SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 23,1998
Outsourcing Solutions Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 333-16867 58-2197161
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Incorporation) Identification No.)
390 South Woods Mill Rd., Suite 350, Chesterfield, MO 63017
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (314) 576-0022
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Items 1-6. Not applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
This amendment provides the pro forma financial information pursuant to Article
11 of Regulation S-X for the period ended December 31, 1997, which was not
included in the Company's Form 8-K filed on February 6, 1998, since the
information for the period was not determinable at such time.
Outsourcing Solutions Inc.
Unaudited Pro Forma Consolidated Financial Statements
On January 23, 1998, Outsourcing Solutions Inc. ("OSI"), through its wholly
owned subsidiary, Sherman Acquisition Corporation, completed its tender offer
for all outstanding shares of Common Stock of The Union Corporation ("Union") at
a price of $31.50 per share in cash. The aggregate purchase price of the Union
acquisition was approximately $207.7 million, including transaction fees. The
merger was completed on March 31, 1998.
The acquisition was accounted for using the purchase method of accounting. The
Unaudited Pro Forma Consolidated Financial Statements reflect the preliminary
allocation of the purchase price for Union to its tangible and intangible assets
and liabilities. The final allocation of such purchase price, and resulting
amortization expense, may differ somewhat from the preliminary estimates. The
following Unaudited Pro Forma Consolidated Financial Statements are based upon
the historical financial statements of OSI and Union, and have been prepared
using assumptions, as set forth in the accompanying Notes to Unaudited Pro Forma
Consolidated Financial Statements. The Unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1997 gives effect to the
acquisition of Union and the related financing as if they had occurred on
January 1, 1997. The Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 1997 gives effect to the acquisition of Union and the related
financing as if they had occurred at that date. The pro forma adjustments are
based upon available information and certain assumptions that management
believes are reasonable.
The Unaudited Pro Forma Consolidated Financial Statements do not purport to
represent what OSI's financial position or results of operations would have been
if consummation of the acquisition of Union had occurred on the date indicated
or which may be achieved in the future. Except for the elimination of costs
associated with duplicate administrative functions and facilities based upon
actions actually taken as of the close of the transaction, anticipated cost
savings have not been reflected in this presentation.
The Unaudited Pro Forma Condensed Consolidated Financial Statements should be
read in conjunction with the historical consolidated financial statements and
accompanying notes for OSI and Union (filed separately).
<PAGE>
Outsourcing Solutions Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1997
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------------------------
PRO FORMA
OSI UNION ADJUSTMENTS COMBINED
------------------ ------------------ ------------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 271,683 $ 128,731 $ - $ 400,414
EXPENSES:
Operating, selling and
administrative expenses 204,486 108,983 (3,187) (A) 310,282
Amortization of loans and
accounts receivable
purchased 52,042 - - 52,042
Amortization of goodwill and
other intangibles 24,479 1,452 5,455 (B) 31,656
Depreciation expense 8,825 2,992 - 11,817
Purchased research and
development - - - -
------------------ ------------------ ------------------- ----------------
Total expenses 290,102 113,427 2,268 405,797
OPERATING INCOME (LOSS)
(18,419) 15,304 (2,268) (5,383)
INTEREST EXPENSE (INCOME)-Net
28,791 (731) (20,703) (C) 48,763
------------------ ------------------ ------------------- ----------------
INCOME (LOSS) BEFORE INCOME
TAXES (47,210) 16,035 (22,971) (54,146)
INCOME TAX PROVISION (BENEFIT)
11,127 7,056 (8,959) (D) 9,224
------------------ ------------------ ------------------- ----------------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS
$ (58,337) $ 8,979 $ (14,012) $ (63,370)
================== ================== =================== ================
</TABLE>
(The accompanying Notes are an integral part of the Unaudited Pro Forma
Consolidated Financial Statements.)
<PAGE>
Outsourcing Solutions Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1997
(A) Elimination of duplicative general and administrative expenses which will
not be incurred prospectively.
(B) Goodwill amortization expense related to the Union acquisition, net of the
elimination of goodwill amortization expense recorded by Union during the
year ended December 31, 1997. Goodwill expense is amortized on a
straight-line basis over 30 years. The amortization expense is based on a
preliminary allocation and future adjustments may be required.
(C) Interest of 8.69% on the necessary borrowings to complete the Union
acquisition, net of the elimination of Union interest income related to the
utilization of cash on hand to pay for a portion of the acquisition. The
interest rate is based on the specific terms of OSI's secured credit
facility (London Interbank Offered Rate plus an additional margin of 300
basis points). In addition, this adjustment includes $425,000 in
amortization of debt origination fees.
(D) Income tax benefit as a result of the adjustments described in these
footnotes, except for certain goodwill amortization adjustments, at an
effective statutory tax rate of 39.0%
<PAGE>
Outsourcing Solutions Inc.
Unaudited Pro Forma Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31, 1997
(IN THOUSANDS)
--------------------------------------------------------------------------
PRO FORMA
OSI UNION ADJUSTMENTS COMBINED
------------------ ------------------ ------------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and investments $ 3,217 $ 53,202 $ - $ 56,419
Cash held in trust 20,762 1,993 - 22,755
Accounts receivable, net 27,192 11,304 - 38,496
Prepaid expenses and other
current assets 2,119 6,072 - 8,191
Deferred tax assets 380 5,819 1,281 (B) 7,480
Purchased A/R portfolios 42,915 - - 42,915
------------------ ------------------ ------------------- ----------------
Total current assets 96,585 78,390 1,281 176,256
Purchased loans and A/R
portfolios 19,537 - - 19,537
P,P&E, net 32,563 7,785 4,000 (A) 44,348
Deferred financing costs 12,517 - 2,869 (C) 15,386
Other assets 693 4,262 (1,542) (D) 3,413
Intangible assets, net 219,795 47,294 165,171 (E) 432,260
------------------ ------------------ ------------------- ----------------
Total assets 381,690 137,731 171,779 691,200
================== ================== =================== ================
LIABILITIES:
Accounts payable 6,977 967 - 7,944
Accounts payable to clients 20,762 1,993 - 22,755
Accrued severance and office
closing 6,487 - - 6,487
Accrued compensation 8,332 - - 8,332
Other current liabilities 19,644 27,497 26,111 (F) 73,252
Current portion of long-term
debt 15,445 20,213 (17,360) (C) 18,298
------------------ ------------------ ------------------- ----------------
Total current liabilities 77,647 50,670 8,751 137,068
Long-term debt 309,521 283 225,000 (C) 534,804
Other non-current liabilities - 17,103 7,703 (G) 24,806
Deferred tax liabilities - - - -
------------------ ------------------ ------------------- ----------------
Total liabilities 387,168 68,056 241,454 696,678
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred equity 11,699 - - 11,699
Common equity 53 4,418 (4,418) (H) 53
Paid-in capital 66,958 47,964 (47,964) (H) 66,958
Treasury stock - (36,895) (36,895) (H) -
Retained earnings (deficit) (84,188) 54,188 (54,188) (H) (84,188)
------------------ ------------------ ------------------- ----------------
Total equity (deficit) (5,478) 69,675 (69,675) (5,478)
------------------ ------------------ ------------------- ----------------
Total liabilities and
stockholders' equity
(deficit) $ 381,690 $ 137,731 $ 171,779 $ 691,200
================== ================== =================== ================
</TABLE>
(The accompanying Notes are an integral part of the Unaudited Pro Forma
Consolidated Financial Statements.)
<PAGE>
Outsourcing Solutions Inc.
Notes to Unaudited Pro Forma Balance Sheet
December 31, 1997
(A) Represents the step-up of Union's tangible assets, primarily real estate,
to estimated fair value at date of acquisition.
(B) Represents the current deferred income tax asset established related to the
net operating loss incurred by Union in its final tax period, net of
reserves recorded to reflect future deductible temporary tax differences at
their estimated realizable value.
(C) The Company amended its existing credit facility to provide for an
additional $225 million in bank debt to finance the acquisition. Financing
fees associated with the credit facility totaled $2.9 million and are being
amortized on a straight line basis over the term of the credit agreement. A
portion of the proceeds from the additional borrowings were used to repay
outstanding debt under Union's pre-existing revolving credit agreement.
(D) Represents the valuation reserves established to reflect the Company's
current estimates of the net realizable value associated with certain Union
investments.
(E) Based on a preliminary review of tangible assets acquired and liabilities
assumed, as well as the operating characteristics of Union, no specific
intangible assets were identified. Accordingly, residual goodwill
associated with the acquisition was $212.5 million. This asset, amortized
on a straight-line basis over 30 years, is based on a preliminary
allocation and future adjustments may be required.
(F) Represents accrued liabilities recorded with respect to change in control
payments, involuntary severance expenses and stay bonuses directly
associated with the elimination or integration of Union's corporate
function.
(G) Based on a detailed review of the environmental proceedings currently
involving Union, including consultation with outside specialists, an
additional provision was established to reserve for current estimates of
exposures for which the Company has potential continuing responsibility.
(H) Represents the elimination of the Union equity balances at acquisition.
<PAGE>
Item 8. Not applicable.
SIGNATURE
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 thereunder duly authorized.
Dated: April 8, 1998
Outsourcing Solutions Inc.
By:_____________________________
Name: Daniel J. Dolan
Title: Executive Vice-President and
Chief Financial Officer
