<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 JUNE 30, 1997
/ / 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)
<TABLE>
<S> <C>
DELAWARE 13-3906555
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
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.
<TABLE>
<CAPTION>
OUTSTANDING ON AUGUST 5,
CLASS 1997
- --------------------------------------------------------- ----------------------------
<S> <C>
COMMON STOCK............................................. 8,798,543
CLASS B COMMON STOCK..................................... 14,787,541
</TABLE>
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-----------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
June 30, 1997 and December 31, 1996................................................. 2
Consolidated Condensed Statements of Income--
Three Month and Six Month Periods Ended June 30, 1997 and 1996...................... 3
Consolidated Condensed Statement of Stockholders' Equity--
Six Months Ended June 30, 1997...................................................... 4
Consolidated Condensed Statements of Cash Flows--
Six Months Ended June 30, 1997 and 1996............................................. 5
Notes to Consolidated Condensed Financial Statements.................................. 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................... 9-14
PART II OTHER INFORMATION
Item 2. Changes In Securities................................................................. 15
Item 4. Submission of Matters to a Vote of Security Holders................................... 15
Item 6. Exhibits and Reports on Form 8-K...................................................... 15
Signatures............................................................................ 16
</TABLE>
<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>
JUNE 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 1,264 $ 898
Accounts receivable,net............................................................. 203,509 191,728
Work-in-process..................................................................... 17,665 14,542
Prepaid and other................................................................... 6,111 5,482
----------- ------------
Total current assets............................................................ 228,549 212,650
Receivable from Principal Stockholder................................................. 11,611 11,413
Property and equipment, net........................................................... 31,568 20,562
Deferred income taxes................................................................. 9,046 9,325
Intangibles, net...................................................................... 90,095 73,975
Other assets.......................................................................... 3,179 3,828
----------- ------------
$ 374,048 $ 331,753
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................................................. $ 174,532 $ 182,129
Accrued expenses and other liabilities............................................ 28,682 23,463
Deferred income taxes............................................................. 10,420 9,818
Current portion of long term debt................................................. 6,046 9,167
----------- ------------
Total current liabilities....................................................... 219,680 224,577
Long-term debt, less current portion.................................................. 116,088 70,799
----------- ------------
Total liabilities............................................................... 335,768 295,376
----------- ------------
Minority interests.................................................................... 435 3,082
----------- ------------
Redeemable preferred stock............................................................ -- 2,000
----------- ------------
Stockholders' equity:
Preferred stock, $.001 par value, authorized 800,000 shares;
issued and outstanding--none.................................................... -- --
Common stock, $.001 par value, authorized 200,000,000 shares;
issued and outstanding--8,797,342, and 8,605,436
shares respectively............................................................. 9 8
Class B common stock, $.001 par value, authorized 39,000,000 shares
issued and outstanding--14,787,541 shares....................................... 15 15
Additional paid-in capital........................................................ 110,916 106,803
Foreign currency translation adjustment........................................... 271 380
Accumulated deficit............................................................... (73,366) (75,911)
----------- ------------
Total stockholders' equity............................................................ 37,845 31,295
----------- ------------
$ 374,048 $ 331,753
----------- ------------
----------- ------------
</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 SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------ ------------ ------------ ------------
Commissions and fees.................................. $ 54,636 $ 36,675 $ 100,619 $ 70,663
------------ ------------ ------------ ------------
Operating expenses:
Salaries and related costs.......................... 27,145 18,384 50,484 35,561
Office and general expenses......................... 19,966 14,146 36,285 26,337
Amortization of intangibles......................... 1,519 1,059 2,849 2,013
CEO bonus........................................... 375 -- 750 --
------------ ------------ ------------ ------------
Total............................................. 49,005 33,589 90,368 63,911
------------ ------------ ------------ ------------
Operating income...................................... 5,631 3,086 10,251 6,752
------------ ------------ ------------ ------------
Other income (expense):
Interest expense.................................... (2,761) (3,221) (4,995) (6,035)
Interest income..................................... 510 87 947 202
Other, net.......................................... 9 436 3 450
------------ ------------ ------------ ------------
Total other income (expense), net................. (2,242) (2,698) (4,045) (5,383)
------------ ------------ ------------ ------------
Income before provision for income taxes, minority
interests and equity in earnings of affiliates...... 3,389 388 6,206 1,369
Provision for income taxes............................ 1,798 (7) 3,306 930
------------ ------------ ------------ ------------
Income before minority interests and equity earnings
of affiliates....................................... 1,591 395 2,900 439
Minority interests.................................... 43 110 227 226
Equity in earnings (losses) of affiliates............. (15) 10 (5) 16
------------ ------------ ------------ ------------
Net income............................................ 1,533 295 2,668 229
Preferred stock dividend and redemption premium....... 0 (53) (123) (105)
------------ ------------ ------------ ------------
Net income applicable to common and Class B common
stockholders........................................ $ 1,533 $ 242 $ 2,545 $ 124
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per common and Class B common share........ $ 0.06 $ 0.01 $ .11 $ .01
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of common, Class B common and
common equivalent shares outstanding................ 24,087 19,617 24,037 19,638
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</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
COMMON STOCK, COMMON STOCK, FOREIGN
$.001 PAR VALUE $.001 PAR VALUE ADDITIONAL CURRENCY
------------------------ ---------------------- PAID-IN TRANSLATION ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT
--------- ------------- --------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997...... 8,605,436 $ 8 14,787,541 $ 15 $ 106,803 $ 380 $ (75,911)
Issuance of common stock in
connection with the exercise
of options.................. 37,575 -- -- -- 489 -- --
Capital contribution from
Principal Stockholder re:
CEO bonus and other......... -- -- -- -- 1,025 -- --
Issuance of common stock for
purchases of interest in
subsidiaries................ 110,783 1 -- -- 2,044 -- --
Issuance of common stock for
Company match to 401K plan.. 43,548 -- -- -- 555 -- --
Foreign currency translation
adjustment.................. -- -- -- -- -- (109) --
Dividend on preferred stock
and redemption premium...... -- -- -- -- -- -- (123)
Net income.................... -- -- -- -- -- -- 2,668
--------- ---------- ----------- ---------- --------- ---------- -----------
Balance, June 30, 1997........ 8,797,342 $ 9 14,787,541 $ 15 $ 110,916 $ 271 $ (73,366)
--------- ---------- ----------- ---------- --------- ---------- -----------
--------- ---------- ----------- ---------- --------- ---------- -----------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance, January 1, 1997...... $ 31,295
Issuance of common stock in
connection with the exercise
of options.................. 489
Capital contribution from
Principal Stockholder....... 1,025
Issuance of common stock for
purchases of interest in
subsidiaries................ 2,045
Issuance of common stock for
Company match to 401K plan.. 555
Foreign currency translation
adjustment.................. (109)
Dividend on preferred stock
and redemption premium...... (123)
Net income.................... 2,668
-------------
Balance, June 30, 1997........ $ 37,845
-------------
-------------
</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>
SIX MONTHS ENDED
JUNE 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................................ $ 2,668 $ 229
--------- ---------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization of property and equipment................................. 3,534 2,025
Amortization of intangibles............................................................. 2,849 2,013
Provision for doubtful accounts......................................................... 1,507 1,993
Minority interests...................................................................... 227 226
Provision for deferred income taxes..................................................... 912 1,078
Other................................................................................... (3) 162
CEO Bonus............................................................................... 750 --
Changes in assets and liabilities, net of effects of purchases of businesses:
(Increase) decrease in accounts receivable, net....................................... 2,732 (6,496)
Increase in work-in-process........................................................... (2,566) (1,063)
(Increase) decrease in prepaid and other.............................................. (12) 43
(Increase) decrease in other assets................................................... 87 (326)
Increase (decrease) in accounts payable and accrued liabilities....................... (17,598) 18,640
--------- ---------
Total adjustments................................................................... (7,581) 18,295
--------- ---------
Net cash provided by (used in) operating activities................................. (4,913) 18,524
--------- ---------
Cash flows from investing activities:
Payments pursuant to notes to Principal Stockholder....................................... (656) (3,733)
Repayments from Principal Stockholder..................................................... 695 1,127
Capital expenditures...................................................................... (12,385) (3,429)
Payments for purchases of businesses, net of cash acquired................................ (11,375) (4,037)
Proceeds from sale of assets.............................................................. -- 3,347
Advances to and investments in affiliates................................................. (71) (443)
--------- ---------
Net cash used in investing activities............................................... (23,792) (7,168)
--------- ---------
Cash flows from financing activities:
Payments on capitalized leases............................................................ (1,450) (434)
Capital contribution from Principal Stockholder........................................... 275 --
Borrowings under line of credit and proceeds from issuance of debt........................ 320,094 305,758
Repayments under line of credit and principal payments on debt............................ (284,567) (315,015)
Distributions to minority interest........................................................ (25) (157)
Redemption of minority interest (including premium)....................................... (3,133) --
Redemption of preferred stock (including premium)......................................... (2,105) --
Dividends on preferred stock.............................................................. (18) (105)
--------- ---------
Net cash provided by (used in) financing activities................................. 29,071 (9,953)
--------- ---------
Net increase in cash and cash equivalents................................................... 366 1,403
Cash and cash equivalents, beginning of period.............................................. 898 2,719
--------- ---------
Cash and cash equivalents, end of period.................................................... $ 1,264 $ 4,122
--------- ---------
--------- ---------
</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 included herein 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.
Previously, the Company had not charged earnings for bonuses specified in
its employment agreement with Andrew J. McKelvey, its CEO and Principal
Stockholder, because he permanetly waived his receipt of the bonuses due to
him before the start of the period to which it related. However, the
Securities and Exchange Commission informed the Company, that in accordance
with their interpretation of Staff Accounting Bulletin 79, Topic 5T
"Accounting for Expenses or Liabilties paid by the Principal Stockholder",
TMP must record bonus expense for this non-cash item, even though their
receipt has been permanently waived. The Company has complied in this amended
filing.
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, 1996. 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.
Primary earnings per share are based upon the weighted average number of
common, class B common and common share equivalents outstanding during each
period.
NOTE 2-BUSINESS ACQUISITIONS
The Company acquired six recruitment advertising businesses and one yellow
page business during the six month period ended June 30, 1997. During 1996, the
Company acquired thirteen recruitment advertising companies. The total value of
cash paid, promissory notes issued, and common stock issued for these
acquisitions was approximately $15,539 and $25,358 for the 1997 and 1996 periods
respectively.
The summarized unaudited pro forma results of operations set forth below for
the six months ended June 30, 1997 and 1996 and the years ended December 31,
1996 and 1995 assume that the acquisitions in 1997 and 1996 occurred as of the
beginning of the year of acquisition and the beginning of the preceding year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE YEAR ENDED DECEMBER
30, 31,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1997 1996 1996 1995
---------- ---------- ---------- ----------
Commission and fees......................................... $ 106,417 $ 97,555 $ 206,669 $ 157,550
Pro forma net income (loss)................................. 2,831 (189) 2,399 3,216
Pro forma net income (loss) per common and
Class B common share...................................... $ .12 $ (.01) $ .12 $ .19
</TABLE>
NOTE 3-SUPPLEMENTAL NET INCOME
Supplemental net income per common share and Class B common share for the
six months ended June 30, 1996 was $.02 compared with historical income of
$.01. For the calculation of such supplemental amount, the weighted average
number of common and Class B common shares includes the number of shares
whose sale at the initial public offering price of $14.00 per share would
provide the proceeds needed to retire $41,600 of borrowings outstanding under
the Company's financing agreement; notes payable totaling $3,800; $3,200 to
redeem the preferred stock of a subsidiary and $2,200 to redeem the preferred
6
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 3-SUPPLEMENTAL NET INCOME (CONTINUED)
stock of the Company, and net income applicable to common and Class B common
stockholders was adjusted to exclude the related financing and interest expense
of the debt.
NOTE 4-REDEEMABLE PREFERRED STOCK
During 1991, the Company sold 200,000 shares of 10.5% nonvoting cumulative
preferred stock ($10.00 par value) to the Company's profit sharing plan for
$2,000. These shares were redeemed on January 31, 1997 for a total of $2,105,
which included a redemption premium of $105.
NOTE 5-STOCK OPTIONS
On January 6, 1997 options to purchase, at an exercise price of $12.88, the
market price on the date of grant, an aggregate of approximately 1.2 million
shares of Company common stock were granted to officers and employees of the
Company.
NOTE 6-MINORITY INTEREST
In connection with an acquisition in 1990, a subsidiary of the Company
issued 88,425 shares of nonvoting convertible 10% cumulative preferred stock in
exchange for 88,425 shares (58%) of the outstanding common stock of the acquired
company held by the acquired company's employee stock ownership trust. These
shares were redeemed on January 31, 1997 for $3,133, which included a redemption
premium of $118.
NOTE 7-LITIGATION SETTLED
In November 1996, an action was commenced against Old TMP, WCI and the
Principal Stockholder by a former employee alleging, among other things, that
the defendants breached purported contractual and fiduciary obligations pursuant
to which the former employee was entitled to an ownership interest in the
Company's recruitment advertising business. In June 1997, this matter was
settled for $275, which was paid by the Principal Stockholder under an indemnity
agreement with the Company.
NOTE 8-SUBSEQUENT EVENTS
PROPOSED ACQUISITION OF AUSTIN KNIGHT LIMITED AND SUBSIDIARIES
In July 1997, the Company entered into an agreement to acquire all of the
outstanding stock of Austin Knight Limited and subsidiaries ("Austin Knight")
for approximately $47.2 million, net of approximately $11.5 million of cash
acquired relating to the sale of real property by Austin Knight. The acquisition
is subject to certain closing conditions including the consent of shareholders
holding at least 80.1% of Austin Knight's outstanding shares. The acquisition is
expected to be completed by the end of August 1997. For the year ended September
30, 1996, Austin Knight had annual gross billings of approximately $213.8
million.
7
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 8-SUBSEQUENT EVENTS (CONTINUED)
INTENTION TO SELL 2,400,000 ADDITIONAL SHARES OF COMMON STOCK
In July 1997, the Company announced its intention to sell 2,400,000 shares
of Common Stock to the public. At an assumed offering price of $22.50, the net
proceeds to the Company are estimated to be $50.5 million after deducting the
underwriting discounts and commissions, and estimated offering expenses payable
by the Company. In addition, it is anticipated that 1,600,000 shares of Common
Stock of the Company will be sold by certain stockholders including the
principal stockholder (the "selling stockholders"). The Company will not receive
any proceeds from the selling stockholders except that the principal stockholder
and certain selling stockholders will repay their net indebtedness to the
Company, approximately $11.9 million, from their proceeds. The Company intends
to use the net proceeds received from the offering, including proceeds received
from certain selling stockholders, to repay a portion of its outstanding
indebtedness, including the amount borrowed from its primary lending facility
for the probable acquisition of Austin Knight.
8
<PAGE>
TMP WORLDWIDE INC.
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,
AND 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, (VIII) THE
COMPANY HAS ENTERED INTO CERTAIN TRANSACTIONS WITH AFFILIATED PARTIES AND (IX)
THE CONTROL OF THE COMPANY BY ANDREW J. MCKELVEY.
9
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C>
GROSS BILLINGS:
Yellow page advertising....................................................... $111,566 $112,380 $210,377 $214,510
Recruitment advertising....................................................... 129,186 58,807 240,622 119,492
Internet(1)................................................................... 4,649 1,454 8,555 2,315
-------- -------- -------- --------
Total........................................................................... $245,401 $172,641 $459,554 $336,317
-------- -------- -------- --------
-------- -------- -------- --------
COMMISSIONS AND FEES:
Yellow page advertising....................................................... $ 23,036 $ 22,987 $ 42,750 $ 43,380
Recruitment advertising....................................................... 27,161 12,234 49,661 24,968
Internet(1)................................................................... 4,439 1,454 8,208 2,315
-------- -------- -------- --------
Total........................................................................... $ 54,636 $ 36,675 $100,619 $ 70,663
-------- -------- -------- --------
-------- -------- -------- --------
COMMISSIONS AND FEES AS A PERCENTAGE OF GROSS BILLINGS:
Yellow page advertising....................................................... 20.6% 20.5% 20.3% 20.2%
Recruitment advertising....................................................... 21.0% 20.8% 20.6% 20.9%
Internet(1)................................................................... 95.5% 100.0% 95.9% 100.0%
Total........................................................................... 22.3% 21.2% 21.9% 21.0%
EBITDA(2)....................................................................... $ 9,078 $ 5,551 $ 16,405 $ 11,030
Cash provided by (used in) operating activities................................. $ 10,675 $ 19,995 $ (4,913) $ 18,524
Cash used in investing activities............................................... $(14,031) $ (4,105) $(23,792) $ (7,168)
Cash provided by (used in) financing activities................................. $ 3,424 $(13,381) $ 29,071 $ (9,953)
</TABLE>
- - ------------------------
(1) Represents fees earned in connection with yellow page, recruitment 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
10
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
accepted accounting principles or as a measure of the Company's
profitability or liquidity. EBITDA for the indicated periods is calculated
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income.............................................................. $ 1,533 $ 295 $ 2,668 $ 229
Interest expense, net................................................. 2,251 3,134 4,048 5,833
Income tax expense.................................................... 1,798 (7) 3,306 930
Depreciation and amortization......................................... 3,496 2,129 6,383 4,038
--------- --------- --------- ---------
EBITDA.................................................................. $ 9,078 $ 5,551 $ 16,405 $ 11,030
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996
Gross billings for the three months ended June 30, 1997 were $245.4 million,
a net increase of $72.8 million or 42.1% from $172.6 million for the three
months ended June 30, 1996. Commissions and fees for the three months ended June
30, 1997 were $54.6 million, an increase of $18.0 million or 49.0% from $36.6
million in the first three months of 1996. Yellow page commissions and fees were
flat at $23.0 million for each of the three month periods, Recruitment
commissions and fees were $27.1 million for the three months ended June 30, 1997
compared with $12.2 million for the three months ended June 30, 1996, an
increase of $14.9 million or 122.0%. This increase was primarily due to
acquisitions and approximately $1.0 million was due to net increases in client
spending and net new clients. Internet commissions and fees increased 205.3% to
$4.4 million for the three months ended June 30, 1997 from $1.5 million for the
three months ended June 30, 1996. For June 1997, web traffic as measured by
Nielsen IPRO, for the Company's two major career web sites (The Monster
Board-Registered Trademark- and Online Career Center(sm) had 1.7 million visits
compared with 1.3 million visits for March 1997 (the first month for which
comparable statistics are available). The increases in revenue and visits
reflect an increasing acceptance of the Company's products, from existing and
new clients and internet users, and the effects of "co-branding" marketing
efforts with other Internet content providers.
Operating expenses for the three months ended June 30, 1997 were $49.0
million, compared with $33.6 million for the same period in 1996. The increase
of $15.4 million or 45.9% reflects acquisition activity, including a $.5 million
increase for amortization of intangibles related to acquisitions, and growth in
client service expenditures to support the increased revenue base. Operating
expenses as a percentage of commissions and fees were 89.7% for the three months
ended June 30, 1997 as compared to 91.6% in the prior year period.
As a result of the above, operating income for the three months ended June
30, 1997 increased $2.5 million or 82.5% to $5.6 million from $3.1 million for
the comparable period last year.
Net interest expense for the three months ended June 30, 1997 was $2.3
million, a decrease of $.9 million or 28.2%, reflecting a net reduction in debt
resulting from the use of the proceeds of the Company's initial public offering,
which closed in December 1996, partially offset by borrowings for acquisitions,
and interest earned on loans to the Company's principal stockholder.
Taxes on income for the three months ended June 30, 1997 were $1.8 million
compared with $0 for the same period last year reflecting a $3.4 million pretax
profit in the 1997 period compared with a $.4 million profit for the 1996
period. The effective tax rate for the three month period ended June 30, 1997
was 53.1%.
Minority interests in consolidated earnings for the three months ended June
30, 1997 was $43 thousand a decrease of $67 thousand from the $110 thousand for
the three months ended June 30, 1996. In addition, there was no
11
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
preferred dividend for the three months ended June 30, 1997 compared with $53
thousand for the three months ended June 30, 1996. Both improvements reflect the
redemptions in January, 1997 by the Company of the underlying preferred stocks.
As a result of all of the above, net income available to common and Class B
common stockholders for the three months ended June 30, 1997 increased $1.3
million to $1.5 million from $.2 million for the for the three months ended June
30, 1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1996
Gross billings for the six months ended June 30, 1997 were $459.6 million a
net increase of $123.2 million or 36.6% from $336.3 million for the six months
ended June 30, 1996. Commissions and fees for the six months ended June 30, 1997
were $100.6 million, an increase of $29.9 million or 42.4% from $70.7 million in
the first six months of 1996. Yellow page commissions and fees were $42.8
million for the six months ended June 30, 1997 compared with $43.4 million for
the six months ended June 30, 1996, a decline of 1.5% or $.6 million reflecting
client resignations and shifts in the timing of yellow page directory printing
schedules. Recruitment commissions and fees were $49.7 million for the six
months ended June 30, 1997 compared with $25.0 million for the six months ended
June 30, 1996, an increase of $24.7 million or 98.9%. This increase was
primarily due to acquisitions and with net increases in client spending and new
clients slightly outpacing the effects of client losses. Internet commissions
and fees increased 254.6% to $8.2 million for the six months ended June 30, 1997
from $2.3 million for the six months ended June 30, 1996, reflecting an
increasing acceptance of the Company's Internet products from existing and new
clients, and the benefits of "co-branding" marketing efforts with other Internet
content providers.
Operating expenses for the six months ended June 30, 1997 were $90.4
million, compared with $63.9 million for the same period in 1996. The increase
of $26.5 million or 41.4% reflects acquisition activity, including $.8 million
for higher amortization of intangibles related to acquisitions, and growth in
client service expenditures to support the increased revenue base. Operating
expenses as a percentage of commissions and fees were 89.8% for the six months
ended June 30, 1997 as compared to 90.4% in the prior year period.
As a result of the above, operating income for the six months ended June 30,
1997 increased $3.5 million or 51.8% to $10.3 million from $6.8 million for the
comparable period last year.
Net interest expense for the six months ended June 30, 1997 was $4.0
million, a decrease of $1.8 million or 30.6%, reflecting a net reduction in debt
resulting from the use of the proceeds from the Company's initial public
offering, which closed in December 1996, partially offset by borrowings for
acquisitions, and interest earned on loans to the Company's Principal
Stockholder.
Taxes on income for the six months ended June 30, 1997 were $3.3 million
compared with $.9 million for the same period last year an increase of $2.4
million or 255.5% as a result of higher pretax profits in the 1997 period and,
during 1996, the inability of the Company to offset profits of certain
subsidiaries with losses of others because they were not then part of the same
consolidated tax return as evidenced by an effective tax rate of 53.3% for the
six month period ended June 30, 1997 compared with an effective tax rate of
67.9% for the same 1996 period.
Minority interests in consolidated earnings for the six months ended June
30, 1997 of $.2 million were unchanged from the prior year period and preferred
dividends for the six months ended June 30, 1997 of $123 thousand were $18
thousand over the $105 thousand for the six months ended June 30, 1996. For
1997, the charges and the redemption premiums on the underlying instruments paid
in the first quarter and resulting lower minority interest charge in the second
quarter were approximately equal to the charges and dividends paid in the first
and second quarters of 1996.
12
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
As a result of all of the above, net income available to common and Class B
common stockholders for the six months ended June 30, 1997 was $2.5 million, an
increase of $2.4 million over the $124 thousand for the for the six months ended
June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in by operating activities for the six months ended June 30,
1997 was $4.9 million compared with $18.5 million provided by operating
activities for the six months ended June 30, 1996. The decrease of $23.4 million
was primarily due to accelerated payments to yellow page vendors in the 1997
period as the Company used the increased cash available to it under its credit
facilities after repaying debt with proceeds from its initial public offering in
December 1996 partially offset by accelerated collection of accounts receivable.
EBITDA was $16.4 million for the six months ended June 30, 1997 an increase of
$5.4 million or 48.7% from $11.0 million for the six months ended June 30, 1996.
As a percentage of commissions and fees, EBITDA increased to 16.3% for the six
months ended June 30, 1997 as compared with 15.6% for the six months ended June
30, 1996. The increase resulted from a higher operating profit in 1997.
The Company's investing activities for the six months ended June 30, 1997
used cash of $23.8 million compared with $7.2 million for the six months ended
June 30, 1996. The $16.6 million increase was primarily due to $7.3 million more
in payments for acquisitions of businesses and $9.0 million more for capital
expenditures when compared with payments made for the same period in 1996.
In July 1997, the Company entered into an agreement to acquire all of the
outstanding stock of Austin Knight Limited and subsidiaries ("Austin Knight")
for approximately $47.2 million, net of approximately $11.5 million of cash
acquired relating to the sale of real property by Austin Knight. The acquisition
is subject to certain closing conditions including the consent of shareholders
holding at least 80.01% of Austin Knight's outstanding shares. The acquisition
is expected to be completed by the end of August 1997. For the year ended
September 30, 1996, Austin Knight had annual gross billings of approximately
$213.8 million.
The Company's financing activities include borrowings and repayments under
its bank financing agreements, issuance of and payments against installment
notes used principally to finance acquisitions and equipment and, prior to 1997,
loans to the Principal and certain other stockholders. The Company's financing
activities for the six months ended June 30, 1997 provided net cash of $29.1
million, compared with a use of $10.0 million for the six months ended June 30,
1996. The change of $39.1 million resulted from higher net borrowings against
credit facilities partially offset by redemption of minority interests and
preferred stock. In July 1997, the Company announced its intention to sell
2,400,000 shares of Common Stock to the public. At an assumed offering price of
$22.50, the net proceeds to the Company are estimated to be $50.5 million after
deducting the underwriting discounts and commissions, and estimated offering
expenses payable by the Company. In addition, it is anticipated that 1,600,000
shares of Common Stock of the Company will be sold by certain stockholders
including the Principal Stockholder (the "Selling Stockholders"). The Company
will not receive any proceeds from the Selling Stockholders except that the
Principal Stockholder and certain selling stockholders will repay their net
indebtedness to the Company, approximately $11.9 million, from their proceeds.
The Company intends to use the net proceeds received from the offering,
including proceeds received from certain selling stockholders, to repay a
portion of its outstanding indebtedness, including the amount borrowed from its
primary lending facility for the probable acquisition of Austin Knight.
At June 30, 1997, the Company had $127 million in committed lines of credit,
with $110 million from its primary lending facility pursuant to a revolving
credit agreement expiring June 30, 2001. In July, the Company secured an
additional $75 million commitment from such facility and a portion of this
amount will be used for the acquisition of Austin Knight. Of the committed
lines, $21.1 million was unused at June 30, 1997.
13
<PAGE>
TMP WORLDWIDE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Cash and cash equivalents at June 30, 1997 was $1.3 million, an increase of
$.4 million from $.9 million at December 31, 1996.
Management believes that the aggregate lines of credit available to the
Company, including the $75 million commitment secured in July, 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 the long term cash requirements as presently
contemplated.
14
<PAGE>
TMP WORLDWIDE INC.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) 48,934 shares of Common Stock were issued to two entities in June 1997
in connection with an acquisition. Such securities were not registered
under the Securities Act of 1933, as amended, pursuant to the exemption
contained in Section 4(2) of such Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on June 25, 1997.
(b) The following directors were reelected at the annual meeting of
stockholders:
Andrew J. McKelvey
George Eisele
John Gaulding
Jean-Louis Pallu
John Swann
(c) Each nominee for election as director received 153,120,836 votes for the
nominee's election and 100 votes were withheld for each nominee. There
were no abstentions. The amendments to the Company's 1996 Stock Option
Plan were approved by the vote indicated:
<TABLE>
<S> <C>
For: 151,954,934
Against: 633,242
Broker non-votes 526,803
Abstain 5,957
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of this report:
2.1 Agreement relating to the Entire Issued Share Capital of Austin
Knight Limited between AK Warranty and Indemnity Limited and TMP
Worldwide Inc. dated July 1997
11.1 Statement re: Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the quarter for which this report was filed.
All other items of this report are inapplicable.
15
<PAGE>
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: January 4, 1999 /S/ THOMAS G. COLLISON
----------------------------------
THOMAS G. COLLISON
Vice Chairman
(PRINCIPAL FINANCIAL OFFICER)
Date: January 4, 1999 /S/ ROXANE PREVITY
----------------------------------
ROXANE PREVITY
Chief Financial Officer
(PRINCIPAL ACCOUNTING OFFICER)
16
<PAGE>
TMP WORLDWIDE INC.
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Net income.............................................................. $ 1,533 $ 295 $ 2,668 $ 229
Preferred stock dividend and redemption premium......................... -- (53) (123) (105)
Net Income applicable to common and Class B common stockholders......... $ 1,533 242 2,545 124
Weighted average number of common, Class B common and common equivalent
shares outstanding (including effect of options granted within one
year of the offering)................................................. 24,087 19,617 24,037 19,638
--------- --------- --------- ---------
Primary and fully diluted net income per common and Class B common
share................................................................. $ .06 $ .01 $ .11 $ .01
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,264
<SECURITIES> 0
<RECEIVABLES> 210,841
<ALLOWANCES> 7,332
<INVENTORY> 0
<CURRENT-ASSETS> 228,549
<PP&E> 60,330
<DEPRECIATION> 28,762
<TOTAL-ASSETS> 374,048
<CURRENT-LIABILITIES> 219,680
<BONDS> 116,088
0
0
<COMMON> 24
<OTHER-SE> 37,821
<TOTAL-LIABILITY-AND-EQUITY> 374,048
<SALES> 0
<TOTAL-REVENUES> 100,619
<CGS> 0
<TOTAL-COSTS> 88,861
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 1,507
<INTEREST-EXPENSE> 4,048
<INCOME-PRETAX> 6,206
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,668
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
