<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 29, 2000
BORON, LEPORE & ASSOCIATES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 000-23093 22-2365997
(State or other jurisdiction (Commission (I.R.S Employer
of incorporation) File Number) Identification No.)
17-17 Route 208 North, Fair Lawn, New Jersey 07410
(Address of principal executive offices and zip code)
201-791-7272
(Registrant's telephone number, including area code)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
---------------------------------------------------------------------------
(a) Financial Statements of Business Acquired
(i) Report of Independent Public Accountants.
(ii) Balance Sheets of Armand Scott, Inc. as of December 31, 1999 and
1998.
(iii) Statements of Income and Retained Earnings for the years ended
December 31, 1999 and 1998.
(iv) Statements of Cash Flows for the years ended December 31, 1999 and
1998.
(v) Notes to financial statements.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Armand Scott, Inc.
Westwood, New Jersey
We have audited the accompanying balance sheets of Armand Scott, Inc. as of
December 31, 1999 and 1998, and the related statements of income and retained
earnings for the years 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 Armand Scott, Inc. as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Flackman, Goodman & Potter, P.A.
March 23, 2000
<PAGE>
ARMAND SCOTT, INC.
BALANCE SHEETS
December 31, 1999 and 1998
--------------------------
<TABLE>
<CAPTION>
ASSETS
1999 1998
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 844,975 $ 137,399
Accounts receivable and accrued revenue 5,911,049 2,206,473
Prepaid project and other expenses 161,739 159,253
Marketable securities 139,913 -
---------- ----------
TOTAL CURRENT ASSETS 7,057,676 2,503,125
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 109,411 80,631
OTHER ASSET
Security deposits 5,411 6,085
---------- ----------
TOTAL ASSETS $7,172,498 $2,589,841
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 548,843 $ 404,953
Deferred revenues 3,394,680 706,379
Pension contributions payable 227,866 164,011
Deferred compensation payable 139,913 -
Income taxes payable 1,138 -
Deferred tax liabilities 48,000 15,100
Other current liabilities 31,243 1,000
---------- ----------
TOTAL CURRENT LIABILITIES 4,391,683 1,291,443
---------- ----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, no par value, 2,500 shares
authorized, 105 issued and outstanding 20,760 20,760
Retained earnings 2,760,055 1,277,638
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,780,815 1,298,398
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,172,498 $2,589,841
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ARMAND SCOTT, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Years Ended December 31, 1999 and 1998
----------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
PROJECT REVENUES $13,680,163 $8,149,347
PROJECT EXPENSES 9,337,756 5,585,246
----------- ----------
GROSS PROFIT 4,342,407 2,564,101
OPERATING EXPENSES 2,850,434 1,963,099
----------- ----------
OPERATING INCOME 1,491,973 601,002
OTHER INCOME AND EXPENSE
Interest and dividend income 24,540 7,170
Interest expense - (2,699)
----------- ----------
INCOME BEFORE PROVISION FOR STATE
INCOME TAXES 1,516,513 605,473
Provision for state income taxes 34,096 1,892
----------- ----------
NET INCOME 1,482,417 603,581
RETAINED EARNINGS - beginning 1,277,638 674,057
----------- ----------
RETAINED EARNINGS - ending $ 2,760,055 $1,277,638
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ARMAND SCOTT, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
----------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,482,417 $ 603,581
Depreciation 28,996 21,011
Deferred income taxes 32,900 (200)
Changes in operating assets and liabilities:
Accounts receivable and accrued revenue (3,704,576) (397,237)
Prepaid projects and other expenses (2,486) (112,483)
Other assets 674 -
Accounts payable and accrued expenses 143,890 (557,837)
Deferred revenues 2,688,301 479,236
Pension contribution payable 63,855 107,340
Other current liabilities 171,294 435
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 905,265 143,846
----------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of investments, net (139,913) -
Purchase of equipment and leasehold improvements (57,776) (44,232)
----------- ---------
NET CASH USED BY INVESTING ACTIVITIES (197,689) (44,232)
----------- ---------
CASH FLOWS USED IN FINANCING ACTIVITIES
Repayment of bank loan payable - (130,000)
----------- ---------
NET INCREASE (DECREASE) IN CASH 707,576 (30,386)
CASH - beginning of year 137,399 167,785
----------- ---------
CASH - end of year $ 844,975 $ 137,399
=========== =========
SUPPLEMENTAL DISCLOSURE:
Cash paid during the year for:
Interest $ - $ 2,699
=========== =========
Income taxes $ 1,058 $ 1,092
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
ARMAND SCOTT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999 and 1998
----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
--------------------
Armand Scott, Inc. ("the Company") creates, designs, develops, implements and
monitors medical education programs and services for clients in the
pharmaceutical, medical device and biotechnology industries. The Company's
clients are located throughout the United States and Canada.
Marketable Securities
---------------------
Available for sale securities consist of mutual funds not classified as trading
securities nor as securities to be held-to-maturity. Securities available for
sale are carried at fair value with unrealized gains and losses reported in
other comprehensive income. Realized gains and losses on securities available
for sale are included in other income (expense) and, when applicable, are
reported as a reclassification adjustment, net of tax, in other comprehensive
income. Gains and losses on the sale of available for sale securities are
determined using the specific identification method.
Declines in the fair value of individual available for sale securities below
their cost that are other than temporary would result in write-downs of the
individual securities to their fair value. The related write-downs would be
included in earnings as realized losses.
Equipment and Leasehold Improvements
------------------------------------
Equipment and leasehold improvements are carried at cost less accumulated
depreciation. Depreciation is based on the estimated useful lives of depreciable
assets and is calculated using the straight-line method. When property is
disposed of, the asset and related accumulated depreciation are removed from the
accounts. Any resulting gain or loss is reflected in income. Maintenance and
repairs are expensed when incurred.
Revenue Recognition
-------------------
Project revenues and project costs are recognized when the project is completed.
Completed projects which have not been billed are included in accounts
receivable and accrued revenue; payments received prior to the project being
completed are recorded as deferred revenues.
Income Taxes
------------
The Company has elected to be taxed as "S" corporation under the Internal
Revenue Code and applicable states statutes. The stockholders of the corporation
are taxed on their proportionate share of the Company's taxable income on their
personal tax returns. The portion of the states income tax that is the
responsibility of the Company is provided for, using statutory rates.
-7-
<PAGE>
ARMAND SCOTT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999 and 1998
----------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes (continued)
------------
Deferred income taxes are recognized for differences between the basis of assets
and liabilities for financial statement and income tax purposes. Deferred tax
assets and liabilities represent future tax consequences of those differences
that will either be taxable or deductible when the related assets and
liabilities are recovered or settled.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements. Although
these estimates are based on management's best knowledge of current events and
actions the Company may undertake in the future, actual results could differ
from those estimates.
2. INVESTMENTS
Marketable securities available for sale at December 31, 1999 totaled $139,913.
The Company's intention is to use these investments to fund compensation for an
individual employee, as discussed in Note 7. The cost of these securities
approximates market value.
3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Components of equipment and leasehold improvements, and their respective useful
lives, are as follows:
1999 1998 Useful Lives
---- ---- ------------
Equipment $249,592 $191,816 5 - 7 years
Leasehold improvements 1,500 1,500 31 years
-------- --------
251,092 193,316
Accumulated depreciation 141,681 112,685
-------- --------
Equipment and leasehold
improvements, net $109,411 $ 80,631
======== ========
Depreciation expense for the years ending December 31, 1999 and 1998 total
$28,996 and $21,011, respectively.
-8-
<PAGE>
ARMAND SCOTT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999 and 1998
----------------------------------------------
4. BANK LOAN PAYABLE
The Company has a line of credit with Fleet Bank with maximum borrowing of
$350,000. Interest is payable at .75% above the prime rate. The agreement
expires December 2000. Outstanding balances at December 31, 1999 and 1998 total
$0.
5. INCOME TAXES
The provision for state income taxes consist of:
1999 1998
---- ----
Current taxes $ 1,196 $ 2,092
Deferred taxes 32,900 (200)
------- -------
Total provision for state
income taxes $34,096 $ 1,892
======= =======
The Company provides for deferred taxes on temporary differences arising from
assets and liabilities whose bases are different for financial reporting and
income tax purposes. The differences relate primarily to depreciable assets and
different methods of accounting for income tax purposes.
The Company's net deferred tax liability at December 31, 1999 and 1998 consist
of:
1999 1998
---- ----
Deferred tax liability $114,000 $ 25,200
Deferred tax asset (66,000) (10,100)
-------- --------
Net Deferred Tax Liability $ 48,000 $ 15,100
======== ========
6. RETIREMENT PLANS
Substantially all Company employees are covered under a money purchase plan and
a profit sharing plan with a 401(k) salary deferral feature. The money purchase
plan requires annual contributions of 10% of eligible employees' salaries. The
Company does not match employee salary deferrals, however, at its discretion,
the Company may make contributions to the profit sharing plan. Contributions to
the plans for the years ended December 31, 1999 and 1998 total $227,866 and
$164,011, respectively.
-9-
<PAGE>
ARMAND SCOTT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999 and 1998
----------------------------------------------
7. DEFERRED COMPENSATION ARRANGEMENT
The Company has a non-qualified deferred compensation arrangement with an
employee whereby contributions are made to a trustee on behalf of the employee's
benefit. The arrangement, which was funded during 1999 with a contribution of
$150,000 allows for discretionary withdrawals. During 1999 $15,000 was
withdrawn, and $4,913 of earnings were added to the fund balance.
8. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables. The Company grants credit terms in
the normal course of business to its customers. Except as detailed below,
concentrations of credit risk with respect to these trade receivables are
considered minimal due to the customers' geographic dispersion. As part of its
ongoing control procedures, the Company monitors the credit worthiness of its
customers. The Company does not normally require collateral or other security
to support credit sales. For the years ended December 31, 1999 and 1998 the
Company has three and two customers whose project revenues represent 75%
($10,227,000) and 79% ($6,435,000) of total project revenues, respectively.
Accounts receivable from these customers total $4,074,000 and $1,855,000 for the
years ended December 31, 1999 and 1998, respectively. At December 31, 1999 the
Company had cash in its bank in excess of the FDIC insurance limits.
9. COMMITMENTS
The Company leases various office facilities under operating leases expiring
through March 2003. Rent expense for the years ended December 31, 1999 and 1998
total $98,599 and $79,755, respectively.
Future minimum lease payments for the years ending December 31:
2000 $ 54,412
2001 47,400
2002 50,400
2003 42,000
--------
$194,212
========
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<PAGE>
(b) Pro Forma Financial Information
(i) Historical Unaudited Condensed Balance Sheet as of June 30, 2000.
(ii) Pro Forma Unaudited Condensed Statements of Operations for the six
months ended June 30, 2000 and the year ended December 31, 1999.
(iii) Notes to the Unaudited Pro Forma Condensed Financial Statements.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements give
effect to the acquisition of Armand Scott, Inc. (AS) by Boron, LePore &
Associates, Inc. (BLP) (the Transaction). These unaudited pro forma condensed
financial statements are presented for illustrative purposes only, and therefore
are not necessarily indicative of the operating results and financial position
that might have been achieved had the Transaction occurred on an earlier date,
nor are they necessarily indicative of operating results and financial position
which may occur in the future.
The condensed historical financial statements for the periods presented are
derived from the historical financial statements of BLP and AS. These condensed
financial statements should be read in conjunction with the BLP December 31,
1999 Annual Report on Form 10-K and the quarterly report as of the June 30, 2000
on Form 10-Q in addition to the historical financial statements of AS, attached
hereto. The historical financial statements as of June 30, 2000 and for the six
months ended June 30, 2000 are unaudited and have been prepared in accordance
with generally accepted accounting principles applicable to interim financial
information and, in the opinion of BLP's and AS's management, includes all
adjustments necessary for a fair presentation of information for such periods.
Pursuant to Regulation S-X, a pro forma condensed balance sheet as of June
30, 2000 is not required since the Transaction is already reflected in BLP's
historical unaudited condensed balance sheet as of June 30, 2000. There are no
pro forma adjustments necessary to the June 30, 2000 historical balance sheet.
Pro forma unaudited condensed statements of operations are provided for the
six months ended June 30, 2000 and the year ending December 31, 1999, giving
effect to the Transaction as though it had occurred at the beginning of the
earliest period presented.
-11-
<PAGE>
Historical Unaudited Condensed Balance Sheet
As of June 30, 2000
(in thousands)
Historical
-----------------
Boron, LePore &
Associates, Inc.
----------------
ASSETS
Current assets:
Cash and cash equivalents $ 28,149
Accounts receivable, net 36,312
Prepaid expenses and other current assets 4,602
----------------
Total current assets 69,063
Furniture, fixtures and equipment, at cost,
net of accumulated depreciation 6,702
Intangible assets, net 45,661
Other assets 568
----------------
Total assets $ 121,994
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,900
Accrued payroll 3,043
Accrued expenses 10,375
Deferred revenue 7,583
----------------
Total current liabilities 25,901
----------------
Other liabilities 23
----------------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.1 par value, 50,000 shares authorized
17,110 issued and 12,169 outstanding 171
Treasury stock at cost, 4,941 shares (29,456)
Additional paid-in capital 120,250
Retained earnings 5,105
----------------
Total stockholders' equity 96,070
----------------
Total liabilities and stockholders' equity $ 121,994
================
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<PAGE>
Pro Forma Unaudited Condensed Statements of Operations
For the six months ended June 30, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
---------------------------------
Pro Forma
Boron, LePore & Armand Pro Forma Combined
Associates, Inc. Scott, Inc. Adjustments BLP and AS
------------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues $ 78,213 $ 9,683 $ 87,896
Cost of Sales 57,177 7,366 64,543
------------------ ------------- -----------
Gross profit 21,036 2,317 23,353
Selling, general and administrative
expenses 18,363 $ 1,365 $ 275 (a) 20,003
------------------ ------------- -----------
Operating income 2,673 952 3,350
Interest income, net 1,301 53 1,354
------------------ ------------- -----------
Income before provision for income taxes 3,974 1,005 4,704
Provision for income taxes 1,600 - $ 282 (c) 1,882
------------------ ------------- -----------
Net income $ 2,374 $ 1,005 $ 2,822
================== ============= ===========
Earnings per share-basic $ 0.19 $ 0.23
================== ===========
Weighted average common shares
outstanding-basic 12,236 172 (e) 12,408
================== ===========
Earnings per share-diluted $ 0.19 $ 0.22
================== ===========
Weighted average common shares
outstanding-diluted 12,383 172 (e) 12,555
================== ===========
</TABLE>
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<PAGE>
Pro Forma Condensed Statements of Operations
For the year ended December 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
--------------------------------
Pro Forma
Boron, LePore & Armand Pro Forma Combined
Associates, Inc. Scott, Inc. Adjustments BLP and AS
------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 149,448 $ 13,680 $ 163,128
Cost of Sales 109,678 9,338 119,016
------------------ ----------- ----------
Gross profit 39,770 4,342 44,112
------------------ ----------- ----------
Selling, general and administrative expenses 38,942 2,850 $ 550 (b) 42,342
Provision for restructuring and other severance 2,920 - 2,920
Goodwill impairment charge 754 - 754
------------------ ----------- ----------
Total operating expenses 42,616 2,850 46,016
------------------ ----------- ----------
Operating income (2,846) 1,492 (1,904)
Interest income 1,873 25 1,898
------------------ ----------- ----------
Income before provision for income taxes (973) 1,517 (6)
Provision (benefit) for income taxes (390) 34 $ 354 (d) (2)
------------------ ----------- ----------
Net income (loss) $ (583) $ 1,483 $ (4)
================== =========== ==========
Earnings per share-basic $ (0.05) $ (0.00)
================== ==========
Weighted average common shares
outstanding-basic 12,633 172 (e) 12,805
================== ==========
Earnings per share-diluted $ (0.05) $ (0.00)
================== ==========
Weighted average common shares
outstanding-diluted 12,633 172 (e) 12,805
================== ==========
</TABLE>
-14-
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed financial statements are presented for
illustrative purposes only, giving effect to the Transaction. In accordance with
SEC reporting rules, the pro forma unaudited condensed statements of income, and
the historical statements from which they are derived, present only income from
continuing operations and, therefore, do not include discontinued operations,
extraordinary items and the cumulative effect of accounting changes, as
applicable.
The accompanying unaudited pro forma condensed financial statements give effect
to the acquisition of Armand Scott, Inc. (AS) by Boron LePore & Associates, Inc.
(BLP). The purchase price was $7.5 million in cash and 172,167 shares of its
common stock. In addition BLP may be required to pay up to an additional $10.8
million in contingent cash and stock payments based on the achievement of
certain operating income goals of the acquired business during the two-year
period subsequent to the date of acquisition. Such contingent payments have been
excluded from the pro forma presentation due to the uncertainty of their payout.
The acquisition has been accounted for using the purchase method of accounting.
The excess of the purchase price over net assets acquired was estimated to be
approximately $8.2 million.
2. PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been made to the unaudited condensed
statements of operations, as applicable-
(a) To record the amortization of goodwill and the non-compete agreement
for the six months ended June 30, 2000 over their estimated useful
lives of 15 and 3 years, respectively.
(b) To record the amortization of goodwill and the non-compete agreements
for the year ended December 31, 1999 over their estimated useful lives
of 15 and 3 years, respectively.
(c) To adjust the pro forma tax provision for the pro forma combined
company. The tax rate utilized was approximately 40%, BLP's effective
tax rate for the six months ended June 30, 2000.
(d) To adjust the pro forma tax provision for the pro forma combined
company. The tax rate utilized was approximately 40%, BLP's effective
tax rate for the year ended December 31, 1999.
(e) To show the issuance of 172,167 shares of common stock issued in the
transaction.
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1 Asset Purchase Agreement, dated as of June 29, 2000, by and among
Boron, LePore & Associates, Inc., BLPAS Acquisition Corp., Armand
Scott, Inc., the Pallais Family Trust, Scott Pallais and Marline
Pallais (incorporated by reference to the Boron, LePore &
Associates, Inc. current report on form 8-K, filed with the
Securities and Exchange Commission on July 13, 2000).
23.1 Consent of Arthur Andersen LLP
-15-
<PAGE>
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.
Dated: September 11, 2000 BORON, LePORE & ASSOCIATES, INC.
By: /s/ Anthony J. Cherichella
--------------------------------------
Anthony J. Cherichella
Chief Financial Officer, Secretary and
Treasurer (Principal Financial and
Accounting Officer)
-16-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Asset Purchase Agreement, dated as of June 29, 2000, by and among
Boron, LePore & Associates, Inc., BLPAS Acquisition Corp., Armand
Scott, Inc., the Pallais Family Trust, Scott Pallais and Marline
Pallais (incorporated by reference to the Boron, LePore &
Associates, Inc. current report on form 8-K, filed with the
Securities and Exchange Commission on July 13, 2000).
23.1 Consent of Arthur Andersen LLP
-17-
