<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM 10-Q/A
|X| Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
|_| Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from _______ to _______.
Commission File Number: 0-21571
TMP WORLDWIDE INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3906555
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1633 Broadway, 33rd Floor, New York, New York 10019
(Address of principal executive offices) (Zip Code)
(212) 977-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding on May 8, 1998
----- --------------------------
Common Stock........................... 24,597,575
Class B Common Stock................... 2,381,000
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
March 31, 1998 and December 31, 1997 ................................ 2
Consolidated Condensed Statements of Income--
Three Months Ended March 31, 1998 and 1997........................... 3
Consolidated Condensed Statement of Stockholders' Equity--
Three Months Ended March 31, 1998 ................................... 4
Consolidated Condensed Statements of Cash Flows--
Three Months Ended March 31, 1998 and 1997 .......................... 5
Notes to Consolidated Condensed Financial Statements .................. 6-8
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................. 9-12
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................. 13
Signatures .............................................................. 14
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- --------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ......................................................... $ 8,136 $ 5,937
Accounts receivable, net ......................................................... 256,040 255,527
Work-in-process .................................................................. 18,422 15,554
Prepaid and other ................................................................ 8,306 11,345
--------- --------
Total current assets ................................................................. 290,904 288,363
Property and equipment, net .......................................................... 39,361 37,760
Deferred income taxes ................................................................ 5,774 4,922
Intangibles, net ..................................................................... 160,143 159,465
Other assets ......................................................................... 6,010 4,696
--------- --------
$ 502,192 $ 495,206
========= ========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable ................................................................ $ 207,968 $ 203,172
Accrued expenses and other liabilities .......................................... 30,273 35,300
Accrued restructuring costs ..................................................... 15,744 16,801
Deferred revenue ................................................................ 11,704 7,992
Deferred income taxes ........................................................... 12,068 10,782
Current portion of long term debt ............................................... 7,228 8,449
--------- --------
Total current liabilities ............................................................ 284,985 282,496
Long term debt, less current portion ................................................. 117,202 115,852
--------- --------
Total liabilities .................................................................... 402,187 398,348
--------- --------
Stockholders' equity:
Preferred stock, $.001 par value, authorized 1,000,000 shares;
issued and outstanding - none ............................................... -- --
Common stock, $.001 par value, authorized 200,000,000 shares;
issued and outstanding--12,553,933, and 12,495,626
shares respectively ......................................................... 12 12
Class B common stock, $.001 par value, authorized 39,000,000 shares
issued and outstanding--13,587,541 .......................................... 14 14
Additional paid-in capital ...................................................... 164,817 163,753
Accumulated other comprehensive income (loss) ................................... (787) (510)
Deficit ......................................................................... (64,051) (66,411)
--------- --------
Total stockholders' equity ........................................................... 100,005 96,858
--------- --------
$ 502,192 $495,206
========= ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
1998 1997
-------- --------
<S> <C> <C>
Commissions and fees ......................................................................... $ 72,997 $ 45,983
-------- --------
Operating expenses:
Salaries and related costs ................................................................ 37,186 23,339
Office and general expenses ............................................................... 26,958 16,319
Amortization of intangibles ............................................................... 2,088 1,330
-------- --------
Total .............................................................................. 66,232 40,988
-------- --------
Operating income ............................................................................. 6,765 4,995
-------- --------
Other income (expense):
Interest (expense) net .................................................................... (2,404) (1,797)
Other, net ................................................................................ (28) (6)
-------- --------
Total other income (expense), net ..................................................... (2,432) (1,803)
-------- --------
Income before provision for income taxes, minority interests and
equity in earnings (losses) of affiliates ............................................. 4,333
3,192
Provision for income taxes ................................................................... 1,886 1,508
-------- --------
Income before minority interests and equity earnings (losses) of affiliates .................. 2,447 1,684
Minority interests ........................................................................... -- 184
Equity in earnings (losses) of affiliates .................................................... (87) 10
-------- --------
Net income ................................................................................... 2,360 1,510
Preferred stock dividend and redemption premium .............................................. -- (123)
-------- --------
Net income applicable to common and
Class B common stockholders ........................................................... $ 2,360 $ 1,387
======== ========
Net income per common and Class B common share:
Basic ................................................................................. $ .09 $ .06
Diluted ............................................................................... $ .09 $ .06
Weighted average shares outstanding:
Basic ................................................................................ 26,106 23,467
Diluted .............................................................................. 27,128 23,789
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Class B Foreign
Common Stock, Common Stock, Additional Currency Total
$.001 par value $.001 par value Paid-in Translation Stockholders'
Shares Amount Shares Amount Capital Adjustment Deficit Equity
-------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 ... 12,495,626 $ 12 13,587,541 $ 14 $ 163,753 $ (510) $ (66,411) $ 96,858
Issuance of common stock
in connection with
the exercise of options .... 22,609 -- -- -- 172 -- -- 172
Issuance of common stock in
connection with acquisitions 8,425 -- -- -- 251 -- -- 251
Issuance of common
stock for Company match
to 401K plan ............... 27,273 -- -- -- 641 -- -- 641
Foreign currency
translation adjustment ..... -- -- -- -- -- (277) -- (277)
Net Income ................... -- -- -- -- -- -- 2,360 2,360
-------- -------- -------- -------- -------- -------- --------- --------
Balance, March 31, 1998 ...... 12,553,933 $ 12 13,587,541 $ 14 $ 164,817 $ (787) $ (64,051) $ 100,005
======== ======== ======== ======== ======== ======== ========= ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................................... $ 2,360 $ 1,510
--------- ---------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization of property and equipment ............................... 2,668 1,557
Amortization of intangibles ........................................................... 2,088 1,330
Provision for doubtful accounts ....................................................... 910 509
Minority interests .................................................................... -- 184
Provision for deferred income taxes ................................................... 676 896
Other ................................................................................. (28) (6)
Changes in assets and liabilities, net of effects of
purchases of businesses:
Increase in accounts receivable, net ................................................. (514) (6,080)
Increase in work-in-process .......................................................... (2,868) (2,257)
Decrease (increase) in prepaid and other ............................................. 3,039 (513)
Increase in other assets ............................................................. (1,315) (424)
Decrease in accounts payable and accrued liabilities ................................. (1,288) (12,294)
--------- ---------
Total adjustments .................................................................. 3,368 (17,098)
--------- ---------
Net cash provided by (used in) operating activities ................................ 5,728 (15,588)
--------- ---------
Cash flows from investing activities:
Payments pursuant to notes to Principal Stockholder ................................... -- (656)
Repayments from Principal Stockholder ................................................. -- 695
Capital expenditures .................................................................. (3,563) (1,500)
Payments for purchases of businesses, net of cash acquired ............................ (1,283) (8,229)
Advances to and investments in affiliates ............................................. -- (71)
--------- ---------
Net cash used in investing activities ............................................... (4,846) (9,761)
--------- ---------
Cash flows from financing activities:
Payments on capitalized leases ........................................................ (634) (318)
Borrowings under lines of credit and proceeds from issuance of debt ................... 230,849 177,859
Repayments under lines of credit and principal payments on debt ....................... (228,898) (146,613)
Distribution to minority interest ..................................................... -- (25)
Redemption of minority interest (including premium) ................................... -- (3,133)
Redemption of preferred stock (including premium) ..................................... -- (2,105)
Dividends on preferred stock .......................................................... -- (18)
--------- ---------
Net cash provided by financing activities ........................................... 1,317 25,647
--------- ---------
Net increase in cash and cash equivalents .................................................... 2,199 298
Cash and cash equivalents, beginning of period ............................................... 5,937 898
--------- ---------
Cash and cash equivalents, end of period ..................................................... $ 8,136 $ 1,196
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 1-BASIS OF PRESENTATION
The consolidated condensed interim financial statements include the
accounts of TMP Worldwide Inc. and all of its wholly-owned and majority-owned
subsidiaries (collectively, the "Company") and have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended December 31, 1997. The Company follows the
same accounting policies in preparation of interim reports.
Results of operations for the interim periods are not indicative of annual
results.
Basic earnings per share assumes no dilution, and is computed by dividing
income available to common and Class B common shareholders by the weighted
average number of common and Class B common shares outstanding during each
period. Diluted earnings per share reflect, in periods in which they have a
dilutive effect, the effects of common shares issuable upon exercise of stock
options and warrants, and contingent shares.
A reconciliation of shares used in calculating basic and diluted earnings
per common and Class B common share follows (in thousands):
Historical
----------
March 31, 1998
Basic................................................ 26,106
Effect of assumed conversion of stock options........ 1,022
-------
Diluted.............................................. 27,128
=======
March 31, 1997
Basic................................................ 23,467
Effect of assumed conversion of stock options........ 322
-------
Diluted.............................................. 23,789
=======
NOTE 2-BUSINESS ACQUISITIONS
In the three month period ended March 31, 1998, the Company completed one
acquisition, a human resources consulting firm that will expand the
traditional advertising services offered to the Company's recruitment
advertising clients. The purchase price paid for this acquisition was
approximately $500. In addition, pursuant to an agreement to purchase a German
recruitment advertising company, which closed in May 1998, the Company paid
$1,022 into an escrow account for the seller.
On May 6, 1998, the Company acquired Johnson, Smith, and Knisely Inc. ("JSK"),
a U.S. based executive search firm, in a stock for stock transaction to be
accounted for as a pooling of interests. Under the terms of the agreement
771,353 shares of Common Stock, valued at approximately $20,000, were
exchanged for all of the outstanding shares of JSK. In addition, in the second
quarter of 1998, the Company anticipates recording a nonrecurring charge of
approximately $5,000 to $6,000 related to the transaction. Such charge
includes amounts related to an aggregate of approximately 170,000 shares and
options granted to key employees, provided that each remains an employee of
the Company for at least one year from the acquisition date. JSK is the 12th
largest executive search firm in the United States and had revenues of
approximately $20,000 for the year ended December 31, 1997. Because the effect
of this pooling transaction is not material, financial statements will not be
6
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(in thousands, except share and per share amounts)
(unaudited)
NOTE 2-BUSINESS ACQUISITIONS (Continued)
restated to give retroactive effect and the results of JSK will be included in
the consolidated financial statements from April 1, 1998, the beginning of the
quarter in which the acquisition occurred. Prior to this transaction, the
Principal Stockholder converted 11,206,541 shares of his Class B Common Stock
to 11,206,541 shares of Common Stock, thereby changing the majority voting
power from Class B Common Stock to Common Stock.
NOTE 3-COMPREHENSIVE NET INCOME
The Company adopted SFAS No. 130 Reporting Comprehensive Income, which
requires that all components of comprehensive income and total comprehensive
income be reported on one of the following: a statement of income and
comprehensive income, a statement of comprehensive income or a statement of
stockholders' equity. Comprehensive income is comprised of net income and all
changes to stockholders' equity, except those due to investments by owners
(changes in paid in capital) and distributions to owners (dividends). For
interim purposes, SFAS 130 requires disclosure of total comprehensive income.
Total comprehensive income is as follows:
For the Three Months
Ended March 31,
-----------------
1998 1997
----- -----
Net income...................................... $2,360 $1,387
Foreign currency translation adjustments........ (277) (890)
------ -----
Comprehensive income............................ $2,083 $ 497
====== =====
NOTE 4-LITIGATION
On February 19, 1998, a class action complaint was filed against the
Company by five former employees. The plaintiffs claim that the Company (a)
misclassified the named plaintiffs and purported class members as exempt from
the overtime requirements of California wage and hour law and failed to pay
them overtime wages, (b) failed to pay accrued but unused vacation days at the
time of termination, and (c) failed to pay accrued but unused personal days at
the time of termination. The plaintiffs purport to represent a class of 450
former and current employees who are similarly situated. The Company intends
to vigorously defend the claims brought by the plaintiffs. Management
presently believes that the disposition of these claims will not have a
material adverse effect on the Company's financial position, operations or
liquidity.
7
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements in this Quarterly Report on Form 10-Q concerning the
Company's outlook or future economic performance; anticipated profitability,
gross billings, commissions and fees, expenses or other financial items; and
statements concerning assumptions made or exceptions to any future events,
conditions, performance or other matter are "forward looking statements" as
that term is defined under the Federal Securities Laws. Forward-looking
statements are subject to risks, uncertainties, and other factors which would
cause actual results to differ materially from those stated in such
statements. Such risks, uncertainties and factors include, but are not limited
to, (i) the uncertain acceptance of the Internet and the Company's Internet
content, (ii) that the Company has grown rapidly and there can be no assurance
that the Company will continue to be able to grow profitably or manage its
growth, (iii) risks associated with acquisitions, (iv) competition, (v) the
Company's quarterly operating results have fluctuated in the past and are
expected to fluctuate in the future, (vi) the Company's business experiences
seasonality, (vii) the loss of services of certain key individuals could have
a material adverse effect on the Company's business, financial condition or
operating results and (viii) the control of the Company by Andrew J. McKelvey.
Overview
TMP Worldwide Inc. ("TMP" or the "Company") is a marketing services,
communications and technology company that provides comprehensive,
individually tailored advertising services, including development of creative
content, media planning, production and placement of corporate advertising,
market research, direct marketing and other ancillary services and products.
The Company is one of the world's largest recruitment advertising agencies,
the world's largest yellow page advertising agency and a leader in the use of
the Internet for recruiting.
The Company offers advertising programs to more than 17,000 clients,
including more than 70 of the Fortune 100 and more than 285 of the Fortune 500
companies. A substantial part of the Company's growth in recruitment
advertising and prior to 1995 in yellow page advertising has been achieved
through acquisitions. Given the significant number of acquisitions, the
results of operations from period to period may not necessarily be comparable.
Gross billings refer to billings for advertisements placed in
telephone directories, newspapers, Internet and other media and associated
fees for related services. While gross billings are not included in the
Company's consolidated financial statements, the trends in gross billings
directly impact the commissions and fees earned by the Company. For
recruitment and yellow page advertising, the Company earns commissions based
on a percentage of the media advertising purchased, at a rate established by
the related publisher, and associated fees for related services. Publishers
typically bill the Company for the advertising purchased by the Company's
clients and the Company in turn bills its clients. In addition, the Company
earns fees for the placement of advertisements on the Internet, primarily its
career Web sites.
For recruitment advertising placed in the U.S., publisher
commissions average 15% of recruitment gross billings. Outside of the U.S.,
where, collectively, the Company derives approximately 52% of its recruiting
commissions and fees, based on consolidated results for the quarter ended
March 31, 1998, the Company's commission rates for recruitment advertising
vary, ranging from approximately 10% in Australia to 15% in Canada and the
United Kingdom. The Company also earns fees from value-added services such as
design, research and other creative and administrative services which resulted
in aggregate commissions and fees equal to approximately 20% of recruitment
advertising gross billing. The Company designs and executes yellow page
advertising programs, receiving an effective commission rate from directory
publishers of approximately 20% of yellow page gross billings. In addition to
base commissions certain yellow page publishers pay increased commissions for
targeted increases in volume placed by advertising agencies. The Company
typically recognizes this additional commission, if any, in the fourth quarter
when it is certain that the additional commission has been earned. The Company
offers its clients Internet based products to complement its client's
recruitment advertising needs and has several career Web sites including The
Monster Board, Online Career Center, Be the Boss and MedSearch. Each of these
Web sites consists of a database of employment opportunities, resumes and a
variety of other value added features. Collectively, as of March 31, 1998
TMP's career Web sites contained approximately 182,000 paid job postings from
34,000 clients and 474,000 resumes. TMP believes that it offers the most
current career opportunities on the Web,
8
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview (Continued)
with the majority of its listings less than 60 days old. In addition, for
March 1998, web traffic as measured by Nielsen IPRO, for the Company's two
major career web sites (The Monster Board(R) and Online Career Center(sm), was
3.7 million visits compared with 1.2 million visits for March 1997, and the
March 1998 ratings from Media Metrix, THE PC METER Company, reported that The
Monster Board(R) was the number one online career Web site, with 26% more
unique visitors than the next leading career Web site.
In the three month period ended March 31, 1998, the Company
completed one acquisition, a human resources consulting firm that will expand
the traditional advertising services offered to the Company's recruitment
advertising clients. The purchase prices paid for this acquisition was
approximately $500,000 compared with three acquisitions, also all in the
recruitment advertising business, for the same period in 1997 for an aggregate
purchase price of $9.1 million. During the period April 1, 1998 through May 7,
1998, the Company completed an additional three acquisitions, of which two are
European recruitment advertising agencies and one is an executive search firm,
Johnson, Smith & Knisely, Inc. ("JSK"). JSK is the 12th largest executive
search firm in the United States according to Kennedy Publications, an
official ranking service for the search industry. Collectively, the four
acquisitions completed through May 7, 1998 had 1997 revenues of approximately
$22 million. The aggregate purchase for these acquisitions, including the fair
market value of shares of TMP common stock issued, was approximately $28.3
million.
9
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview (Continued)
Results of Operations
Three Months Ended March 31,
1998 1997
--------- ----------
(dollars in thousands)
Gross Billings:
Recruitment advertising................... $200,085 $111,436
Yellow page advertising................... 105,518 98,811
Internet(1)............................... 8,536 3,906
--------- ----------
Total ...................................... $314,139 $214,153
======== ========
Commissions and Fees:
Recruitment advertising................... $43,726 $ 22,500
Yellow page advertising................... 21,569 19,714
Internet(1)............................... 7,702 3,769
--------- ----------
Total ...................................... $72,997 $ 45,983
======= ========
Commissions and Fees as a Percentage of
Gross Billings:
Recruitment advertising.................... 21.9% 20.2%
Yellow page advertising.................... 20.4% 20.0%
Internet(1)................................ 90.2% 96.5%
Total ..................................... 23.2% 21.5%
EBITDA(2)................................... $11,406 $7,702
Cash provided by (used in) operating
activities .............................. $5,728 $(15,588)
Cash used in investing activities........... $(5,546) $(9,761)
Cash provided by financing activities....... $2,017 $25,647
- ---------------
(1) Represents fees earned in connection with recruitment, yellow page and
other advertisements placed on the Internet, primarily on the Company's
own Web sites.
(2) Earnings before interest, income taxes, depreciation and amortization
("EBITDA") is presented to provide additional information about the
Company's ability to meet its future debt service, capital expenditure
and working capital requirements and is one of the measures which
determines the Company's ability to borrow under its credit facility.
EBITDA should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities and other income
or cash flow statement data prepared in accordance with generally
accepted accounting principles or as a measure of the Company's
profitability or liquidity. EBITDA for the indicated periods is
calculated as follows:
Three Months Ended March 31,
1998 1997
------ ------
(in thousands)
Net income.................................. $ 2,360 $ 1,510
Interest expense, net....................... 2,404 1,797
Income tax expense.......................... 1,886 1,508
Depreciation and amortization............... 4,756 2,887
------ ------
EBITDA....................................... $11,406 $ 7,702
====== ======
10
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Three months ended March 31, 1998 compared to the three months ended March 31,
1997
Gross billings for the three months ended March 31, 1998 were $314.1
million, a net increase of $100.0 million or 46.7% from $214.1 million for the
three months ended March 31, 1997. Commissions and fees for the three months
ended March 31, 1998 were $73.0 million, an increase of $27.0 million or 58.7%
from $46.0 million in the comparable three months of 1997. Recruitment
commissions and fees were $43.7 million for the three months ended March 31,
1998 compared with $22.5 million for the three months ended March 31, 1997, an
increase of $21.2 million or 94.3%. This increase was primarily due to
acquisitions and approximately $3.5 million was due to increases in client
spending and net new client wins. Yellow page commissions and fees were $21.6
million for the three months ended March 31, 1998, an increase of $1.9 million
or 9.4% from $19.7 million in the comparable three months of 1997.
Approximately $1.1 million of the growth in yellow page advertising was due to
increases in client spending and net new client wins; the balance,
approximately $700,000, was due to acquisitions. Internet commissions and fees
increased 104.3% to $7.7 million for the three months ended March 31, 1998
from $3.8 million for the three months ended March 31, 1997. The increase in
Internet revenue and visits from the March 1997 periods to the March 1998
period, reflects (i) an increasing acceptance of the Company's Internet
services and products from existing clients, new clients and Internet users,
(ii) price increases on certain products, and (iii) the benefits of strategic
alliances with other Internet service and content providers. As of May 7, 1998
The Monster Board(R) and Online Career Center(sm) together had more than 40 such
alliances.
Operating expenses for the three months ended March 31, 1998 were
$66.2 million, compared with $41.0 million for the same period in 1997. The
increase of $25.2 million or 61.6% is primarily due to acquisitions, and
includes an $800,000 increase for amortization of intangible assets related to
acquisitions. Salaries and related costs for the three months ended March 31,
1998 were $37.2 million or 50.9% of commissions and fees, compared with $23.3
million or 50.8 % of commissions and fees for the same period in 1997. The
increase of $13.9 million or 59.3% is primarily due to acquisitions. Office
and general expenses for the three months ended March 31, 1998 were $27.0
million or 36.9% of commissions and fees, compared with $16.3 million or 35.5
% of commissions and fees for the same period in 1997. The increase of $10.7
million or 65.2% is primarily due to acquisitions. Additionally, the increase
as a percentage of commissions and fees was effected by expenditures for
client services to support the increased revenue base and Internet marketing
efforts for The Monster Board(R) and Online Career Center(sm).
As a result of the above, operating income for the three months
ended March 31, 1998 increased $1.8 million or 35.4% to $6.8 million from $5.0
million for the comparable period last year.
Net interest expense for the three months ended March 31,1998 was
$2.4 million, an increase of $600,000 or 33.8%, from $1.8 million for the
comparable 1997 period. This increase reflects additional borrowings for
acquisitions and equipment financing.
Taxes on income for the three months ended March 31, 1998 were $1.9
million on a $4.3 million pretax profit compared with a tax expense of $1.5
million on a $3.2 million pretax profit for the same period last year. The
effective tax rate for the three month period ended March 31, 1998 was 43.5%,
down from the 47.2% effective rate for the comparable period in 1997. The 1998
rate is lower because he Company realized the majority of its profits in the
1998 period in countries which had comparatively lower statutory rates than
the countries where the Company realized the majority of its profits for the
1997 period. In addition, when the Company's operating profits increase, the
impact of non-deductible expenses on the effective tax rate is reduced.
The Company had no minority interests in consolidated earnings for
the three months ended March 31, 1998 compared with $184,000 for the three
months ended March 31, 1997. In addition, there was no preferred dividend
payment for the three months ended March 31, 1998 compared with $123,000 for
the three months ended March 31, 1997. Both improvements reflect redemptions
in January 1997 by the Company of the underlying preferred stock. However,
equity in earnings (losses) of unconsolidated subsidiaries was a loss of
$87,000 for the three months ended March 31, 1998 compared with income of
$10,000 for the comparable period in 1997. The decline of $97,000 reflects
losses associated with the real estate advertising company in which the
Company holds a minority interest.
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TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
The diluted weighted average shares for the period ended March 31,
1998 was 27.1 million, an increase of 3.3 million from the 23.8 million for
the comparable period last year. This increase reflects the shares issued in a
secondary public offering during September 1997, the effect of employee stock
option grants and the exercise of certain of such grants, shares issued in
connection with acquisitions and shares issued for matching contributions to
the 401(k) plan.
As a result of all of the above, net income available to common and
Class B common stockholders for the three months ended March 31, 1998
increased $1.0 million to $2.4 million from $1.4 million for the three months
ended March 31, 1997. On a diluted per share basis, net income available to
common and Class B common stockholders for the three months ended March 31,
1998 was $.09, an increase of $.03 or 50% from $.06 for the comparable 1997
period.
Liquidity and Capital Resources
Net cash provided by operating activities for the three months ended
March 31, 1998 was $5.7 million compared with a use of $15.6 million for the
three months ended March 31, 1997. This improvement of $21.3 million was
primarily due to (i) a $1.3 million decrease in accounts payable and accrued
liabilities compared with a $12.3 million decline for the three months ended
March 31, 1997, as funds received from the initial public offering in December
1996 were used to pay yellow page vendors in the first quarter of 1997 in
order to eliminate high rate interest on past due balances (ii) a $500,000
increase in accounts receivable for the three months ended March 31, 1998
compared with a $6.1 million increase for the three months ended March 31,
1997 and (iii) for the period ended March 31, 1998, funds provided by the
increases in net income and non-cash charges to earnings exceeded the amounts
for the same 1997 period by $2.7 million. In addition, EBITDA was $11.4
million for the three months ended March 31, 1998 an increase of $3.7 million
or 48.1% from $7.7 million for the three months ended March 31, 1997. The
increase in EBITDA resulted from a higher operating profit and higher
depreciation and amortization in 1998.
The Company's investing activities for the three months ended March
31, 1998 used cash of $4.8 million compared with $9.8 million for the three
months ended March 31, 1997. The $5.0 million decrease reflects a $6.9 million
decline in payments for purchases of businesses, net of cash acquired,
partially offset by a $2.1 million increase in capital expenditures over the
same period in 1997.
The Company's financing activities for the three month period ended
March 31, 1998 provided net cash of $1.3 million, compared with $25.6 million
for the three month period ended March 31, 1997. This decline of $24.3 million
primarily reflects a $28.6 million decline in net borrowings for debt under
the Company's line of credit and other borrowings for the three months ended
March 31, 1998 compared to March 31, 1997, partially offset by the use of $5.2
million used in 1997 for the redemption of preferred shares with proceeds from
the Company's initial public offering of common stock in December 1996.
At March 31, 1998, the Company had a $175 million committed line of
credit from its primary lender pursuant to a revolving credit agreement
expiring June 30, 2001. Of such line, at March 31, 1998, approximately $65.8
million was unused and $21.6 million could be borrowed based upon the eligible
collateral base. In addition, the company has secured lines of credit
aggregating $6 million for its operations in Australia, France, Belgium and
the Netherlands of which approximately $3 million was unused at March 31,
1998.
Cash and cash equivalents at March 31, 1998 equaled $8.1 million, an
increase of $2.2 million from $5.9 million at December 31, 1997.
Management believes that the aggregate lines of credit available to
the Company, plus funds provided by operations will be adequate to support its
short-term cash requirements for acquisitions, capital expenditures, repayment
of debt and maintenance of working capital. The Company anticipates that
future cash flows from operations plus funds available under existing line of
credit facilities will be adequate to support its long term cash requirements
as presently contemplated. However, if the Company determines that conditions
are favorable, it would consider additional corporate finance or capital
transactions.
12
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PART II OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) The following exhibits are filed as a part of this report:
27 Financial Data Schedule
(b) Reports on Form 8-K. None
All other items of this report are inapplicable.
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TMP WORLDWIDE INC.
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.
TMP WORLDWIDE INC.
(Registrant)
Date: May 12, 1998 /s/ Thomas G. Collison
-----------------------
Thomas G. Collison
Vice Chairman
(Principal Financial Officer)
Date: May 12, 1998 /s/ Roxane Previty
-----------------------
Roxane Previty
Chief Financial Officer
(Principal Accounting Officer)
