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
July 31, 1997
Date of Report (date of earliest event reported)
Commission file number - 0-28830
The Metzler Group, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-4094854
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 Lake Cook Road, Suite 500
Deerfield, Illinois 60015
(Address of principal executive office, including zip code)
(847) 914-9100
(Registrant's telephone number, including area code)
The undersigned registrant hereby amends the following
items, financial statements, exhibits, or other portions of its
Current Report on Form 8-K, originally filed with Securities and
Exchange Commission on August 14, 1997 as set forth in the pages
attached hereto.
The required interim financial information shall be filed by the Company
as soon as practible, but in no event shall such interim financial
information be filed later than 60 days after the date of the the form
8-K filed on August 14, 1997.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The following Financial Statements of Resource Management
International, Inc. and Subsidiaries are attached:
Report of Independent Accountants
Consolidated Balance Sheet as of December 31, 1996
Consolidated Statement of Operations for the year ended December
31, 1996
Consolidated Statement of Stockholders' Equity for the year ended
December 31, 1996
Consolidated Statement of Cash Flows for the year ended December
31, 1996
Notes to the Consolidated Financial Statements
(b) Pro Forma Financial Information.
The following unaudited pro forma Financial Statements are
attached:
Unaudited Pro Forma Condensed Combining Balance Sheet as of
December 31, 1996
Unaudited Pro Forma Condensed Combining Statement of Operations
for the year ended December 31, 1996
Notes to Unaudited Condensed Combining Statements
(c) Exhibits.
23.1 Consent of Coopers & Lybrand LLP
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
REPORT ON AUDIT OF CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1996
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Resource Management International, Inc.
Rancho Cordova, California
We have audited the accompanying consolidated balance sheet of
Resource Management International, Inc. and Subsidiaries as of
December 31, 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year
then ended. These financial statements are the responsibility of
the Companies' 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 consolidated
financial position of Resource Management International, Inc. and
Subsidiaries at December 31, 1996, and the consolidated results
of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Sacramento, California
July 31, 1997, except for
notes 2, 6 and 10 for which
the date is October 10, 1997
Item 7 - FINANCIAL STATEMENTS AND EXHIBITS
Resource Management International, Inc.
And Subsidiaries
CONSOLIDATED BALANCE SHEET
Dec. 31,
1996
ASSETS
Current assets:
Cash $ 749,479
Trade receivables, less allowance
for uncollectible 8,392,134
Accounts of $590,000
Marketable equity securities
classified as available 69,030
for sale and stated at fair value
Other current assets 354,914
------------
Total current assets 9,565,557
Property and equipment, net of
accumulated 1,874,373
depreciation and amortization of
$5,505,794
Intangible Assets, net of
accumulated 749,345
Amortization of $93,842
Other assets 430,076
------------
Total assets $ 12,619,351
=============
The accompanying notes are an integral part of the financial statements.
Item 7 - FINANCIAL STATEMENTS AND EXHIBITS
Resource Management International, Inc.
And Subsidiaries
CONSOLIDATED BALANCE SHEET
Dec. 31,
1996
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Book overdraft $ 642,124
Current portion of:
Long-term debt 202,201
Obligations under capital 61,574
leases
Accrued rent 206,479
Accounts payable and accrued 2,518,104
liabilities
Accrued pension and profit
sharing plan contribution 900,799
Income taxes payable 36,163
Deferred income taxes 2,323,330
------------
Total current liabilities 6,890,774
Lines of credit 1,590,133
Long-term debt, net of current 1,871,125
portion
Capital lease obligation, net of 113,317
current portion
Accrued rent, net of current 195,676
portion
Deferred income taxes 68,935
-----------
Total liabilities 10,729,960
-----------
Minority interest in consolidated 17,093
subsidiary -----------
Mandatory redeemable preferred
stock of subsidiary 99,595
-----------
Commitments and contingencies
(Notes 8, 15 and 16)
Stockholders' equity:
Common stock, no par value, Class A,
10,000 shares authorized, 1,953 480,200
shares issued and outstanding
Common stock, no par value, Class B,
10,000 shares authorized, 123 155,877
shares issued and outstanding
Notes receivable from (69,677)
stockholders
Unrealized holding gain 12,472
Retained earnings 1,193,831
-----------
Total stockholders' equity 1,772,703
-----------
Total liabilities and $ 12,619,351
stockholders' equity ============
The accompanying notes are an integral part of the financial statements.
Item 7 - FINANCIAL STATEMENTS AND EXHIBITS
Resource Management International, Inc.
And Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1996
Dec. 31,
1996
Revenues $ 35,640,252
-------------
Costs and expenses:
Direct costs 16,910,669
Administrative salaries 7,241,998
Pension and other benefits 4,958,231
Equipment and office expense 5,028,119
Outside services and
administrative expenses 3,275,654
-------------
Total costs and expenses 37,414,671
=============
(Loss) from operations (1,774,419)
-------------
Other income (expense):
Other 94,117
Interest expense (444,555)
------------
Total other income(expense) (350,438)
------------
Loss before provision for (2,124,857)
income taxes
Income tax benefit (873,213)
------------
Net loss $ (1,251,644)
=============
The accompanying notes are an integral part of the financial statements.
Resource Management International, Inc.
And Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended
December 31, 1996
Retained Earnings
Before After
Cumu- Cumu- Cumu-
Notes lative lati lative
Receiv Unrea Trans- ve Trans-
Commo Commo able lized lation Tran lation
n n From Holdi Adjust- s- Adjust-
Stock Stock Stock- ng ment lati ment Total
Class Class holder Gain on
A B s Admu
st-
ment
Balance,
December
31, 1995 363,400 244,877 (130,241) 14,725 2,834,709 -- 2,834,709 3,327,470
Common
Stock
issued: 150,000 -- -- -- -- -- -- 150,000
Class A
(50shares)
Purchase of
common
stock:
Class A
(100shares) (33,200) -- -- -- (266,800)-- (266,800) (300,000)
Class B
(50shares) -- (89,000) -- -- (128,500)-- (128,500) (217,500)
Notes
receivable -- -- 60,564 -- -- -- -- 60,564
collected
Unrealized
holding
loss on
available-
for-sale-
securities -- -- -- (2,253) -- -- -- (2,253)
Net loss -- -- -- --(1,251,644)--(1,251,644)(1,251,644)
Translation
adjustment,
net of -- -- -- -- -- 6,066 6,066 6,066
income
taxes
Balance, ------- ------- ------- ------ --------- ----- -------- ---------
December 480,200 155,877 (69,677) 12,472 1,187,765 6,066 1,193,831 1,772,703
31, 1996 ======= ======= ======= ====== ========= ===== ======== =========
The accompanying notes are an integral part of the financial statements.
Item 7 - FINANCIAL STATEMENTS AND EXHIBITS
Resource Management International, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 1996
Dec. 31,
1996
Cash flows from operating
activities:
Net loss $(1,251,644)
Adjustments to reconcile net
loss to net cash
provided by operations:
Depreciation and amortization 851,867
Loss on sale of property and
equipment 70,560
Change in accrued rent (105,015)
Provision for bad debts 213,306
Deferred taxes (851,521)
Net change in operating assets
and liabilities net of effects
from acquisitions of businesses:
Trade receivables 1,898,220
Other assets 132,562
Income taxes payable (167,063)
Accounts payable and
accrued liabilities (400,669)
Accrued pension and profit
sharing plan contribution 10,799
----------
Net cash provided by operations 401,402
----------
Cash flows from investing
activities:
Purchase of property and (351,020)
equipment
Acquisition of businesses, net (4,408)
of cash received -----------
Net cash used in investing (355,428)
activities -----------
Cash flows from financing
activities:
Proceeds from sale of common 150,000
stock
Repurchase of common stock (517,500)
Notes issued to stockholders (15,000)
Collection of notes receivable 75,564
from stockholders
Net borrowings on line of (164,867)
credit
Borrowings on long-term debt 1,524,485
Repayment of long-term debt (1,221,564)
Payments on capital lease (32,593)
obligations
Increase in book 642,124
overdraft ----------
Net cash provided by financing 440,649
activities ----------
Net increase in cash 486,623
Cash, beginning of year 262,856
----------
Cash, end of year $ 749,479
==========
The accompanying notes are an integral part of the financial statements.
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCCOUNTING POLICIES:
Organization
Resource Management International, Inc. (RMI) was
incorporated in 1979 and provides professional consulting
services to utilities and other industries throughout the
world. RMI is headquartered in Sacramento, California and
has regional offices in various states within the United
States, Denmark, Australia, Czech Republic, as well as a
regional office in the Philippines.
Principles of Consolidation
The consolidated financial statements include the accounts
of Resource Management International, Inc. and its wholly
owned subsidiaries: Bookman-Edmonston Engineering, Inc., RMI
Utility Services, Synergic Resources Corporation (SRC) and
Synergic Resources Group (SRC Group) (collectively
Companies). SRC Group holds an eighty percent interest in Synergic
Resources Corporation International (SRCI). SRCI's wholly woned subsid-
iaries include SRCI ApS (Denmark) and SRCI Pty (Australia). SRCI also
has an eighty-two percent interest in SRCI Cs (Czech Republic). The
remaining minority interest was purchased in July 1997. All significant
intercompany transactions have been eliminated in consolidation.
Property and Equipment
Property and equipment are stated at cost and are
depreciated using the straight-line and declining balance
methods over estimated useful lives of three to forty years.
Leasehold improvements are amortized over the shorter of the
useful life or the term of the lease, generally three to
seven years. Upon sale or retirement of property and
equipment, the accounts are relieved of the cost and related
depreciation or amortization, and any resulting gain or loss
is included in the results of operations.
Intangible Assets
Intangible assets consist principally of goodwill (excess of
purchase price over the fair value of net assets acquired)
and covenants not to compete. Goodwill is being amortized
on the straight-line method from ten to forty years. The
non-compete covenants are recorded at cost and are being
amortized over their respective terms of 33 to 72 months.
Cash
The Companies maintain their cash accounts in several
commercial banks. At December 31, 1996 the Companies had
deposits with several financial institutions of $253,336
which exceeded the Federal Deposit Insurance Corporation
insurable limit of $100,000. The Companies have not
experienced losses on these deposits to date.
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SIGNIFICANT ACCOUNTING POLICIES, continued
Accounting 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. Significant estimates in
which it is reasonably possible that there could be a change
in the estimates in the near term include the calculation of
contingency reserves and revenue recognized on long-term
contracts.
Marketable Equity Securities
The Companies account for their investments in accordance
with Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity
Securities. SFAS No. 115 requires that, except for debt
securities classified as "held-to-maturity securities,"
investment in debt and equity securities should be reported
at fair value. Debt and equity securities not classified as
either "held-to-maturity securities" or "trading securities"
are classified as "available-for-sale securities," with
unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
Revenue Recognition
Revenue from consulting contracts is generally recognized as
services are provided and subcontract costs are incurred.
Certain contracts are accounted for on the percentage of
completion method whereby revenues are recognized based upon
costs incurred in relation to total estimated costs at
completion. Provision is made for the entire amount of
estimated losses, if any, at completion of contracts in
progress.
Income Taxes
The Companies account for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes, under which the
liability method is used to compute deferred income taxes.
Deferred income taxes reflect the future tax consequences of
differences between the tax and book bases of assets and
liabilities.
Notes Receivable From Stockholders
Notes issued in exchange for stock of RMI have been included
as an offset to stockholders' equity.
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUBSEQUENT EVENT
On July 31, 1997, the Company merged with The Metzler Group, Inc.
(Metzler Group) whereby substantially all of the Company's Class A and
Class B common stock was exchanged for common stock of Metzler Group.
Subsequent to the merger, Metzler Group advanced the Company
$3,624,006 to retire the line of credit (Note 6) and the term loan
(Note 10) plus accrued interest. According to the written commitment
from Metzler Group, the company is not obligated to repay the advance,
in whole or in part, during the next eighteen months (after March 1999).
In addition, Metzler Group intends to provide capital infusions in the
normal course of operations, if and as needed.
As a result of the above transaction, the lines of credit and long-term
debt have been classified as long-term obligations.
3. MARKETABLE EQUITY SECURITIES:
At December 31, 1996, the Companies had the following equity
securities classified as available-for-sale:
1996
Cost basis $ 59,525
Gross unrealized holding gains 22,500
Gross unrealized holding losses (12,995)
---------
Fair Value $ 69,030
=========
4. TRADE ACCOUNTS RECEIVABLE:
Trade accounts receivable include the following (unbilled
accounts receivable include $3,094,699 billed in January
1997 for services performed in December 1996):
1996
Billed accounts receivable $ 4,213,838
Unbilled accounts receivable 4,178,296
-----------
$ 8,392,134
===========
5. PROPERTY AND EQUIPMENT:
Property and equipment as of December 31 consisted of:
1996
Land and buildings $ 370,000
Furniture and fixtures 2,430,550
Equipment 3,292,597
Leasehold improvements 865,499
Transportation equipment 386,521
Equipment under capital leases 35,000
-------------
7,380,167
=============
Less: accumulated
depreciation
and amortization (5,505,794)
-------------
$ 1,874,373
=============
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. LINES OF CREDIT:
The Companies have two lines of credit totaling $3,500,000.
Amounts outstanding at December 31 are as follows:
1996
$2,500,000 line of credit, interest payable monthly at
the bank's prime rate (8.25% at December 31, 1996)
plus .375%, collateralized by substantially all assets,
outstanding balance due on demand $ 590,133
$1,000,000 line of credit, interest payable monthly at
the bank's prime rate (8.25% at December 31, 1996)
plus 1.0%, collateralized by substantially all assets,
outstanding balance due on April 30,1997 1,000,000
----------
$ 1,590,133
==========
Covenants under the line of credit and term loan agreements
contain provisions that limit capital expenditures or
incurrence of new debt or leases, require maintaining
profitable operations, minimum levels of net worth, tangible
net worth, and minimum ratio of current assets to current
liabilities. At December 31, 1996, the Companies were not
in compliance with all of these covenants and the balance
due on April 30, 1997, was not paid.
On July 31, 1997, the Company merged with The Metzler Group (Note 2).
The lines of credit were paid in full from advances from The Metzler
Group which are not due for repayment until after March 1999.
At December 31, 1996, the Companies had letters of credit
available of $800,000 of which $255,272 has been utilized.
The letters of credit expired April 30,1997.
7. INCOME TAXES:
The components of income tax benefit for the year ended
December 31, 1996, are as follows:
1996
Current:
Federal $ (32,677)
State 6,944
-----------
(25,733)
-----------
Deferred:
Federal (548,015)
State (299,465)
-----------
(847,480)
-----------
Total income tax benefit $ (873,213)
===========
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
7. INCOME TAXES, continued:
Reconciliation of the differences between income taxes
computed at Federal statutory tax rate and the effective
income tax rate are as follows:
1996
Federal tax rate (35.0)%
State tax, net of federal benefit (4.9)
Permanent differences 2.6
Settlement of prior federal and
state income tax returns and
adjustment to prior year federal
and state accruals including change
in effective state tax rate (3.8)
-------
(41.1)%
=======
The state net operating loss carryforward of approximately
$85,000 expires in 2001.
The net deferred tax assets and liabilities consist of the
following at December 31, 1996:
Deferred tax assets: 1996
Net operating loss carryforward $ 6,365
State income taxes 157,076
Accrued rent 201,240
Alternative minimum tax credit carryforward 35,426
Other 8,933
--------
409,040
Valuation allowance --
--------
409,040
--------
Deferred tax liabilities:
Accrual to cash adjustment 2,509,306
Depreciation and amortization 82,436
Investment in partnerships 200,532
Unrealized holding gain on available
for sale securities 9,031
---------
2,801,305
---------
$ 2,392,265
===========
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. LEASE COMMITMENTS:
The Companies lease buildings and equipment under operating
leases with initial or remaining noncancelable lease terms
in excess of one year. Those operating lease agreements
expire through 2002 with renewal options of two to five
years. The terms of the leases provide for fixed or minimum
payments plus, in some cases, additional rents based on the
consumer price index. The Companies are generally
responsible for taxes, maintenance, insurance and related
expenses. Following are future minimum rental payments
required under operating leases as of December 31, 1996:
Year ending December 31:
1997 $ 2,508,675
1998 2,193,416
1999 1,453,090
2000 1,390,449
2001 1,337,102
Thereafter
Future minimum
rental payments 77,347
-----------
$ 8,960,079
===========
Building and equipment rental expense under operating leases
was $2,569,979 in 1996.
The Companies also sublease some of these buildings to
others under noncancelable operating leases. The leases
expire through November 1998 without renewal options.
Future minimum rentals to be received are as follows:
Year ending December 31:
1997 $ 89,832
1998 77,023
----------
$ 166,855
==========
9. RETIREMENT AND PROFIT SHARING PLANS:
As of January 1, 1996, the Companies maintained three profit
sharing plans (RMI Profit Sharing Plan, Bookman-Edmonston
Profit Sharing Plan and Robert E. Meyer Consultants, Inc.
Profit Sharing Plan) and two money purchase pension plans
(RMI, Inc. Money Purchase Pension Plan and RMI Utility
Services Money Purchase Pension Plan). In connection with
the acquisition of SRC Group and SRC as discussed in Note
15, the Companies assumed the SRC Profit Sharing Plan.
The Companies amended to suspend participation, cease
benefit accruals and terminate the Robert E. Meyer
Consultants, Inc. Profit Sharing Plan and the RMI, Inc.
Money Purchase Pension Plan in 1996, and the SRC Profit
Sharing Plan effective January 1, 1997. Eligible employees
under these Plans became 100% vested upon termination.
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. RETIREMENT AND PROFIT SHARING PLANS, continued:
Effective July 1996, the Companies amended the RMI and
Bookman-Edmonston Profit Sharing Plans converting these
plans to the RMI, Inc. 401(k) and Profit Sharing Plan.
Robert E. Meyer Consultants, Inc. employees also became
eligible to participate in the RMI, Inc. 401(k) and Profit
Sharing Plan. SRC employees became eligible to participate
in the RMI, Inc. 401(k) and Profit Sharing Plan effective
January 1, 1997.
Under the RMI, Inc. 401(k) and Profit Sharing Plan, eligible
employees may contribute up to 12% of their compensation to
these plans and the Companies match a percentage of
employees' contributions as determined by the Board of
Directors. The Companies may also make an annual profit
sharing contribution at their discretion. Employees are
eligible to participate after age 21 and six months of
service. After the second year of service, vesting of all
contributions made by the Companies occur ratably at 20% per
year.
Prior to freezing the plan, under the SRC Profit Sharing
Plan, eligible employees could contribute a portion of their
compensation and the Companies matched up to 6% of the
employees' contributions. The Companies could also make an
annual profit sharing contribution at their discretion.
Employees were eligible to participate after age 20-1/2 and
twelve months of service. After the second year of service,
vesting of all contributions made by the Companies occurred
ratably at 20% per year.
Prior to freezing the plan, under the RMI, Inc. Money
Purchase Pension Plan, the Companies contributed the greater
of 5.72% or the OASDI limit of the employees' total wages.
Employees were eligible to participate after age 21 and six
months of service.
Under the RMI Utility Services Money Purchase Pension Plan,
the Companies contribute the greater of 5.72% or the 0ASDI
limit of the employees' total wages. Only union employees
may participate and are eligible upon the date of employment
and after the first year of service, contributions made by
the Companies vest 100%.
The Companies, as sponsors of the plans, use independent
third parties to provide administrative services to the
plans. The Companies have the right to terminate plans at
any time.
Pension and profit sharing expense for the year ended
December 31, 1996 was $885,864.
RESOURCE MANAGEMENT INTERNATIONAL INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. LONG-TERM DEBT:
Long-term debt at December 31 consists of the following:
1996
Term loan to bank, variable interest at the bank's
prime rate (8.25% at December 31, 1996) plus 1.0%,
collateralized by substantially all assets of the
Companies, monthly principal and interest install-
ments of $36,458, through April 2000 $1,458,333
Covenant not to compete, payable in equal monthly
installments of $5,000 including imputed interest of
10%, through December 1997 56,872
Covenant not to compete, payable in equal annual
installments of $60,000 plus interest of 4%,
commencing July 1997 through July 2001 300,000
Covenants not to compete, payable in equal monthly
installments from $3,220 to $3,864 plus interest of 6%,
payable through May 1999 97,198
Mortgage payable, interest at 10%, collateralized by
land and building, payable in equal monthly
installments of principal and interest of $2,095,
due in 2001 94,771
Note payable to individual, interest at 10%, payable
in two annual installments beginning June 1997,
without collateral 66,152
-----------
2,073,326
Less portion due within one year 202,201
-----------
$1,871,125
===========
The company was not in compliance with certain debt
covenants as described in Note 6. On July 31, 1997, the company merged
with The Metzler Group (Note 2). The term loan to bank was paid in
full from advances from The Metzler Group which are not due for
repayment until after March, 1999.
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. LONG-TERM DEBT, continued:
Future aggregate annual maturities of long-term debt as of
December 31, 1996, are as follows:
1997 $ 202,201
1998 155,113
1999 1,557,555
2000 82,304
2001 76,153
-------------
$ 2,073,326
=============
11. CAPITAL LEASE OBLIGATION:
The Companies lease certain equipment under capital lease
agreements which expire through May 2000. The Companies
payments of principal and interest amount to $5,135 monthly.
Future minimum payments under the capital lease agreements
are as follows:
Year ending December 31:
1997 $ 61,614
1998 61,614
1999 61,614
2000 31,111
-----------
215,953
Less interest portion (41,062)
-----------
174,891
Less current portion (61,574)
-----------
$ 113,317
===========
12. RELATED-PARTY TRANSACTIONS:
RMI leases office space from a company in which a related
party holds a minority interest. Rent expenses amounted to
$74,412 for the year ended December 31, l996.
RESOURCE MANAGEMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES AND
CASH FLOW INFORMATION:
During 1996, RMI acquired Synergic Resources Corporation and
Synergic Resources Group (Note 15). which included non-
compete agreements with the former owners. RMI recorded the
fair value of intangible assets and notes payable totaling
$115,934.
For the year ended December 31, 1996, there was an
unrealized loss on investments which decreased marketable
equity securities by $3,883 and increased net unrealized
holding loss on available-for-sale securities by $2,253, net
of deferred taxes of $1,630.
Cash was paid during the year for:
1996
Interest $ 444,555
Income taxes 215,842
14. MANDATORY REDEEMABLE PREFERRED STOCK OF SUBSIDIARY:
Mandatory redeemable preferred stock of subsidiary
represents the minority shareholders ownership of 100% of
the preferred stock of SRCI. SRCI has authorized 100 shares
of Series A Convertible Noncumulative Preferred Stock
(Preferred Shares). The Preferred Shares are convertible into
SRCI common stock at a conversion of 1:1 subject in certain
circumstances, to anti-dilutive adjustments. The Preferred
Shares are convertible at the holder's discretion and
convert automatically in the case of 1) a public offering of
not less than $5 per share, or 2) upon written consent of
holders of not less than 50% of the then outstanding shares.
Also, the Preferred Shares are redeemable at the option of the
holder, upon 30 day written notice, at a purchase price
equal to the greater of 1) the fair value at the date of
notice of intent to redeem or 2) the greater of the
shareholders' basis in the Preferred Shares or 20% of pre-tax
net profits. The shareholders are entitled to additional
consideration of 20% of SRCI's pre-tax net profits for each
fiscal year beginning after February 1, 1996. Each
Preferred Share is entitled to one vote per share of SRCI's
common stock into which the Preferred is convertible. The
Preferred shareholders may appoint three members to the SRCI
Board of Directors and participate fully in all dividends
declared. In the event of liquidation, each share of
Preferred is entitled to receive in preference to the Common
shareholders, an amount equal to the aggregate amount of
royalty payments made by the vendor pursuant to the
agreement.
RESOURCE MANAGEMENT INTERNATIONAL INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
15. BUSINESS ACQUISITIONS:
In May 1996, RMI purchased the outstanding shares of
Synergic Resources Corporation and Synergic Resources Group.
The acquired companies provide consulting and technical
research services to governmental agencies, public and
private utilities, research institutions and industrial
firms located throughout the world. RMI paid approximately
$313,000 in cash for combined net assets of approximately
$134,000. The acquisition has been accounted for by the
purchase method of accounting. The excess of the purchase
price over the fair value of net assets acquired has been
recorded as goodwill which is being amortized on a straight-
line basis over ten years. The operating results of the
acquired companies are included in the Companies results of
operations from the date of acquisition.
Pursuant to the purchase agreement, the Company entered into
employment and covenant not to compete agreements with
certain officers of the acquired companies. These
agreements provide for the officers to receive salaries
totaling approximately $600,000 annually through May 1998,
bonus payments totaling $480,000 and covenant payments
totaling approximately $120,000. The covenant payments are
to be paid out with interest in monthly installments over a
36-month period.
16. CONTINGENCIES:
During 1996 and 1995, five legal actions were brought
against a subsidiary of RMI and several unrelated entities
regarding the preparation of engineering reports. All cases
are in the early stages of discovery. Management believes
that the subsidiary acted in accordance with their contract
and is not liable. Although it is too early to conclude on
the outcome of these actions, management believes that it is
unlikely that the outcome will have a material impact on the
financial condition of the Companies. Management intends to
defend these actions vigorously.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The Metzler Group, Inc. (Metzler Group or the Company) completed its
acquisition of Resource Management International, Inc. (RMI) on July 31, 1997
by exchanging 2,137,178 shares of the Company's common stock for
substantially all of the outstanding common stock of RMI. The
accompanying unaudited pro forma condensed combining balance
sheet combines the Company's historical consolidated balance
sheet and the balance sheet of RMI as if the transaction had been
consummated on December 31, 1996, and the unaudited pro forma
condensed combining statement of operations for the year ended
December 31, 1996 reflects the merger with RMI, applying the
pooling-of-interests method of accounting. The unaudited pro
forma condensed combining financial statements give effect to the
issuance of the Company's common stock in exchange for
substantially all the outstanding shares of common stock of RMI.
The unaudited pro forma condensed combining financial statements
are presented for illustrative purposes only and do not purport
to represent what the Company's results of operations or
financial position would have been had the merger with RMI
occurred on the dates indicated or for any future period or
date, and are therefore qualified in their entirety by reference
to and should be read in conjunction with the historical
financial statements of the Company and RMI.
THE METZLER GROUP, INC.
PRO FORMA CONDENSED
COMBINING BALANCE SHEET (UNAUDITED)
AS OF DECEMBER 31, 1996
Metzler Pro
Forma
ASSETS Group RMI Adjustme Pro Forma
nts
Current Assets:
Cash and cash equivalents $ 32,717,756 $ 818,509 $ -- $33,536,265
Trade receivables 5,718,328 8,392,134 -- 14,110,462
Other current assets 304,573 354,914 -- 659,487
------------- ----------- ----------- ----------
Total current assets 38,740,657 9,565,557 -- 48,306,214
Property and equipment, net 839,420 1,874,373 -- 2,713,793
Other assets -- 1,179,421 -- 1,179,421
------------- ----------- ----------- ----------
Total assets $ 39,580,077 $12,619,351 $ -- $ 52,199,428
============= =========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Current portion of notes
payable and other debt
obligations $ 1,932,514 $ 905,899 $ -- $2,838,413
Accounts payable and
accrued liabilities 2,707,819 3,661,545 -- 6,369,364
Deferred income taxes 100,000 2,323,330 (2,083,333) 339,997
----------- ----------- ----------- ---------
Total current liabilities 4,740,333 6,890,774 (2,083,333) 9,547,774
Notes payable and other debt
obligations, net of current
portion 69,249 3,574,575 -- 3,643,824
Deferred income taxes 525,000 68,935 2,083,333 2,677,267
Other liabilities and 138,501 312,364 -- 450,865
deferrals
---------- ---------- ---------- -----------
Total liabilities 5,473,083 10,846,648 -- 16,319,731
Total stockholders' equity 34,106,994 1,772,703 -- 35,879,697
----------- ---------- ---------- -----------
Total liabilities
and stockholders' equity $ 39,580,077 $ 12,619,351 $ -- $52,199,428
============ ============ =========== ===========
THE METZLER GROUP, INC.
PRO FORMA CONDENSED COMBINING
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
Pro
Metzler Forma
Group RMI Adjustments Pro Forma
Revenue $27,913,085 $ 35,640,252 $ -- $ 63,553,337
Operating expenses 20,510,635 37,414,671 57,925,306
----------- ----------- ------------- --------------
Operating income (loss) 7,402,450 (1,774,419) -- 5,628,031
Other (income)
expense, net (277,160) 350,438 -- 73,278
----------- ------------ ------------- --------------
Income (loss) before
provision for income
taxes 7,679,610 (2,124,857) -- 5,554,753
Income tax expense
(benefit) 692,862 (873,213) -- (180,351)
------------ ------------ ------------- --------------
Net income(loss) $ 6,986,748 $(1,251,644) $ -- $ 5,735,104
============ ============ ============= ==============
Pro forma income data:
Net income as
reported $ 6,986,748 $ 5,735,104
Pro forma adjustments
to income tax expense (1,799,403) (1,799,403)
Pro forma adjustments (1,019,460) (1,019,460)
to compensation expense------------ -----------
Pro forma net income $ 4,167,885 $ 2,916,241
============ ============
Pro forma net income
per share $ 0.39 $ 0.23
============ ============
Shares used in
computing pro forma
net income
per share 10,564,618 2,137,178 12,701,796
See accompanying notes to unaudited pro forma condensed combining
financial statements.
The Metzler Group, Inc.
Notes to Unaudited Pro Forma Condensed Combining Financial
Statements
Note A - Description of Business Combination
The accompanying unaudited condensed combining financial
statements reflect all adjustments which, in the opinion of
management, are necessary for fair presentation. All adjustments
are of a normal recurring nature. All intercompany accounts and
transactions have been eliminated. On July 31, 1997, the Company
issued 2,137,178 shares of common stock for substantially all the
outstanding common stock of RMI. Because this acquisition is
being treated as a pooling of interests for accounting purposes,
the Company's consolidated financial statements as of December
31, 1996 and for the year then ended are being restated to
include RMI's assets, liabilities and operating results.
Note B - Basis of Presentation
The accompanying unaudited condensed combining financial
statements reflect all adjustments which, in the opinion of
management, are necessary for fair presentation. All adjustments
are of a normal recurring nature. All intercompany accounts and
transactions have been eliminated. On August 15, 1997, the
Company issued 518,400 shares of common stock for substantially
all the outstanding common stock of Reed Consulting Group, Inc.
(Reed). Because this acquisition is being treated as a pooling
of interests for accounting purposes, the Company's consolidated
financial statements as of December 31, 1996 and for the year
then ended have been restated to include Reed's assets,
liabilities and operating results.
Note C - Pro Forma Adjustments
The pro forma adjustment is a reclassification of the noncurrent
liability associated with the built-in gain resulting from a
change in the method of accounting used for tax purposes. The
current portion of RMI's deferred tax liability as of December
31, 1996 included a liability of $2,509,306 for items presented
on an accrual basis for financial purposes that were reported on
a cash basis for tax purposes. Following the acquisition, RMI
changed the method of accounting used for tax purposes from the
cash basis to the accrual basis. The resulting built-in gain is
payable in six equal annual installments.
EXHIBIT
23.1 CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inlcusion in Form 8K/A (to be filed on or about
October 14, 1997) of our report dated July 31, 1997, except for
Notes 2,6 and 10 for which the date is October 10, 1997, on our
audit of the consolidated financial statements of Resource Management
International, Inc. and Subsidiaries.
/s/ Coopers & Lybrand L.L.P.
Sacramento, CA
October 14, 1997
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 thereunto duly authorized.
Dated: October 21, 1997 The Metzler Group, Inc.
by: /s/ Robert P. Maher
Robert P. Maher
Chairman of the Board, President
and Chief Executive Officer
by: /s/ James F. Hillman
James F. Hillman
Chief Financial Officer
