<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 4, 2000
TMP WORLDWIDE INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-21571 13-3906555
- ---------------------------- ----------- -------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number Identification No.)
1633 BROADWAY, NEW YORK, NEW YORK 10019
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 212-977-4200
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 21, 1999, pursuant to the terms of the Amended and
Restated Purchase Agreement dated as of October 20, 1999, by and among TMP
Worldwide Inc. ("TMP" or "the Company"), Highland Search Group L.L.C.
("Highland") and the owners of Highland (collectively, the "Owners"), TMP
completed its acquisition from the Owners of all the membership interests of
Highland for an aggregate of 699,333 shares of TMP's common stock, $.001 par
value per share (the "TMP Common Stock") (the "Transaction"). Highland is
engaged in the executive search business. As a result of the Transaction, TMP
holds 100% of the membership interests in Highland, and the Owners became
stockholders of TMP. The merger has been accounted for as a pooling of
interests.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The historical financial information of Highland as of and for
the year ended December 31, 1998 and as of September 30, 1999
and 1998 and the nine months ended September 30, 1999 and 1998
is set forth in (c) below.
(b) PRO FORMA FINANCIAL INFORMATION.
Set forth below are the unaudited Pro Forma Condensed Combined
Balance Sheet of TMP Worldwide Inc. as of September 30, 1999,
and the unaudited Pro Forma Condensed Combined Statements of
Operations of TMP Worldwide Inc. for the nine months ended
September 30, 1999 and 1998 and the year ended December 31,
1998, respectively.
2
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Combined Financial Information reflects
financial information which gives effect to the Company's acquisition of all
of the outstanding stock of Highland in exchange for the issuance of 699,333
shares of TMP's Common Stock. The Pro Forma Condensed Combined Financial
Information included herein reflects the use of the pooling of interests
method of accounting, after giving effect to the pro forma adjustments
discussed in the accompanying notes. Such financial information has been
prepared from, and should be read in conjunction with, the supplemental
consolidated financial statements and notes thereto of TMP included in TMP's
Current Report on Form 8-K dated September 30, 1999 with respect to the
information for the year ended December 31, 1998, TMP's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, with respect to the
information as of September 30, 1999 and for the nine months ended September
30, 1999 and 1998, and the Highland historical financial statements and notes
thereto attached hereto as exhibits.
The Pro Forma Condensed Combined Balance Sheet gives effect to the
transaction as if it had occurred on September 30, 1999, combining the
balance sheet of TMP as of September 30, 1999 with that of Highland as of
September 30, 1999. The Pro Forma Condensed Combined Statements of Operations
give effect to the transaction as if it had occurred at the beginning of the
earliest period presented, combining the results of TMP for the nine months
ended September 30, 1999 and September 30, 1998 with those of Highland for
the nine months ended September 30, 1999 and September 30, 1998, and
combining the results of TMP for the year ended December 31, 1998 with those
of Highland for the year ended December 31, 1998.
The Pro Forma Condensed Combined Financial Information is unaudited and is
not necessarily indicative of the consolidated results which actually would
have occurred if the above Transaction had been consummated at the beginning
of the periods presented, nor does it purport to present the future
financial position and results of operations for future periods.
3
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
TMP Highland Search Pro Forma
Worldwide Inc. Group L.L.C. Adjustments Combined
-------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 59,565 $ 8,222 $ $ 67,787
Accounts receivable, net.................................. 414,182 2,768 416,950
Work-in-process........................................... 19,593 -- 19,593
Prepaid and other......................................... 24,940 505 25,445
-------- ------- -------- --------
Total current assets................................... 518,280 11,495 529,775
Property and equipment, net................................. 61,876 641 62,517
Deferred income taxes....................................... 15,817 -- 2,614(a) 18,431
Intangibles, net............................................ 257,807 -- 257,807
Other assets................................................ 17,139 326 17,465
-------- ------- -------- --------
$870,919 $12,462 $ 2,614 $885,995
-------- ------- -------- --------
-------- ------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $302,005 $ 18 $ $302,023
Accrued expenses and other liabilities.................... 112,544 10,410 122,954
Accrued restructuring costs............................... 25,041 -- 25,041
Deferred revenue.......................................... 47,016 -- 47,016
Deferred income taxes..................................... -- 133 (133)(a) --
Current portion of long-term debt......................... 8,805 93 8,898
-------- ------- -------- --------
Total current liabilities.............................. 495,411 10,654 (133)(a) 505,932
Long-term debt, less current portion........................ 100,900 298 101,198
Other liabilities........................................... 16,328 176 16,504
Stockholders' equity:
Common stock.............................................. 37 -- 37
Class B common stock...................................... 2 -- 2
Additional paid-in capital................................ 300,400 -- 300,400
Other comprehensive income (loss)......................... (4,339) 8 (4,331)
Retained earnings (deficit)............................... (37,820) 1,326 2,747(a) (33,747)
-------- ------- -------- --------
Total stockholders' equity............................. 258,280 1,334 2,747 262,361
-------- ------- -------- --------
$870,919 $12,462 $ 2,614 $885,995
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
(a) Adjustment to record the tax benefit of temporary differences of Highland
which were not previously subject to tax because Highland was a limited
liability company.
4
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
TMP Highland Search Pro Forma
Worldwide Inc. Group L.L.C. Adjustments Combined
-------------- --------------- ------------ ---------
<S> <C> <C> <C> <C>
Revenue:
Commissions and fees................... $539,546 $19,758 $ -- $559,304
-------- ------- -------- --------
Operating expenses:
Salaries and related costs............. 318,471 8,658 2,363(a) 329,492
Office and general..................... 163,012 8,249 -- 171,261
Amortization of intangibles............ 8,564 -- -- 8,564
Restructuring charges.................. 2,789 -- -- 2,789
Merger and integration costs........... 46,262 -- -- 46,262
-------- ------- -------- --------
Total operating expenses............. 539,098 16,907 2,363 558,368
-------- ------- -------- --------
Operating income......................... 448 2,851 (2,363) 936
Interest income (expense), net........... (6,308) 40 -- (6,268)
Other expense, net....................... (785) (2) -- (787)
-------- ------- -------- --------
Income (loss) before provision for
income taxes, minority interests and
equity in losses of affiliates......... (6,645) 2,889 (2,363) (6,119)
Provision for income taxes............... 751 264 (54)(b) 961
Minority interests....................... 107 -- -- 107
Equity in losses of affiliates........... (300) -- -- (300)
-------- ------- -------- --------
Net income (loss) applicable to common
and Class B common stockholders........ $ (7,803) $ 2,625 $ (2,309) $ (7,487)
-------- ------- -------- --------
-------- ------- -------- --------
Net loss per common and Class B
common share:
Basic................................ $ (0.20) $ (.19)(c)
Diluted.............................. $ (0.20) $ (.19)(c)
Weighted average shares outstanding:
Basic................................ 38,852 39,551 (c)
Diluted.............................. 38,852 39,551 (c)
</TABLE>
- -------------------------
(a) Adjustment to reflect compensation for key officers' new employment
agreements with TMP in excess of amounts expensed as employees of
Highland.
(b) Includes tax benefit of $945 on the salary adjustment and additional
Federal and State taxes of $891 on income of Highland which was not subject
to such taxes because it was a limited liability company.
(c) Gives effect to the additional shares that have been issued in connection
with the Transaction.
5
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
TMP Highland Search Pro Forma
Worldwide Inc. Group L.L.C. Adjustments Combined
--------------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue:
Commissions and fees................................ $479,903 $14,517 $ -- $494,420
-------- ------- -------- --------
Operating expenses:
Salaries and related costs.......................... 281,884 5,719 2,363(a) 289,966
Office and general.................................. 132,888 1,926 -- 134,814
Amortization of intangibles......................... 7,394 -- -- 7,394
Special compensation and CEO bonus.................. 1,125 -- -- 1,125
Merger and integration costs........................ 9,577 -- -- 9,577
-------- ------- -------- --------
Total operating expenses.......................... 432,868 7,645 2,363 442,876
-------- ------- -------- --------
Operating income...................................... 47,035 6,872 (2,363) 51,544
Interest income (expense), net........................ (7,110) 76 -- (7,034)
Other expense, net.................................... (932) (4) -- (936)
-------- ------- -------- --------
Income before provision for income taxes, minority
interests and equity in losses of affiliates........ 38,993 6,944 (2,363) 43,574
Provision for income taxes............................ 16,313 240 1,592(b) 18,145
Minority interests.................................... (18) -- -- (18)
Equity in losses of affiliates........................ (297) -- -- (297)
-------- ------- -------- --------
Net income applicable to common and
Class B common stockholder......................... $ 22,401 $ 6,704 $ (3,955) $ 25,150
-------- ------- -------- --------
-------- ------- -------- --------
Net income per common and Class B common share:
Basic............................................... $ 0.59 $ .65 (c)
Diluted............................................. $ 0.57 $ .63 (c)
Weighted average shares outstanding:
Basic............................................... 37,938 38,637 (c)
Diluted............................................. 39,043 39,742 (c)
</TABLE>
- ------------------------
(a) Adjustment to reflect compensation for key officers' new employment
agreements with TMP in excess of amounts expensed as employees of
Highland.
(b) Includes tax benefit of $945 on the salary adjustment and additional Federal
and State taxes of $2,537 on income of Highland which was not subject to
such taxes because it was a limited liability company.
(c) Gives effect to the additional shares that have been issued in connection
with the Transaction.
6
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
TMP Highland Search Pro Forma
Worldwide Inc. Group L.L.C. Adjustments Combined
--------------- --------------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue:
Commissions and fees................................ $637,516 $16,939 $ -- $654,455
-------- ------- -------- --------
Operating expenses:
Salaries and related costs.......................... 374,908 7,137 3,150(a) 385,195
Office and general.................................. 185,277 2,941 -- 188,218
Amortization of intangibles......................... 10,185 -- -- 10,185
Special compensation and CEO bonus.................. 1,250 -- -- 1,250
Restructuring charge................................ 3,543 -- -- 3,543
Merger and integration costs........................ 22,412 -- -- 22,412
-------- ------- -------- --------
Total operating expenses.......................... 597,575 10,078 3,150 610,803
-------- ------- -------- --------
Operating income...................................... 39,941 6,861 (3,150) 43,652
Interest income (expense), net........................ (9,903) 76 -- (9,827)
Other expense, net.................................... (1,790) -- -- (1,790)
-------- ------- -------- --------
Income before provision for income taxes, minority
interests and equity in losses of affiliates........ 28,248 6,937 (3,150) 32,035
Provision for income taxes............................ 13,899 320 1,195(b) 15,414
Minority interests.................................... 28 -- -- 28
Equity in losses of affiliates........................ (396) -- -- (396)
-------- ------- -------- --------
Net income applicable to common and Class B
common stockholders................................. $ 13,925 $ 6,617 $ (4,345) $ 16,197
-------- ------- -------- --------
-------- ------- -------- --------
Net income per common and Class B common share:
Basic............................................... $ 0.37 $ .42 (c)
Diluted............................................. $ 0.36 $ .41 (c)
Weighted average shares outstanding:
Basic............................................... 37,977 38,676 (c)
Diluted............................................. 38,880 39,579 (c)
</TABLE>
- ------------------------
(a) Adjustment to reflect compensation for key officers' new employment
agreements with TMP in excess of amounts expensed as employees of
Highland.
(b) Includes tax benefit of $1,260 on the salary adjustment and additional
Federal and State taxes of $2,455 on income of Highland which was not
subject to such taxes because it was a limited liability company.
(c) Gives effect to the additional shares that have been issued in connection
with the Transaction.
7
<PAGE>
(c) EXHIBITS.
(99.1) Audited historical financial statements of Highland as of and for
the year ended December 31, 1998.
(99.2) Unaudited historical financial statements of Highland as of
September 30, 1999 and 1998 and for the nine months ended
September 30, 1999 and 1998.
(99.3) Consent of BDO Seidman, LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TMP WORLDWIDE INC.
By: /s/ Myron F. Olesnyckyj
----------------------------------
Myron F. Olesnyckyj
Vice President and General Counsel
Dated: January 4, 2000
8
<PAGE>
Exhibit 99.1
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
1
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS:
Balance sheet 4
Statement of operations 5
Statement of changes in members' equity 6
Statement of cash flows 7
Notes to financial statements 8-12
</TABLE>
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members of
Highland Search Group, L.L.C.
New York, New York
We have audited the accompanying balance sheet of Highland Search Group, L.L.C.
(a limited liability company) as of December 31, 1998, and the related
statements of operations, changes in members' equity and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Highland Search Group, L.L.C.
(a limited liability company) as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ BDO Seidman, LLP
- -------------------------------
BDO Seidman, LLP
New York, New York
December 16, 1999
3
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
<TABLE>
<CAPTION>
BALANCE SHEET
(in thousands)
- --------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
- --------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS (Note 6)
CURRENT:
Cash and cash equivalents (Note 2) $ 833
Accounts receivable, net of allowance for doubtful accounts of $75 (Note 3) 2,920
Note receivable (Note 4) 103
Prepaid expenses and other current assets 44
- --------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,900
PROPERTY AND EQUIPMENT (Notes 2 and 5) 805
OTHER ASSETS 292
- --------------------------------------------------------------------------------------------------------
$4,997
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note 8) $ 601
Current portion of notes payable (Note 6) 87
Deferred tax liability (Note 2) 85
- --------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 773
DEFERRED RENT (Note 7) 176
NOTES PAYABLE, NET OF CURRENT PORTION (Note 6) 396
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,345
COMMITMENTS AND CONTINGENCY (Notes 7 and 10)
MEMBERS' EQUITY (Notes 1 and 2) 3,652
- --------------------------------------------------------------------------------------------------------
$4,997
- --------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(in thousands)
- --------------------------------------------------------------------------------------------------------
<S> <C>
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------------------------------
REVENUE (Notes 2 and 3) $16,939
OPERATING EXPENSES:
Compensation and other benefits (Note 8) 7,137
Selling, general and administrative (Note 2) 2,941
- --------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 6,861
INTEREST INCOME, NET (Notes 4 and 6) 76
- --------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 6,937
-------
PROVISION FOR INCOME TAXES (Note 2):
CURRENT 363
DEFERRED (43)
-------
320
- --------------------------------------------------------------------------------------------------------
NET INCOME $ 6,617
- --------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN MEMBERS' EQUITY
(in thousands)
YEAR ENDED DECEMBER 31, 1998
<S> <C>
Balance, January 1, 1998 $ 5,077
Distributions (Note 2) (7,179)
Member withdrawal (Note 1) (863)
Net income 6,617
- -------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 3,652
- -------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
(in thousands)
<S> <C>
YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,617
- -----------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for bad debt 15
Accrued interest on notes receivable (3)
Depreciation and amortization 228
Deferred income tax benefit (43)
Changes in operating assets and liabilities:
Decrease in accounts receivable 815
Decrease in prepaid expenses, other current assets and other assets 14
Decrease in accounts payable and accrued expenses (98)
Increase in deferred rent 20
- -----------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 948
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,565
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (446)
Issuance of notes receivable (100)
- -----------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (546)
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (21)
Proceeds from notes payable 500
Repayments on notes payable (17)
Distributions of income (7,179)
Member distribution (863)
- -----------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (7,580)
- -----------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (561)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,394
- -----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 833
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 17
Income taxes 367
- -----------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in thousands)
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS Highland Search Group, L.L.C. (the "Company") was
formed under the laws of the State of Delaware in
February 1995 under the name Steven Potter
Associates, L.L.C. In August 1995, the Company
amended the certificate of formation to the
current name. The Company specializes in
recruiting executives to meet specific
requirements on a retainer and success fee basis.
On February 20, 1998, the membership of one of the
six members was terminated. The member received a
distribution equal to her account balance at
January 1, 1998. The ownership allocation was then
redistributed among the remaining five members for
1998.
2. SUMMARY OF USE OF ESTIMATES
SIGNIFICANT
ACCOUNTING The preparation of financial statements in
POLICIES 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.
REVENUE RECOGNITION
The Company's revenues consist of success fees
upon placement of executives and retainers.
Success fee revenue is recognized when a candidate
is accepted for employment. Nonrefundable retainer
revenue is recognized upon billing as prescribed
under the terms of the specific contract, which
generally is in equal thirds. There is no minimum
employment period required and, accordingly, the
Company is under no obligation to refund success
fee revenue if a placement is terminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid
investments with a maturity of three months or
less when purchased to be cash equivalents.
8
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in thousands)
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment are stated at historical
cost. The equipment is depreciated utilizing the
straight-line method over the estimated useful
lives of 5 to 7 years. Expenditures for repairs
and maintenance are charged to expenses as
incurred.
INCOME TAXES
The Company is a limited liability company taxed
as a partnership for Federal and State income tax
purposes and, as a result, the earnings of the
Company are taxable directly to the members. The
Company remains liable for the New York City
Unincorporated Business Tax, which was $320
for the year ended December 31, 1998.
The Company uses the cash method of accounting for
tax purposes.
Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to
differences between financial statement carrying
amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax
rates expected to apply to taxable income in the
year in which those temporary differences are
expected to be recovered or settled. The Company's
deferred tax liability is primarily generated from
the differences in the cash method versus the
accrual method of accounting for income taxes. The
Company had a deferred tax liability of $85 at
December 31, 1998.
DISTRIBUTION OF EARNINGS
The Company distributes earnings to its members
based upon a formula in the members' agreement,
which takes into consideration, among other
things, ownership percentages, bonuses and other
subjective allocations.
9
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in thousands)
- --------------------------------------------------------------------------------
3. MAJOR CLIENTS For the year ended December 31, 1998, the
Company's largest client accounted for 12% of
revenue. The Company had two clients that
accounted for 17% and 11% of accounts receivable.
4. NOTE RECEIVABLE During 1998, the Company extended a note in the
amount of $100 to a member with interest
payable at 7%. The note was due at December 31,
1998, but was subsequently extended to March 31,
1999. The outstanding amount shown on the balance
sheet at December 31, 1998 is inclusive of accrued
interest.
During March 1999, approximately $25 was paid
in cash and the remaining balance was offset
against member distribution.
5. PROPERTY AND Property and equipment is comprised of the
EQUIPMENT following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------------------------------------
<S> <C>
Computer equipment and related software $ 487
Office furniture and fixtures 545
Leasehold improvements 263
--------------------------------------------------------------------------------
1,295
Less: Accumulated depreciation and amortization 490
--------------------------------------------------------------------------------
$ 805
--------------------------------------------------------------------------------
</TABLE>
For the year ended December 31, 1998, depreciation
and amortization expense amounted to $228.
6. NOTE PAYABLE In July 1998, the Company obtained an installment
loan from a bank amounting to $500 which
expires July 2003. The note is secured by the
assets of the Company and personally by the
members.
10
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in thousands)
- --------------------------------------------------------------------------------
Interest is charged at 8.5%. At December 31, 1998,
the outstanding balance was $483. The principal
payments on the loan are due as follows:
<TABLE>
--------------------------------------------
<S> <C>
1999 $ 87
2000 94
2001 102
2002 111
2003 89
---------------------------------------------
$ 483
---------------------------------------------
</TABLE>
The note was paid in October 1999 in connection
with the TMP Worldwide, Inc.'s ("TMP's") merger
(see Note 9).
7. COMMITMENTS OPERATING AND CAPITAL LEASES
The Company leases office space under two
operating leases which expire in July 2003 and
February 2006. These leases are subject to
escalations for increases in real estate taxes and
other expenses.
At December 31, 1998, the future minimum lease
commitments for these obligations are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------
Year ending December 31,
<S> <C>
1999 $ 666
2000 671
2001 685
2002 685
2003 552
Thereafter 747
--------------------------------------------------
$4,006
--------------------------------------------------
</TABLE>
Rent expense under operating leases, including
escalation charges, was $660 for the year
ended December 31, 1998.
11
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
NOTES TO FINANCIAL STATEMENTS
(all dollar amounts in thousands)
- --------------------------------------------------------------------------------
Pursuant to the Company's leases, rent expense
charged to operations differs from rent paid
because of the effect of rent abatements and
scheduled rent increases. Accordingly, the Company
has recorded deferred rent payable of $176 at
December 31, 1998. Rent expense is calculated by
allocating total rental payments, including those
attributable to scheduled rent increases, on a
straight-line basis over the lease term.
8. PROFIT SHARING PLAN The Company has three defined contribution plans,
two for all eligible employees and one for
members. The Company's contribution is
discretionary, and the Company's annual
contribution for 1998 was $188 for members and
$224 for nonmembers, respectively.
9. SUBSEQUENT EVENTS On January 1, 1999, the Company admitted a sixth
member who received a 4% ownership interest and
who will receive 4% of the profits and losses of
the Company.
On October 21, 1999, as part of a merger with TMP
Worldwide, Inc. ("TMP") the Company's members
exchanged their interests in the Company for TMP
shares. On this date, the Company ceased to exist
as Highland Search Group L.L.C. and began
operations as TMP Worldwide, Inc.
12
<PAGE>
Exhibit 99.2
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
BALANCE SHEETS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
As Of
September 30,
-----------------
1999 1998
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 8,222 $ 3,353
Accounts receivable, net ...................................... 2,768 2,794
Prepaid and other ............................................. 505 429
------- -------
Total current assets ........................................ 11,495 6,576
Property and equipment, net ..................................... 641 1,025
Other assets .................................................... 326 292
------- -------
$12,462 $ 7,893
------- -------
------- -------
LIABILITIES AND MEMBERS EQUITY
Current liabilities:
Accounts payable .............................................. $ 18 $ 76
Accrued expenses and other current liabilities ................ 10,410 3,077
Deferred income taxes ......................................... 133 128
Current portion of notes payable .............................. 93 74
------- -------
Total current liabilities .................................. 10,654 3,355
Notes payable, less current portion.............................. 298 410
Deferred rent.................................................... 176 156
------- -------
Total liabilities........................................... 11,128 3,921
Members' equity ................................................. 1,334 3,972
------- -------
$12,462 $ 7,893
------- -------
------- -------
</TABLE>
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
----------------
1999 1998
---- ----
<S> <C> <C>
Revenue.................................................... $19,758 $14,517
------- -------
Operating expenses:
Compensation and other benefits.......................... 8,658 5,719
Selling, general and administrative...................... 8,249 1,926
------- -------
Income from operations................................. 2,851 6,872
Interest income and other, net........................... 38 72
------- -------
Income before provision for income taxes............... 2,889 6,944
Provision for income taxes............................... 264 240
------- -------
Net income............................................... $ 2,625 $ 6,704
======= =======
</TABLE>
<PAGE>
HIGHLAND SEARCH GROUP, L.L.C.
(a limited liability company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................................................................. $ 2,625 $ 6,704
------- -------
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment................................................. 254 171
Provisions for doubtful accounts........................................................................ 700 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net......................................................... (547) 955
Increase in accounts payable and accrued liabilities.................................................... 9,866 2,284
(Increase) in work-in process, prepaid and other........................................................ (391) (371)
------- -------
Total adjustments................................................................................... 9,882 3,039
------- -------
Net cash provided by operating activities........................................................... 12,507 9,743
------- -------
Cash flows from investing activities:
Capital expenditures.................................................................................... (69) (437)
------- -------
Net cash used in investing activities............................................................... (69) (437)
------- -------
Cash flows from financing activities:
Borrowings under lines of credit and proceeds from issuance of debt, net................................ -- 463
Repayments under lines of credit and principal payments on debt......................................... (98) --
Distributions to members................................................................................ (4,951) (7,809)
------- -------
Net cash used in financing activities............................................................... (5,049) (7,346)
------- -------
Net increase in cash and cash equivalents............................................................... 7,389 1,960
------- -------
Cash and cash equivalents, beginning of period.......................................................... 833 1,393
------- -------
Cash and cash equivalents, end of period................................................................ $ 8,222 $ 3,353
------- -------
------- -------
</TABLE>
<PAGE>
(all dollar amounts in thousands)
NOTE 1. BASIS OF PRESENTATION
The interim condensed financial statements included herein have been
prepared by Highland Search Group, L.L.C. ("Highland") without audit. 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 Highland 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 herein. It is suggested that these
condensed financial statements be read in conjunction with the Highland
financial statements and notes thereto included elsewhere herein. Highland
follows the same accounting policies in preparation of interim financial
statements.
Results of operations for the interim periods may not be indicative of
annual results.
In addition, in September 1999 Highland entered into a Co-op Advertising
Agreement with TMP, under which Highland agreed to provide $5 million in
media advertising during that month. As a result, Highland recorded $4,485 in
advertising costs relating to this agreement for the nine months ended
September 30, 1999.
NOTE 2. SUBSEQUENT EVENTS - ACQUISITION OF HIGHLAND SEARCH GROUP L.L.C.
On October 21, 1999 Highland and TMP entered into a merger agreement
whereby TMP acquired all of the membership interests of Highland in exchange
for 699,333 shares of TMP common stock. The transaction was accounted for as
a pooling of interests.
<PAGE>
EXHIBIT 99.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
We hereby consent to the incorporation by reference in the previously
filed Registration Statements (Nos. 333-63499, 333-70795, 333-75031,
333-83131, 333-93065, 333-88193 and 333-81843) of TMP Worldwide Inc. and
Subsidiaries of our report dated December 16, 1999, relating to the financial
statements of the Highland Search Group, LLC as of and for the year ended
December 31, 1998 appearing in the Company's current report on Form 8-K dated
January 4, 2000.
/s/BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
New York, New York
January 4, 2000
