provision for income taxes relates to state income taxes owed by the Company
for the year ended December 31, 1996.
Net Income Per Share
Net income per 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 year ended December 31,
1996.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentration of
credit risk consist primarily of accounts receivable. Credit risk arising from
accounts receivable is minimal due to the large number of customers comprising
the Company's customer base. The customers are concentrated primarily in the
Company's United States market area.
For the year ended December 31, 1996, the Company derived approximately 17
percent of its revenues from a single customer.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial assets and liabilities,
including cash and cash equivalents, accounts receivable, accounts payable and
accrued liabilities, accrued compensation and current maturities of long-term
debt at December 31, 1996, approximate fair value because of the short
maturities of these instruments. The carrying amount of the Company's long-term
debt approximates fair value at December 31, 1996, based on current market rates
of interest and maturities.
28
Newly Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
(SFAS 128). SFAS 128 establishes new standards for computing and presenting
earnings per share (EPS). Specifically, SFAS 128 replaces the presentation of
primary EPS with a presentation of basic EPS, requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS 128 is effective for financial statements issued
for periods ending after December 15, 1997; earlier application is not
permitted. EPS computed under SFAS 128 would have been the same as reflected on
the accompanying statement of income.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits" (SFAS 132). SFAS 132 revises
employers' disclosures about pension and other postretirement benefit plans.
SFAS 132 is effective for fiscal years beginning after December 15, 1997;
earlier application is encouraged. Management has implemented SFAS 132 for the
year ended December 31, 1996.
2. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of December 31, 1996:
Amount
---------
Office furniture and equipment $ 84,284
Computer equipment 65,715
--------
149,999
Less- Accumulated depreciation (30,834)
--------
$119,165
========
29
3. LONG-TERM DEBT:
Long-term debt consisted of a Term Loan (the Loan) bearing interest at the
bank's reference rate plus 1.5 percent (9.75 percent at December 31, 1996). The
Loan requires monthly principal payments of $1,667 plus accrued interest. The
Loan matures on June 1, 1999.
Aggregate principal amounts due under the Loan as of December 31, 1996, are as
follows:
Year Ending
December 31, Amount
------------ -------
1997 $20,000
1998 20,000
1999 11,667
-------
$51,667
=======
The Company maintains a revolving Line of Credit (the Line) which provides for
maximum borrowings of $200,000, bearing interest at the bank's reference rate
plus 1.5 percent (9.75 percent at December 31, 1996). The Line expires on May
15, 1997. No amounts were outstanding under the Line as of December 31, 1996.
Under the terms of the Loan and the Line, the Company is required to maintain,
among other restrictions, minimum net income levels, current ratio and
liabilities to net worth ratios. In addition, the Loan and the Line contain
restrictions on asset dispositions, additional debt and changes in ownership. As
of December 31, 1996, the Company was in compliance with the terms and covenants
of the Loan and the Line.
4. EMPLOYEE BENEFIT PLANS:
Defined Contribution 401(k) Profit Sharing Plan
The Company maintains a defined contribution 401(k) profit sharing plan. For the
year ended December 31, 1996, the Company did not make a contribution to this
plan.
Money Purchase Pension Plan
The Company maintains a money purchase pension plan. For the year ended December
31, 1996, the Company has accrued for contributions totaling approximately
$65,986, which are reflected in accrued compensation in the accompanying balance
sheet.
30
5. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Company leases certain office space under a non-cancelable operating lease.
Aggregate future minimum lease payments under this lease are as follows:
Year Ending
December 31, Amount
------------ ---------
1997 $ 98,796
1998 98,796
---------
$ 197,592
=========
Rent expense totaled $98,796 for the year ended December 31, 1996.
6. SUBSEQUENT EVENT:
On January 2, 1998, the Company entered into an asset sale agreement with
Lamalie Associates, Inc. (LAI) to sell certain assets of the Company. The sales
price was approximately $3.1 million and was paid with approximately $1.4
million of cash, a $1.25 million convertible subordinated note and LAI's common
stock.
31
CHARTWELL PARTNERS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
As of
-----------------------------
9/30/97 12/31/96
---------- --------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $1,023,635 $ 14,664
Accounts receivable 544,307 591,247
Prepaid expenses 9,019 --
---------- --------
Total current assets 1,576,961 605,911
---------- --------
Property and equipment, net 132,714 119,165
Other assets 6,259 6,259
---------- --------
Total assets $1,715,934 $731,335
========== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 107,721 $ 33,017
Accrued compensation 889,692 274,867
Current maturities of long-term debt 20,000 20,000
---------- --------
Total current liabilities 1,017,413 327,884
Long-term debt, less current maturities 16,667 31,667
Commitments and contingencies
Stockholder's equity:
Common stock; no par value; 100,000 shares authorized; 100,000 100,000
10,000 shares issued and outstanding
Retained earnings 581,854 271,784
---------- --------
Total stockholder's equity 681,854 371,784
---------- --------
Total liabilities and stockholder's equity $1,715,934 $731,335
========== ========
The accompanying notes are an integral part of these condensed financial
statements.
32
CHARTWELL PARTNERS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(unaudited)
1997 1996
---------- ----------
Fee revenue, net $2,803,653 $1,863,371
Operating expenses:
Compensation and benefits 2,192,543 1,422,074
General and administrative expenses 317,857 342,148
---------- ---------
Total operating expenses 2,510,400 1,764,222
---------- ---------
Operating income 293,253 99,149
Interest income, net 18,459 15,823
---------- --------
Income before provision for income taxes 311,712 114,972
Provision for income taxes 1,642 3,347
---------- ---------
Net income $ 310,070 $ 111,625
========== =========
The accompanying notes are an integral part of these condensed financial
statements.
33
CHARTWELL PARTNERS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(unaudited)
1997 1996
---------- --------
CASH FLOWS FROM OPERATING ACTIVITIES: $ 310,070 $111,625
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42,628 24,008
Changes in operating assets and liabilities 727,450 800,297
---------- --------
Net cash provided by operating activities 1,080,148 935,930
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (56,177) (42,798)
---------- --------
Net cash used in investing activities (56,177) (42,798)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt (15,000) (15,000)
Dividends paid -- (104,914)
---------- --------
Net cash used in financing activities (15,000) (119,914)
---------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,008,971 773,218
CASH AND CASH EQUIVALENTS, at beginning of period 14,664 40,151
---------- --------
CASH AND CASH EQUIVALENTS, at end of period $1,023,635 $813,369
========== ========
The accompanying notes are an integral part of these condensed financial
statements.
34
CHARTWELL PARTNERS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 1.
Interim Financial Information
The interim financial data is unaudited; however, in the opinion of Chartwell
Partners International, Inc. ("CPI"), the interim data includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair statement of
the results of the interim periods. The results of operations for the nine
months ended September 30, 1997, are not necessarily indicative of the results
that can be expected for the entire fiscal year ending December 31, 1997.
35
LAMALIE ASSOCIATES, INC.
INTRODUCTION TO UNAUDITED
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements for the year
ended February 28, 1997, and the nine months ended November 30, 1997, have been
prepared to reflect the financial position of Lamalie Associates, Inc. ("LAI" or
"the Company") as if the acquisitions of Chartwell Partners International, Inc.
("CPI") in January 1998, and Ward Howell International, Inc. ("WHI") in February
1998, had occurred effective March 1, 1996.
WHI Acquisition
The acquisition was treated as a purchase for financial reporting purposes. The
Company acquired WHI for approximately $20 million. The purchase consideration
consisted of (1) approximately $8.7 million cash, (2) $7.6 million in notes
payable over three years, accruing interest on the unpaid balance at the rate of
5.0 percent per annum, and (3) approximately 190,000 shares of the Company's
common stock. Approximately $8.7 million of the purchase consideration was
derived from the proceeds of the Company's initial public offering which had
been invested in short-term investment securities since July 1997.
CPI Acquisition
The acquisition was treated as a purchase for financial reporting purposes. The
Company acquired CPI for approximately $3.1 million. The purchase consideration
consisted of (1) approximately $1.4 million cash, (2) a convertible subordinated
promissory note of the Company in the principal amount of $1.2 million, payable
over three years, accruing interest on the unpaid balance at the rate of 6.75
percent per annum and convertible into shares of the Company's common stock at
each anniversary date at the prices specified in the asset purchase agreement,
and (3) approximately 26,000 shares of the Company's common stock. Approximately
$1.4 million of the purchase consideration was derived from the proceeds of the
Company's initial public offering which had been invested in short-term
investment securities since July 1997.
The Company believes that the assumptions used in preparing the unaudited pro
forma combined financial statements contained herein provide a reasonable basis
on which to present the unaudited pro forma combined financial data. The
unaudited pro forma combined financial statements are provided for informational
purposes only and should not be construed to be indicative of the results of
operations or financial position of the Company had the transactions occurred on
the date indicated and are not intended to project the Company's results of
operations or its financial position for any future period or as of any future
date. The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial statements of the Company,
CPI and WHI and in conjunction with the related assumptions and notes to these
36
unaudited pro forma combined financial statements. The historical financial
statements of CPI and WHI for the year ended December 31, 1996, were used in
preparing the unaudited pro forma combined statement of operations for the year
ended February 28, 1997. The unaudited pro forma combined financial statements
as of and for the nine months ended November 30, 1997, were prepared using the
unaudited condensed financial statements of CPI and WHI as of and for the nine
months ended September 30, 1997.
The unaudited pro forma combined financial statements do not reflect the effect
of expected decreases in expenses as a result of cost savings which may be
achieved through facilities, technology and administrative integration.
Likewise, these statements do not reflect expected increases in levels of
expenses as a result of planned upgrades to CPI's and WHI's management
information systems. Such items are not reflected because they are not factually
determinable or estimable.
37
LAMALIE ASSOCIATES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF NOVEMBER 30, 1997
(In thousands)
Businesses Acquired
---------------------
Acquisition Pro Forma
LAI CPI WHI Adjustments Combined
-------- -------- -------- ------------ ---------
ASSETS
Current assets:
Cash and cash equivalents $21,739 $ 1,024 $ 1,002 ($9,910) (a),(b) $ 13,855
Accounts receivable, net 14,920 544 8,140 (544) (a) 23,060
Employee advances -- -- 994 (974) (b) 20
Prepaid expenses 1,445 9 44 (9) (a) 1,489
Refundable income taxes 1,419 -- 120 -- 1,539
Deferred tax assets 376 -- 137 -- 513
------- -------- -------- ------- --------
Total current assets 39,899 1,577 10,437 (11,437) 40,476
Property and equipment, net 4,901 133 957 (964) (a) 5,027
Non-current deferred tax assets 2,949 -- -- (52) (a) 2,897
Goodwill -- -- -- 24,233 (a) 24,233
Other assets 3,878 6 445 (19) (a) 4,310
------- -------- -------- ------- -------
Total assets $51,627 $ 1,716 $ 11,839 $11,761 $76,943
======= ======== ======== ======= =======
38
LAMALIE ASSOCIATES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF NOVEMBER 30, 1997
(In thousands)
(Continued)
Businesses Acquired
---------------------
Acquisition Pro Forma
LAI CPI WHI Adjustments Combined
-------- --------- -------- ------------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,122 $ 107 $ 617 $ (61) (a) $ 1,785
Accrued compensation 11,740 890 9,017 (890) (a) 20,757
Current maturities of long-term debt 114 20 83 2,864 (a),(b) 3,081
Other current liabilities 192 -- 55 2,500 (a) 2,747
-------- -------- -------- --------- --------
Total current liabilities 13,168 1,017 9,772 4,413 28,370
-------- -------- -------- --------- --------
Accrued rent 1,015 -- 273 (273) (a) 1,015
Long-term debt, less current maturities 140 17 86 5,802 (a),(b) 6,045
Deferred compensation 6,676 -- -- -- 6,676
Deferred taxes -- -- 52 (52) (a) --
-------- -------- -------- --------- --------
Stockholders' equity:
Common stock 54 100 2 (100) (a) 56
Additional paid-in capital 29,138 -- 1,181 3,026 (a) 33,345
Subscriptions receivable -- -- (86) 86 (b) --
Retained earnings 1,436 582 559 (1,141) (a) 1,436
-------- -------- -------- --------- --------
Total stockholders' equity 30,628 682 1,656 1,871 34,837
-------- -------- -------- --------- --------
Total liabilities and stockholders' equity $ 51,627 $ 1,716 $ 11,839 $ 11,761 $ 76,943
======== ======== ======== ========= ========
See Notes to Unaudited Pro Forma Combined Financial Statements.
39
LAMALIE ASSOCIATES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1997
(In thousands, except per share data)
Businesses Acquired
-------------------
Compensation Pro Forma Acquisition Pro Forma
LAI Adjustments LAI CPI WHI Adjustments Combined
------- ------------ --------- ------- -------- ----------- --------
Fee revenue, net $46,437 $ -- $46,437 $ 2,618 $ 25,138 $ -- $74,193
Operating expenses:
Compensation and benefits 39,928 (4,575) (c) 35,353 1,896 22,370 (2,341) (d) 57,278
General and administrative expenses 6,685 -- 6,685 547 2,079 -- 9,311
Goodwill amortization -- -- -- -- -- 808 (e) 808
------- ------- ------- ------- -------- -------- -------
Total operating expenses 46,613 (4,575) 42,038 2,443 24,449 (1,533) 67,397
------- ------- ------- ------- -------- -------- -------
Operating income (loss) (176) 4,575 4,399 175 689 1,533 6,796
Interest income (expense), net (376) -- (376) 20 31 (901) (f) (1,226)
------- ------- ------- ------- -------- -------- -------
Income (loss) before provision for (552) 4,575 4,023 195 720 632 5,570
income taxes
Provision for income taxes 15 1,675 (c) 1,690 6 382 558 (g) 2,636
------- ------- ------- ------- -------- -------- -------
Net income (loss) $ (567) $ 2,900 $ 2,333 $ 189 $ 338 $ 74 $ 2,934
======= ======= ======= ======= ======== ======== =======
Net income (loss) per common and
common equivalent share $ (0.18) $ 0.73 $ 0.86
======= ======= =======
Weighted average common and
common equivalent shares
outstanding 3,199 3,199 3,415
======= ======= =======
See Notes to Unaudited Pro Forma Combined Financial Statements.
40
LAMALIE ASSOCIATES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997
(In thousands, except per share data)
Businesses Acquired
----------------------- Acquisition Pro Forma
LAI CPI WHI Adjustments Combined
------- -------- ------- ----------- ---------
Fee revenue, net $45,847 $ 2,804 $19,394 $ -- $ 68,045
Operating expenses:
Compensation and benefits 35,152 2,192 16,958 (2,240) (d) 52,062
General and administrative expenses 5,872 318 2,384 -- 8,574
Goodwill amortization -- -- -- 606 (e) 606
-------- -------- ------- -------- ----------
Total operating expenses 41,024 2,510 19,342 (1,634) 61,242
-------- -------- ------- -------- ----------
Operating income 4,823 294 52 1,634 6,803
Interest income (expense), net 45 18 77 (676) (f) (536)
-------- -------- ------- -------- ----------
Income before provision for income taxes 4,868 312 129 958 6,267
Provision for income taxes 2,094 2 58 768 (g) 2,922
-------- -------- ------- -------- ----------
Net income $ 2,774 $ 310 $ 71 $ 190 $ 3,345
======== ======== ======= ======== ==========
Net income per common and
common equivalent share $ 0.63 $ 0.72
======== ==========
Weighted average common and common
equivalent shares outstanding 4,413 4,629
======== ==========
See Notes to Unaudited Pro Forma Combined Financial Statements.
41
LAMALIE ASSOCIATES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) To reflect purchase accounting adjustments for allocation of purchase price
and to reflect the use of cash, borrowing and issuance of common stock by
the Company to finance the transactions.
(b) To reflect settlement of WHI employee and related party receivables and
payables required as a condition to completing the transaction.
(c) To reflect the elimination of that portion of consultant compensation that
exceeds the amount which would have been paid to the Company's consultants
had the Company's revised compensation plan for consultants, adopted March
1, 1997, been in effect for all of fiscal 1997 and the related increase in
provision for income taxes.
(d) To reflect the elimination of that portion of consultant compensation that
exceeds the amount which would have been paid had the WHI consultants been
paid under the Company's revised compensation plan for consultants, adopted
March 1, 1997.
(e) To reflect the increase in amortization expense related to the goodwill
recorded under the purchase method of accounting. The Company amortizes
goodwill over 30 years.
(f) To reflect the elimination of interest income foregone in connection with
the cash used in the acquisitions and the increase in interest expense for
the notes payable issued in connection with the acquisitions bearing
interest at rates ranging from 5 to 6.75 percent.
(g) To reflect the increase in income tax expense based on the pro forma
adjustments to income before provision for income taxes based on the
Company's effective tax rate after consideration of certain portions of
goodwill which are not deductible for income tax purposes.
42
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)
March 13, 1998
/s/ JACK P. WISSMAN
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Jack P. Wissman
Executive Vice President
(Authorized officer of
Registrant and principal
financial officer)