<PAGE> 1
UNITED STATES
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): November 25, 1998
STAFFMARK, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-20971 71-0788538
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
302 East Millsap Road
Fayetteville, Arkansas 72703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 973-6000
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
This Form 8-K/A amends the Form 8-K filed on December 9, 1998. In this
connection, on November 25, 1998, StaffMark, Inc. (the "Company") consummated a
transaction, whereby Robert Walters plc, a company registered under the
Companies Act of 1985 of Great Britain, as amended ("Robert Walters") became an
indirect wholly-owned subsidiary of the Company (the "Transaction"). Robert
Walters is a London-based international recruitment consultancy operating in 14
cities in ten countries and specializing in placing accounting, finance and
information technology professionals on a contract, temporary and permanent
basis with clients in the commercial, industrial and finance sectors.
The consideration paid to the Robert Walters stockholders in the
Transaction consisted of 6,687,704 shares of the Company's common stock. The
purchase price was determined as a result of direct negotiations with Robert
Walters. The Transaction will be accounted for as a pooling-of-interests.
Item 7. Financial Statements and Exhibits
(a) As noted in the Form 8-K filed on December 9, 1998, to which
this Form 8-K/A relates, audited financial statements of the
business acquired were included in the Company's Definitive
Proxy Statement which was filed with the Securities and
Exchange Commission (the "Commission") on September 25, 1998,
under the Securities Exchange Act of 1934, as amended. As a
result, the financial information required under Item 7(a) and
Item 7(b) of Form 8-K are not applicable to the Transaction
and have, therefore, been excluded from this filing.
(b) Pro Forma Financial Information.
(c) Exhibits. The Merger Agreement relating to the Transaction was
filed as part of the Company's Definitive Proxy Statement
filed with the Commission on September 25, 1998 and was
referenced in Form 8-K filed on December 9, 1998, to which
this Form 8-K/A relates.
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 hereunto duly authorized.
STAFFMARK, INC.
(Registrant)
Dated: February 5, 1999 By: /s/ Terry C. Bellora
--------------------------
Terry C. Bellora
Chief Financial Officer
<PAGE> 3
STAFFMARK, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Financial Statements
On November 25, 1998, StaffMark consummated a transaction whereby
Robert Walters became an indirect wholly-owned subsidiary of the Company. Robert
Walters is a London-based international recruitment consultancy operating in 14
cities in ten countries and specializing in placing accounting, finance and
information technology professionals on a contract, temporary and permanent
basis with clients in the commercial, industrial and finance sectors. The
following unaudited pro forma balance sheet as of September 30, 1998, and the
unaudited pro forma statements of income for the nine months ended September 30,
1998 and for the year ended December 31, 1997 give effect to the Transaction
using the pooling-of-interests method of accounting as well as other pro forma
adjustments as outlined below.
StaffMark incurred certain non-recurring expenses related to the
Transaction of approximately $23.8 million. These expenses include, but are not
limited to, professional fees, printing fees, fees of financial advisors, and
restructuring expenses including elimination of redundant offices, severance
plans and other expenses directly related to the Transaction, as well as
one-time payments to executive directors of Robert Walters to harmonize their
executive compensation with that of the StaffMark consolidated group.
Transaction related expenses were recorded in the period in which the
Transaction was concluded. Because the foregoing charges are non-recurring in
nature, they have not been reflected in the accompanying pro forma statements of
income.
The following unaudited pro forma financial statements present StaffMark
and give effect to: (i) the Transaction with the Company for all periods
presented; (ii) other significant purchase business combinations consummated
since January 1, 1997 as if the transactions were consummated as of the
beginning of 1997; (iii) the adjustment to compensation expense for the
difference between historical compensation paid to certain owners of previous
purchase business combinations and the employment contract compensation
negotiated in conjunction with the respective acquisitions and (iv) the
adjustment to record income taxes related to the taxation of certain
acquisitions as S corporations prior to the consummation of the acquisitions.
Pro forma income tax expense is based upon a combined effective tax rate of 41%
for periods beginning on or after January 1, 1997. The unaudited pro forma
statement of income for the year ended December 31, 1997 has been revised to
reflect the restatement related to the pooling-of-interests transactions with
Brady & Company, Inc. and Enterprise Systems Associates, Inc. This presentation
is consistent with the financial statement presentation to be included in the
Company's Form 10-K for the year ended 1998.
<PAGE> 4
STAFFMARK, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Robert Walters
------------------------------------------------------------
As Reported in Reporting Basis U.S. GAAP
ASSETS StaffMark British Pounds(a) Conversion(b) in British Pound
-------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,827 (pound) 3,410 (pound) 3,410
Accounts receivable, net of allowance for
doubtful accounts 96,733 24,750 24,750
Prepaid expenses and other 4,851 1,108 1,108
Deferred income taxes 1,538 -- -
--------------- ---------------- ---------------- ---------------
Total current assets 108,949 29,268 -- 29,268
PROPERTY AND EQUIPMENT, net 15,894 2,907 2,907
INTANGIBLE ASSETS, net 319,425 -- 4,645(c) 4,645
OTHER ASSETS 995 20 20
--------------- ---------------- ---------------- ---------------
$ 445,263 (pound) 32,195 (pound) 4,645 (pound) 36,840
=============== ================ ================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities $ 7,304 (pound) 11,638 (pound) 11,638
Payroll and related liabilities 30,077 -- -
Reserve for workers' compensation claims 7,018 -- -
Income taxes payable 3,467 3,763 3,763
--------------- ---------------- ---------------- ---------------
Total current liabilities 47,866 15,401 -- 15,401
LONG-TERM DEBT 138,808 1,674 1,674
OTHER LONG-TERM LIABILITIES 17,034 1,585 1,585
DEFERRED INCOME TAXES 2,511 13 13
STOCKHOLDERS' EQUITY:
Common stock 222 1,229 1,229
Paid-in capital 193,545 7,052 7,052
Retained earnings 45,277 5,241 4,645(c) 9,886
Accumulated other comprehensive income -- -- -
--------------- ---------------- ---------------- ---------------
Total stockholders' equity 239,044 13,522 4,645 18,167
--------------- ---------------- ---------------- ---------------
$ 445,263 (pound) 32,195 (pound) 4,645 (pound) 36,840
=============== ================ ================ ================
<CAPTION>
Robert Walters
------------------------- Restated Pro Forma
Exchange As Translated Historical Merger
ASSETS Rate to U.S. Dollars Combined Results Adjustments Pro Forma
--------- --------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 1.69810 $ 5,791 $ 11,618 $ -- $ 11,618
Accounts receivable, net of allowance for
doubtful accounts 1.69810 42,028 138,761 -- 138,761
Prepaid expenses and other 1.69810 1,881 6,732 -- 6,732
Deferred income taxes 1.69810 -- 1,538 -- 1,538
------------ ----------- ----------- -----------
Total current assets 49,700 158,649 -- 158,649
PROPERTY AND EQUIPMENT, net 1.69810 4,936 20,830 -- 20,830
INTANGIBLE ASSETS, net 1.69810 7,888 327,313 -- 327,313
OTHER ASSETS 1.69810 34 1,029 -- 1,029
------------ ----------- ----------- -----------
$ 62,558 $ 507,821 $ -- $ 507,821
============ =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities 1.69810 $ 19,762 $ 27,066 $ 23,800(d) $ 50,866
Payroll and related liabilities 1.69810 -- 30,077 -- 30,077
Reserve for workers' compensation claims 1.69810 -- 7,018 -- 7,018
Income taxes payable 1.69810 6,390 9,857 -- 9,857
---------- ------------ ----------- ----------- -----------
Total current liabilities 26,152 74,018 23,800 97,818
LONG-TERM DEBT 1.69810 2,843 141,651 -- 141,651
OTHER LONG-TERM LIABILITIES 1.69810 2,691 19,725 -- 19,725
DEFERRED INCOME TAXES 1.69810 22 2,533 -- 2,533
STOCKHOLDERS' EQUITY:
Common stock 1.69810 2,087 2,309 (1,968)(e) 289
(52)(f)
Paid-in capital 1.69810 11,975 205,520 1,968 (e) 207,159
(329)(f)
Retained earnings 1.69810 16,787 62,064 (23,800)(d) 37,712
(552)(f)
Accumulated other comprehensive income 1.69810 -- -- 933 (f) 933
------------ ----------- ----------- -----------
Total stockholders' equity 30,849 269,893 (23,800) 246,093
------------ ----------- ----------- -----------
$ 62,558 $ 507,821 $ -- $ 507,821
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of this balance sheet.
<PAGE> 5
STAFFMARK, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 1998
(a) Records the balance sheet of Robert Walters as of September 30, 1998 as
reported in British pounds.
(b) Records adjustments to conform the basis of accounting used in preparing
Robert Walters' historical financial results to U.S. generally accepted
accounting principles ("GAAP").
(c) Adjustment to record capitalization of intangible assets related to
Robert Walters' purchase business combinations in accordance with U.S.
GAAP, which was formerly written off to Stockholders' Equity in
accordance with U.K. GAAP. Intangible assets related to these
combinations totaled approximately (pound)4.7 million and are expected
to be amortized over periods ranging from thirty to forty years.
(d) Adjustment to record certain non-recurring expenses related to the
Transaction totaling approximately $23.8 million. Since these charges
are nonrecurring in nature, they have not been reflected in the
accompanying pro forma statements of income.
(e) Adjustment to record issuance of StaffMark Common Stock in exchange for
all of Robert Walters' outstanding shares. The excess of the par value
of Robert Walters' outstanding shares over the par value of the
StaffMark Common Stock will be transferred to Paid-In Capital.
(f) Adjustment to record the balance of Accumulated Other Comprehensive
Income in accordance with U.S. GAAP. This balance represents the
accumulated total of adjustments related to the translation of Robert
Walters' historical financial statements to U.S. dollars.
<PAGE> 6
STAFFMARK, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Robert Walters
------------------------------------------------------------------------------
Adjusted to Average
As Reported in Reporting Basis U.S. GAAP Exchange As Translated
StaffMark British Pounds(a) Conversion(b) in British Pounds Rate to U.S. Dollars
------------ ----------------- --------------- ----------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
SERVICE REVENUES $ 535,101 (pound) 113,262 (pound) 113,262 1.65039 $ 186,926
COST OF SERVICES 398,735 80,598 80,598 1.65039 133,018
----------- --------------- ------------ --------------- ----------
Gross profit 136,366 32,664 -- 32,664 53,908
OPERATING EXPENSES:
Selling, general and administrative 83,852 25,659 (866)(c) 24,793 1.65039 40,918
Depreciation and amortization 8,442 734 90(d) 824 1.65039 1,360
Non-recurring merger costs 1,656 -- -- 1.65039 --
----------- --------------- ------------ --------------- ----------
Operating income 42,416 6,271 776 7,047 11,630
----------- --------------- ------------ --------------- ----------
OTHER INCOME (EXPENSE):
Interest expense (3,835) (96) (96) 1.65039 (158)
Other, net (251) -- 1.65039 --
----------- --------------- ------------ --------------- ----------
INCOME BEFORE INCOME TAXES 38,330 6,175 776 6,951 11,472
INCOME TAX PROVISION 15,403 2,468 2,468 1.65039 4,073
----------- --------------- ------------ --------------- ----------
Net income (loss) $ 22,927 (pound) 3,707 (pound) 776 (pound) 4,483 $ 7,399
=========== =============== ============ =============== ==========
BASIC NET INCOME
PER COMMON SHARE $ 1.05
===========
BASIC WEIGHTED
AVERAGE SHARES OUTSTANDING 21,809
===========
DILUTED NET INCOME
PER COMMON SHARE $ 1.01
===========
DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 22,660
===========
<CAPTION>
Pro Forma
Restated Pro Forma Combined Purchase
Historical Merger StaffMark & Business
Combined Results Adjustments Robert Walters Combinations(h) Pro Forma
---------------- ----------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
SERVICE REVENUES $ 722,027 $ -- $ 722,027 $ 11,284 $ 733,311
COST OF SERVICES 531,753 -- 531,753 7,932 539,685
------------ ---------- ------------ ----------- ----------
Gross profit 190,274 -- 190,274 3,352 193,626
OPERATING EXPENSES:
Selling, general and administrative 124,770 1,429(g) 126,199 1,904 128,103
Depreciation and amortization 9,802 -- 9,802 202 10,004
Non-recurring merger costs 1,656 -- 1,656 -- 1,656
------------ ---------- ------------ ----------- ----------
Operating income 54,046 (1,429) 52,617 1,246 53,863
OTHER INCOME (EXPENSE):
Interest expense (3,993) -- (3,993) (429) (4,422)
Other, net (251) -- (251) -- (251)
------------ ---------- ------------ ----------- ----------
INCOME BEFORE INCOME TAXES 49,802 (1,429) 48,373 817 49,190
INCOME TAX PROVISION 19,476 -- 19,476 335 19,811
------------ ---------- ------------ ----------- ----------
Net income (loss) $ 30,326 $ (1,429) $ 28,896 $ 482 $ 29,378
============ ========== ============ =========== ==========
BASIC NET INCOME
PER COMMON SHARE $ 1.06 $ 1.01 $ 1.03
============ ============ ==========
BASIC WEIGHTED
AVERAGE SHARES OUTSTANDING 28,497(e) 28,497(e) 28,582(i)
============ ============ ==========
DILUTED NET INCOME
PER COMMON SHARE $ 1.02 $ 0.98 $ 0.99
============ ============ ==========
DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 29,621(f) 29,621(f) 29,706(j)
============ ============ ==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 7
STAFFMARK, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME
For the Nine Months Ended September 30, 1998
(a) Records the financial results of Robert Walters for the period from
January 1, 1998 through September 30, 1998 as reported in British
pounds.
(b) Records adjustments to conform the basis of accounting used in preparing
Robert Walters' historical financial results to U.S. GAAP.
(c) Adjustment to record compensation expense related to Robert Walters'
Share Option Schemes in accordance with U.S. GAAP. Options under the
Share Option Schemes are exercisable between three and ten years after
the grant date, dependent on the achievement of certain financial
targets over any three year period. Accordingly, the Share Option
Schemes have been considered variable plans under Accounting Principles
Board No. 25, "Accounting for Stock Issued to Employees." Compensation
expense was computed as the sum of (i) the net equity in the share
options, determined as the product of the outstanding share options and
the difference between the period-ending market price of the Robert
Walters' shares and the grant price, amortized over the remaining
vesting period and (ii) the net equity value of share options exercised
during the period. For purposes of computing this adjustment, the
minimum possible vesting period of three years from grant date was used
to determine the amortization period. Information regarding the
outstanding share options as of September 30, 1998 was as follows:
<TABLE>
<CAPTION>
OUTSTANDING
GRANT DATE SHARE OPTIONS GRANT PRICE
----------------------- --------------------- --------------------
<S> <C> <C>
July 15, 1996 929,231 (pound) 0.7066
August 15, 1997 326,392 3.0205
April 21, 1998 40,000 5.4500
June 3, 1998 70,000 5.0667
</TABLE>
(d) Adjustment to record the amortization of intangible assets related to
Robert Walters' purchase business combinations in accordance with U.S.
GAAP. Intangible assets related to these combinations totaled
approximately (pound)4.7 million and are being amortized over periods
ranging from thirty to forty years.
(e) Represents the sum of StaffMark's historical weighted average shares
outstanding plus 6,687,704 shares of StaffMark Common Stock that were
issued to the stockholders of Robert Walters in conjunction with the
Transaction.
(f) Includes the shares discussed in Note (e) above and the dilutive effect
of StaffMark's stock options and Robert Walters' share options and SAYE
schemes adjusted for the share exchange ratio of .272 as shown below.
<TABLE>
<CAPTION>
WEIGHTED
DESCRIPTION AVERAGE SHARES
---------------------------------------------------- ---------------------
<S> <C>
Restated Historical Basic Weighted Average Shares 28,497,046
Dilutive Effect:
StaffMark Stock Option Plan 851,135
Robert Walters' Share Option Scheme 272,507
------------
Pro Forma Diluted Weighted Average Shares 29,620,688
============
</TABLE>
<PAGE> 8
(g) Adjustment to remove compensation expense recognized in accordance with
Robert Walters' Share Option and SAYE Schemes which will not be incurred
subsequent to the Transaction.
(h) Represents the financial results of Progressive Resources, Inc.,
Progressive Personnel Resources, Inc., Progressive Personnel Resources
of New Jersey, Inc., and Strategic Computer Resources, LLC (collectively
referred to as "Progressive") for the period from January 1, 1998
through the date of acquisition as adjusted to: (i) reflect the
compensation level the owners have agreed to receive from StaffMark
subsequent to the acquisition; (ii) reflect the amortization expense
relating to the intangible assets recorded in conjunction with the
acquisition; (iii) reflect interest expense relating to debt incurred in
conjunction with the acquisition; and (iv) reflect the incremental
provision for federal and state income taxes as if Progressive had
recognized income tax expense in accordance with StaffMark's effective
tax rate.
(i) Includes the shares discussed in Note (e) above and the effect of shares
issued in conjunction with the purchase business combination discussed
in Note (h) as shown below.
<TABLE>
<CAPTION>
WEIGHTED
DESCRIPTION AVERAGE SHARES
----------------------------------------------------- ----------------
<S> <C>
Restated Historical Basic Weighted Average Shares 28,497,046
Effect of Shares Issued for Progressive 85,218
------------
Pro Forma Basic Weighted Average Shares 28,582,264
============
</TABLE>
(j) Includes the shares discussed in Note (f) above and the effect of shares
issued in conjunction with the purchase business combination discussed
in Note (h) as shown below.
<TABLE>
<CAPTION>
WEIGHTED
DESCRIPTION AVERAGE SHARES
----------------------------------------------------------- -------------------
<S> <C>
Restated Historical Diluted Weighted Average Shares 29,620,688
Effect of Shares Issued for Progressive 85,218
------------
Pro Forma Diluted Weighted Average Shares 29,705,906
============
</TABLE>
<PAGE> 9
STAFFMARK, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Robert Walters
-----------------------------------------------------------------------------
Adjusted to Average
As Reported in Reporting Basis U.S. GAAP Exchange As Translated
StaffMark British Pounds(a) Conversion(b) in British Pounds Rate to U.S. Dollars
----------- ----------------- ------------- ----------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
SERVICE REVENUES $ 445,268 (pound) 90,806 (pound) -- (pound) 90,806 1.63831 $ 148,768
COST OF SERVICES 343,018 61,299 -- 61,299 1.63831 100,427
----------- -------------- ------------- -------------- -----------
Gross profit 102,250 29,507 -- 29,507 48,342
OPERATING EXPENSES:
Selling, general and administrative 67,858 21,312 2,826(c) 24,138 1.63831 39,546
Depreciation and amortization 5,389 592 8(d) 600 1.63831 983
----------- -------------- ------------- -------------- -----------
Operating income 29,003 7,603 (2,834) 4,769 7,812
----------- -------------- ------------- -------------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,362) -- -- -- 1.63831 --
Other, net 731 97 -- 97 1.63831 160
----------- -------------- ------------- -------------- -----------
INCOME BEFORE INCOME TAXES 28,372 7,700 (2,834) 4,866 7,972
INCOME TAX PROVISION 11,611 2,645 -- 2,645 1.63831 4,333
----------- -------------- ------------- -------------- -----------
Net income (loss) $ 16,761 (pound) 5,055 (pound) 2,834 (pound) 2,221 $ 3,639
----------- -------------- ------------- -------------- -----------
BASIC NET INCOME
PER COMMON SHARE $ 0.97
===========
BASIC WEIGHTED
AVERAGE SHARES OUTSTANDING 17,321
===========
DILUTED NET INCOME
PER COMMON SHARE $ 0.94
===========
DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 17,827
===========
<CAPTION>
Pro Forma
Restated Pro Forma Combined Purchase
Historical Merger StaffMark & Business
Combined Results Adjustments Robert Walters Combinations(h) Pro Forma
--------------- ----------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
SERVICE REVENUES $ 594,036 $ -- $ 594,036 $ 82,487 $ 676,523
COST OF SERVICES 443,445 -- 443,445 58,568 502,013
--------- --------- ----------- ---------- ----------
Gross profit 150,592 -- 150,592 23,919 174,511
OPERATING EXPENSES:
Selling, general and administrative 107,404 (4,630)(g) 102,774 16,365 119,139
Depreciation and amortization 6,372 -- 6,372 1,851 8,223
--------- --------- ----------- ---------- ----------
Operating income 36,815 4,630 41,445 5,703 47,148
--------- --------- ----------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (1,362) -- (1,362) (2,857) (4,219)
Other, net 891 -- 891 13 904
--------- --------- ----------- ---------- ----------
INCOME BEFORE INCOME TAXES 36,344 4,630 40,974 2,859 43,833
INCOME TAX PROVISION 15,944 -- 15,944 1,172 17,116
--------- --------- ----------- ---------- ----------
Net income (loss) $ 20,400 $ 4,630 $ 25,030 $ 1,687 $ 26,717
========= ========= =========== ========== ==========
BASIC NET INCOME
PER COMMON SHARE $ 0.85 $ 1.04 $ 1.08
========= =========== ==========
BASIC WEIGHTED
AVERAGE SHARES OUTSTANDING 24,009(e) 24,009(e) 24,786(i)
========= =========== ==========
DILUTED NET INCOME
PER COMMON SHARE $ 0.82 $ 1.01 $ 1.05
========= =========== ==========
DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 24,782(f) 24,782(f) 25,558(j)
========= =========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 10
STAFFMARK, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME
For the Year Ended December 31, 1997
(a) Records the financial results of Robert Walters for the year ended
December 31, 1997 as reported in British pounds.
(b) Records adjustments to conform the basis of accounting used in preparing
Robert Walters' historical financial results to U.S. GAAP.
(c) Adjustment to record compensation expense related to Robert Walters'
Share Option Schemes in accordance with U.S. GAAP. Options under the
Share Option Schemes are exercisable between three and ten years after
the grant date, dependent on the achievement of certain financial
targets over any three year period. Accordingly, the Share Option
Schemes have been considered variable plans under Accounting Principles
Board No. 25, "Accounting for Stock Issued to Employees." Compensation
expense was computed as the sum of (i) the net equity in the share
options, determined as the product of the outstanding share options and
the difference between the period-ending market price of the Robert
Walters' shares and the grant price, amortized over the remaining
vesting period and (ii) the net equity value of share options exercised
during the period. For purposes of computing this adjustment, the
minimum possible vesting period of three years from grant date was used
to determine the amortization period. Information regarding the
outstanding share options as of December 31, 1997 was as follows:
<TABLE>
<CAPTION>
OUTSTANDING
GRANT DATE SHARE OPTIONS GRANT PRICE
----------------------- --------------------- --------------------
<S> <C> <C>
July 15, 1996 1,046,679 (pound) 0.7066
August 15, 1997 371,000 3.0205
</TABLE>
(d) Adjustment to record the amortization of intangible assets related to
Robert Walters' purchase business combinations in accordance with U.S.
GAAP. Intangible assets related to these combinations totaled
approximately (pound)4.7 million and are being amortized over periods
ranging from thirty to forty years.
(e) Represents the sum of StaffMark's historical weighted average shares
outstanding plus 6,687,704 shares of StaffMark Common Stock that were
issued to the stockholders of Robert Walters in conjunction with the
Transaction.
(f) Includes the shares discussed in Note (e) above and the dilutive effect
of StaffMark's stock options and Robert Walters' share options and SAYE
schemes adjusted for the share exchange ratio of .272 as shown below.
<TABLE>
<CAPTION>
WEIGHTED
DESCRIPTION AVERAGE SHARES
--------------------------------------------------------- -------------------
<S> <C>
Restated Historical Basic Weighted Average Shares 24,009,220
Dilutive Effect:
StaffMark Stock Option Plan 505,908
Robert Walters' Share Option Scheme 266,597
-------------------
Pro Forma Diluted Weighted Average Shares 24,781,725
===================
</TABLE>
(g) Adjustment to remove compensation expense recognized in accordance with
Robert Walters' Share Option and SAYE Schemes which will not be incurred
subsequent to the Transaction.
<PAGE> 11
(h) Represents the financial results of Progressive, Strategic Legal
Resources, LLC ("SLR"), Structured Logic Company, Inc.("SLC"), Expert
Business Systems, Inc.("EBS"), Global Dynamics, Inc.("Global"), and
Flexible Personnel, Inc., Great Lakes Search Associates, Inc. and HR
America, Inc. (collectively "Flexible") for the period from January 1,
1997 through the earlier of the date of acquisition or December 31, 1997
as adjusted to: (i) reflect the compensation level the owners agreed to
receive from StaffMark subsequent to the acquisition; (ii) reflect the
amortization expense relating to the intangible assets recorded in
conjunction with the acquisitions; (iii) reflect interest expense
relating to debt incurred in conjunction with the acquisitions; and (iv)
reflect the incremental provision for federal and state income taxes as
if the acquired companies had recognized income tax expense in
accordance with StaffMark's effective tax rate.
(i) Includes the shares discussed in Note (e) above and the effect of shares
issued in conjunction with the purchase business combinations discussed
in Note (h).
<TABLE>
<CAPTION>
WEIGHTED
DESCRIPTION AVERAGE SHARES
-------------------------------------------------------------- -------------------
<S> <C>
Restated Historical Basic Weighted Average Shares 24,009,220
Effect of Shares Related to the Following Acquisitions:
Progressive 211,496
SLR 46,320
SLC 245,898
EBS 67,242
Global 170,348
Flexible 35,447
----------------
Pro Forma Basic Weighted Average Shares 24,785,971
================
</TABLE>
(j) Includes the shares discussed in Note (f) above and the effect of shares
issued in conjunction with the purchase business combinations discussed
in Note (h).
<TABLE>
<CAPTION>
WEIGHTED
DESCRIPTION AVERAGE SHARES
-------------------------------------------------------------- -------------------
<S> <C>
Restated Historical Diluted Weighted Average Shares 24,781,725
Effect of Shares Related to the Following Acquisitions:
Progressive 211,496
SLR 46,320
SLC 245,898
EBS 67,242
Global 170,348
Flexible 35,447
------------------
Pro Forma Diluted Weighted Average Shares 25,558,476
==================
</TABLE>
