<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): NOVEMBER 13, 1997
-----------------
ASI SOLUTIONS INCORPORATED
(Exact name of Registrant as specified in charter)
DELAWARE 000-22309 13-3903237
------------------------- ---------------------- ---------------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
780 THIRD AVENUE, NEW YORK, NEW YORK 10017
------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 319-8400
--------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
This Form 8-K/A is filed as an amendment to the Current Report on Form 8-K
filed by ASI Solutions Incorporated (the "Company") on November 24, 1997 in
connection with the acquisition by the Company, through certain of its wholly-
owned direct and indirect subsidiaries, of substantially all of the assets and
businesses of McLagan Partners Incorporated, an Illinois corporation, and its
related entities McLagan Partners International Incorporated, an Illinois
corporation, and McLagan Partners Asia Incorporated, an Illinois corporation.
(a) Financial Statements of Businesses Acquired.
-------------------------------------------
. Combined Financial Statements as of and for the year ended
December 31, 1996 and 1995.
. Report of Independent Accountants.................................. F-1
. Combined Balance Sheets............................................ F-2
. Combined Statements of Income...................................... F-3
. Combined Statement of Stockholders' Equity......................... F-4
. Combined Statements of Cash Flows.................................. F-5
. Notes to Combined Financial Statements............................. F-6
. Unaudited Combined Financial Statements as of September
30, 1997 and for the nine months then ended.
. Unaudited Combined Balance Sheet................................... F-10
. Unaudited Combined Statement of Income............................. F-11
. Unaudited Combined Statement of Stockholders' Equity............... F-12
. Unaudited Combined Statements of Cash Flows........................ F-13
. Notes to Unaudited Combined Financial Statements................... F-14
(b) Unaudited Pro Forma Financial Statements.
----------------------------------------
. Introduction to Unaudited Pro Forma Combined Financial Statements..... F-15
. Unaudited Pro Forma Balance Sheet of ASI Solutions Incorporated as of
September 30, 1997.................................................... F-16
. Unaudited Pro Forma Combined Statements of Income of ASI Solutions
Incorporated for the nine months ended December 31, 1997 and the year
ended March 31, 1997.................................................. F-17
. Notes to the Unaudited Pro Forma Combined Financial Statements........ F-19
(c) Exhibits
--------
23.1 Consent of Coopers & Lybrand L.L.P.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be filed on its behalf by the
undersigned thereunto duly authorized
ASI SOLUTIONS INCORPORATED
Dated: January 27, 1998 By: /s/ Michael J. Mele
-----------------------------------------
Name: Michael J. Mele
Title: Vice President and Chief Financial
Officer
3
<PAGE>
Report of Independent Accountants
To the Board of Directors of McLagan Partners Incorporated
We have audited the accompanying combined balance sheets of McLagan Partners
Incorporated as of December 31, 1996 and 1995, and the related combined
statements of income, stockholders' equity, and cash flows 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of McLagan Partners
Incorporated as of December 31, 1996 and 1995, and the combined results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P
Chicago, Illinois
October 30, 1997
F-1
<PAGE>
McLagan Partners Incorporated
Combined Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS: 1996 1995
--------------- -------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 3,766,973 $ 2,184,429
Accounts receivable, net 3,622,432 3,354,465
Prepaid expenses and other current assets 146,729 239,524
-------------- -------------
Total current assets 7,536,134 5,778,418
Property and equipment, net 603,131 406,051
Other assets 125,715 158,084
-------------- -------------
Total assets $ 8,264,980 $ 6,342,553
============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to stockholders $ 978,750
Current portion of obligations under capital leases 15,481 12,056
Accounts payable 1,343,925 964,293
Accrued salaries 365,239 19,590
Accrued bonuses 928,000 834,000
Other accrued liabilities 573,649 305,157
-------------- -------------
Total current liabilities 4,205,044 2,135,096
Long-term debt, less current portion 21,250 1,000,000
Obligations under capital leases 9,298 24,779
-------------- -------------
Total liabilities 4,235,592 3,159,875
-------------- -------------
Stockholders' equity:
Common stock (Note 2) 3,600 3,600
Cumulative translation adjustment 49,305 (12,141)
Retained Earnings 3,976,483 3,191,219
-------------- -------------
Total stockholders' equity 4,029,388 3,182,678
Total liabilities and stockholders' equity $ 8,264,980 $ 6,342,553
============== =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-2
<PAGE>
McLagan Partners Incorporated
Combined Statements of Income
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Revenues $ 13,747,823 $ 12,196,754
Cost of services 7,571,031 6,728,361
--------------- ----------------
Gross profit 6,176,792 5,468,393
Selling, general and administrative 3,349,698 3,249,187
--------------- ----------------
Income from operations 2,827,094 2,219,206
Other income, net 31,557 49,519
--------------- ----------------
Net income $ 2,858,651 $ 2,268,725
=============== ================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-3
<PAGE>
McLagan Partners Incorporated
Combined Statement of Stockholders' Equity
for the years ended December 31, 1996, and 1995
<TABLE>
<CAPTION>
Cumulative Translation
Common Stock Adjustment Retained Earnings
----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1995 $ 3,600 $ $ 3,330,183
Net income 2,268,725
Distributions to stockholders (2,407,689)
Translation adjustment (12,141)
------------------ ----------------------- --------------------
Balance at December 31, 1995 3,600 (12,141) $ 3,191,219
Net income 2,858,651
Distributions to stockholders (2,073,387)
Translation adjustment 61,446
------------------ ------------------------ --------------------
Balance at December 31, 1996 $ 3,600 $ 49,305 $ 3,976,483
================== ======================== ====================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-4
<PAGE>
McLagan Partners Incorporated
Combined Statements of Cash Flows
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 2,858,651 $ 2,268,725
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 275,064 166,632
Changes in assets and liabilities:
Accounts receivable (267,967) (759,668)
Prepaid expenses and other current assets 92,795 (138,445)
Other assets 32,369 (58,291)
Accounts payable 379,632 251,495
Accrued salaries 345,649 19,590
Accrued bonuses 94,000 68,750
Other accrued liabilities 268,492 44,176
------------ ------------
Net cash provided by operating activities 4,078,685 1,862,964
Cash flow from investing activities:
Purchase of property and equipment (472,144) (258,697)
------------ ------------
Net cash used in investing activities (472,144) (258,697)
Cash flow from financing activities:
Obligations under capital leases (12,056) 36,835
Distributions to stockholders (2,073,387) (2,407,689)
------------ ------------
Net cash used in financing activities (2,085,443) (2,370,854)
Net increase (decrease) in cash 1,521,098 (766,587)
Foreign currency translation adjustment 61,446 (12,141)
Cash, at beginning of period 2,184,429 2,963,157
------------ ------------
Cash, at end of period $ 3,766,973 $ 2,184,429
============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-5
<PAGE>
Notes to Combined Financial Statements
1. Organization and Basis of Presentation:
McLagan Partners Incorporated (the "Company") is comprised of management
consultants specializing in providing services to the financial,
investment, and securities industries in the major domestic and
international financial centers. The Company's clients include a large
number of the leading broad-based financial services organizations,
specialized investment banking and securities firms, and many major
institutional investors.
The services provided by the Company include consulting projects,
compensation surveys, and multiple-client studies performed on a continuous
basis.
2. Significant Accounting Policies:
Combined Financial Statements
The combined financial statements include the accounts of the Company,
which includes McLagan Partners Incorporated, McLagan Partners
International and McLagan Partners Asia Incorporated. All significant
intercompany accounts and transactions have been eliminated. The equity
capital of all three subchapter S-corporations have been combined in these
financial statements. Each company has 1,200 shares of common stock with
$1.00 per share par value, issued and outstanding.
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 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. The most significant estimates made are
related to the recoverability of accounts receivable. Actual results could
differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist of cash and accounts receivable. The
Company places its cash with high-quality institutions, however, amounts on
deposit exceed the amounts insured by the institution. Accounts receivable
are concentrated among a limited number of major companies. For the years
ended December 31, 1996 and 1995 revenues from the Company's top five
customers represented approximately 23% and 16% of total revenues,
respectively. Accounts receivable from five customers represented
approximately 12% and 14% of total accounts receivable at December 31, 1996
and 1995, respectively.
The allowance for doubtful accounts was approximately $26,331 and $25,767
as of December 31, 1996 and 1995, respectively.
Revenue and Cost Recognition
The Company recognizes revenue as earned upon completion of consulting
services. Revenues from the compensation surveys and multiple client
studies are recognized based on the completed contract method.
F-6
<PAGE>
Notes to Combined Financial Statements, continued
2. Significant Accounting Policies, continued
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity date of three months or less from the date of purchase to
be a cash equivalent.
Property and Equipment
Furniture and equipment are stated at cost and depreciated over their
estimated useful lives of five to seven years using the straight-line
method. Maintenance and repairs are charged to expense as incurred;
renewals and improvements which extend the life of assets are capitalized.
Gains or losses on the disposition of fixed assets are included in income.
Income Taxes
The Company has elected to be treated as an S corporation under IRS Code
Section 1362. Under these provisions, income is taxed directly to the
stockholders and therefore the Company does not pay U.S. federal income
taxes. The Company is subject to certain state and local taxes which is
provided for in these financial statements, which totaled approximately
$22,775 and $26,605 in 1996 and 1995, respectively. The foreign operations
are operated as branches of U.S. Subchapter S Corporations.
Foreign Currency Translation
Local currencies are considered the functional currencies for operations in
Europe and Asia. Assets and liabilities are translated at year-end
exchange rates. Income and expense items are translated at average rates
of exchange prevailing during the year.
3. Foreign Operations:
Assets in Europe and Asia were approximately 24% and 11%, respectively of
the total 1996 assets reported. Revenues in Europe and Asia were
approximately 17% and 8%, respectively of the total 1996 revenues reported.
4. Property and Equipment:
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
1996 1995
--------------- ----------------
<S> <C> <C>
Furniture and equipment 1,591,572 1,232,453
Less, accumulated depreciation and
amortization (988,441) (826,402)
--------------- ----------------
$ 603,131 $ 406,051
=============== ================
</TABLE>
F-7
<PAGE>
Notes to Combined Financial Statements, continued
5. Lease Commitments:
The Company leases certain equipment under an agreement which is classified
as a capital lease. The equipment lease has a three year term. Leased
capital assets included in property, plant and equipment at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Furniture and fixtures $ 42,000 $ 42,000
Accumulated amortization (23,300) (9,300)
--------------- ---------------
$ 18,700 $ 32,700
=============== ===============
</TABLE>
Future minimum payments, by year and in the aggregate, under noncancelable
capital leases and operating leases with initial or remaining terms of one
year or more consist of the following at December 31, 1996:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
------------------------------------------------------------
<S> <C> <C>
1997 $ 20,454 $ 303,937
1998 10,227 305,875
1999 308,808
2000 293,279
2001 39,596
------------------------------------------------------------
Total minimum lease payments 30,681
Amounts representing interest (5,902)
---------------------------------------
Present value of net minimum
payments 24,779
Current portion 15,481
------------------------------------------------------------
$ 9,298
==========
</TABLE>
The Company's rental expense for operating leases was $419,752 and $256,426
for the years ended December 31, 1996 and 1995, respectively.
6. Retirement Plans:
The Company has a 401(k) profit sharing plan, covering substantially all
employees. Employees can contribute to a maximum of 5% of their earnings
up to IRS limitations. Contributions can be made by the Company on a
discretionary basis and vest after two and one half years. Contributions
made by the Company to the plan for the years ended December 31, 1996 and
1995 were $138,102 and $123,406, respectively.
F-8
<PAGE>
Notes to Combined Financial Statements, continued
7. Long Term Debt:
The Company entered into loan agreements with the owners of the Company in
order to finance the opening of the international offices. The notes bear
interest at a rate of 6%. Of the total long term debt of $1,000,000,
$978,750 matures on December 31, 1997; the remainder on December 31, 1998.
Cash paid for interest was $60,000 for 1996 and 1995, respectively.
8. Related Party Transactions:
The Company provides administrative services for three companies owned by
common stockholders and billed $110,821 and $105,838 in 1996 and 1995,
respectively. Other receivables relating to these administrative services
were $33,407 and $25,467 at December 31, 1996 and 1995, respectively.
9. Subsequent Event:
The shareholders of the Company agreed to sell substantially all the
operations with closing expected in November 1997.
F-9
<PAGE>
MCLAGAN PARTNERS INCORPORATED
UNAUDITED COMBINED BALANCE SHEET
For the nine months ended September 30, 1997
<TABLE>
<S> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 2,011,044
Accounts receivable, net 2,047,669
Prepaid expenses and other current assets 82,708
---------------
Total current assets 4,141,421
---------------
Property and equipment, net 590,117
Other assets 151,178
---------------
Total assets $ 4,882,716
===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes payable to stockholders $ 1,000,000
Accounts payable 716,263
Accrued salaries (575)
Other accrued liabilities 104,707
---------------
Total liabilities 1,820,395
---------------
Stockholders' equity:
Common stock 3,600
Cumulative translation adjustment 37,423
Retained earnings 3,021,298
---------------
Total stockholders' equity 3,062,321
---------------
Total liabilities and stockholders' equity $ 4,882,716
===============
</TABLE>
F-10
<PAGE>
MCLAGAN PARTNERS INCORPORATED
UNAUDITED COMBINED STATEMENT OF INCOME
For the nine months ended September 30, 1997
<TABLE>
<S> <C>
Revenue $ 7,851,684
Cost of services 3,653,374
---------------
Gross profit 4,198,310
---------------
Selling, general and administrative 1,918,287
---------------
Income from operations 2,280,023
Other expense (138,137)
Interest income, net 39,476
---------------
Net income $ 2,181,362
===============
</TABLE>
F-11
<PAGE>
MCLAGAN PARTNERS INCORPORATED
UNAUDITED COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
For the nine months ended September 30, 1997
<TABLE>
<CAPTION>
Cumulative
Common Translation Retained
Stock Adjustment Earnings
<S> <C> <C> <C>
Balance at January 1, 1997 $ 3,600 $ 49,305 $ 3,976,483
Net income 2,181,362
Distributions to stockholders (3,136,547)
Translation adjustment (11,882)
---------------- ---------------- ----------------
Balance at September 30, 1997 $ 3,600 $ 37,423 $ 3,021,298
================ ================ ================
</TABLE>
F-12
<PAGE>
MCLAGAN PARTNERS INCORPORATED
UNAUDITED COMBINED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 1997
<TABLE>
<S> <C>
Cash flow from operating activities:
Net income $ 2,181,362
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 206,298
Changes in assets and liabilities:
Accounts receivable 1,574,763
Prepaid expenses and other current assets 64,021
Other assets (25,463)
Accounts payable (627,662)
Accrued salaries (365,814)
Accrued bonuses (928,000)
Other accrued liabilities (482,480)
--------------
Net cash provided by operating activities 1,597,025
Cash flow from investing activities:
Purchase of property and equipment, net (193,284)
--------------
Net cash used in investing activities (193,284)
Cash flow from financing activities:
Payment of capital lease obligations (11,241)
Distributions to stockholders (3,136,547)
--------------
Net cash used in financing activities (3,147,788)
Foreign currency translation adjustment (11,882)
Net decrease in cash (1,755,929)
Cash, at beginning of period 3,766,973
--------------
Cash, at end of period $ 2,011,044
==============
</TABLE>
F-13
<PAGE>
MCLAGAN PARTNERS INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Basis of Presentation:
The accompanying unaudited interim financial statements of McLagan Partners
Incorporated ("McLagan") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and note disclosures normally included in annual financial statements have
been condensed or omitted pursuant to those rules and regulations. In the
opinion of management, all adjustments, consisting of normal, recurring
adjustments considered necessary for a fair presentation, have been included.
Although management believes that the disclosures made are adequate to ensure
that the information presented is not misleading, it is suggested that these
financial statements be read in conjunction with the annual financial
statements and notes thereto included elsewhere in this Form 8-K/A.
2. Sale of McLagan Partners Incorporated:
On November 13, 1997, the operations of McLagan were purchased by ASI
Solutions Incorporated ("ASI").
F-14
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements of ASI
Solutions, Inc. ("ASI") and McLagan Partners Incorporated ("McLagan") (the
"Company") are based on, and should be read in conjunction with, the
Consolidated Financial Statements of ASI and the Combined Financial Statements
of McLagan and the notes thereto included in this Form 8-K/A, and have been
adjusted to give pro forma effect to the Transaction.
The Unaudited Pro Forma Combined Statement of Income of the Company for the
nine months ended December 31, 1997 and for the year ended March 31, 1997 give
pro forma effect to the Transaction as if it had occurred on April 1, 1996. The
Unaudited Pro Forma Combined Statement of Income for the nine month period ended
December 31, 1997 has been prepared by combining the Consolidated Statement of
Income of ASI for the nine month period ended December 31, 1997 with the
Combined Statement of Income of McLagan for the nine month period ended
September 30, 1997. The Unaudited Pro Forma Combined Statement of Income for
the year ended March 31, 1997 has been prepared by combining the Consolidated
Statement of Income of ASI for the year ended March 31, 1997 with the Combined
Statement of Income of McLagan for the year ended December 31, 1996.
The Unaudited Pro Forma Combined Balance Sheet as of September 30, 1997 has
been prepared by combining the September 30, 1997 Consolidated Balance Sheet of
ASI and the assets acquired of McLagan and gives pro forma effect to the
Transaction as if it had occurred on such date.
The pro forma adjustments are based upon available information and certain
assumptions that ASI believes are reasonable. The acquisition has been accounted
for using the purchase method of accounting. Allocations of the purchase price
have been determined based upon preliminary information and estimates of fair
value and are subject to change. Differences between the amounts included herein
and the final allocations are not expected to have a material effect on the
Unaudited Pro Forma Combined Financial Statements. The Unaudited Pro Forma
Combined Financial Statements does not purport to represent what the Company's
results of operations would have been if such events had occurred at the dates
indicated, nor do such statements purport to project the results of the
Company's operations for any future period.
F-15
<PAGE>
ASI SOLUTIONS INCORPORATED
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of September 30, 1997
<TABLE>
<CAPTION>
ASSETS
ACQUIRED AND
LIABILITIES
ASSUMED
ASI OF MCLAGAN PRO FORMA PRO FORMA
SOLUTIONS PARTNERS INC. ADJUSTMENTS(1) CONSOLIDATED
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 5,680,696 $ (2,574,600) $ 3,106,096
Accounts receivable, net 4,463,294 4,463,294
Prepaid expenses and other current assets 295,196 295,196
Deferred income taxes 5,910 5,910
-------------- ----------------- ---------------- ----------------
Total current assets 10,445,096 (2,574,600) 7,870,496
Property and equipment, net 4,406,040 $ 501,478 4,907,518
Intangible assets, net 2,094,077 22,703,122 24,797,199
Other assets 246,964 246,964
-------------- ----------------- ---------------- ----------------
Total assets $ 17,192,177 $ 501,478 $ 20,128,522 $ 37,822,177
============== ================= ================ ================
Current liabilities:
Notes payable to bank $ 1,145,850 $ 1,145,850
Notes payable to shareholders $ 1,000,000 $ (1,000,000)
Current portion, long-term debt 423,947 3,167,000 3,590,947
Accounts payable and accrued expenses 1,102,750 1,102,750
Accrued income taxes (122,697) (122,697)
-------------- ----------------- ---------------- ----------------
Total current liabilities 2,549,850 1,000,000 2,167,000 5,716,850
Deferred income taxes 78,303 78,303
Long-term debt, less current portion 910,524 16,833,000 17,743,524
Other liabilities 125,075 125,075
-------------- ----------------- ---------------- ----------------
Total liabilities 3,663,752 1,000,000 19,000,000 23,663,752
-------------- ----------------- ---------------- ----------------
Stockholders' equity:
Common stock 64,423 700 65,123
Additional paid-in capital 10,217,365 629,300 10,846,665
Retained earnings 3,639,368 3,639,368
Acquired equity (498,522) 498,522
-------------- ----------------- ---------------- ----------------
13,921,156 (498,522) 1,128,522 14,551,156
Less: Treasury stock at cost (45,534 shares) (392,731) (392,731)
-------------- ----------------- ---------------- ----------------
Total stockholders' equity 13,528,425 (498,522) 1,128,522 14,158,425
-------------- ----------------- ---------------- ----------------
Total liabilities and
stockholders' equity $ 17,192,177 $ 501,478 $ 20,128,522 $ 37,822,177
============== ================= ================ ================
</TABLE>
F-16
<PAGE>
ASI SOLUTIONS INCORPORATED
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Nine months ended December 31, 1997
<TABLE>
<CAPTION>
(1)
ASI MCLAGAN PRO FORMA PRO FORMA
SOLUTIONS* PARTNERS INC. ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Revenue $ 19,192,526 $ 7,851,684 $ 27,044,210
Cost of services 10,403,714 3,653,374 14,057,088
---------------- ----------------- ---------------- ----------------
Gross profit 8,788,812 4,198,310 12,987,122
Operating expenses:
General and administrative 4,006,559 1,739,222 $ 934,335 (2)(3)(4) 6,680,116
Sales and marketing 2,162,548 179,065 2,341,613
Research and development 1,228,043 1,228,043
---------------- ----------------- ---------------- ----------------
Income from operations 1,391,662 2,280,023 (934,335) 2,737,350
Interest (expense) income, net 87,543 39,476 (1,284,375) (5) (1,157,356)
Other expense, net (23,687) (138,137) (161,824)
---------------- ----------------- ---------------- ----------------
Income before provision for
income taxes 1,455,518 2,181,362 (2,218,710) 1,418,170
Provision (benefit) for income taxes 654,644 (16,060) (6) 638,584
---------------- ----------------- ---------------- ----------------
Net income $ 800,874 $ 2,181,362 $ (2,202,650) $ 779,586
================ ================= ================ ================
Basic earnings per share (7) $ 0.12
Diluted earnings per share (7) $ 0.12
Weighted average common shares
outstanding
Basic shares 6,364,171
Plus diluted effect of stock options
and warrants 184,511
----------------
Diluted shares 6,548,682
================
</TABLE>
* Excludes financial results of McLagan for the period November 13, 1997
(acquisition date) through December 31, 1997.
F-17
<PAGE>
ASI SOLUTIONS INCORPORATED
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Year ended March 31, 1997
<TABLE>
<CAPTION>
(1)
ASI MCLAGAN PRO FORMA PRO FORMA
SOLUTIONS PARTNERS INC. ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Revenue $ 18,818,839 $ 13,747,823 $ 32,566,662
Cost of services 8,705,528 6,407,218 15,112,746
--------------- ---------------- --------------- ----------------
Gross profit 10,113,311 7,340,605 17,453,916
Operating expenses:
General and administrative 3,224,083 4,092,191 $ 1,245,780 (2)(3)(4) 8,562,054
Sales and marketing 1,889,910 421,320 2,311,230
Research and development 1,272,043 1,272,043
--------------- ---------------- --------------- ----------------
Income from operations 3,727,275 2,827,094 (1,245,780) 5,308,589
Interest (expense) income, net 1,343 (1,712,500) (5) (1,711,157)
Other income, net 31,557 31,557
--------------- ---------------- --------------- ----------------
Income before provision for income
taxes 3,728,618 2,858,651 (2,958,280) 3,628,989
Provision (benefit) for income taxes 1,916,926 (42,840) (6) 1,874,086
--------------- ---------------- --------------- ----------------
Net income $ 1,811,692 $ 2,858,651 $ (2,915,440) $ 1,754,903
=============== ================ =============== ================
Basic earnings per share $ 0.28 $ 0.27
=============== ================
Diluted earnings per share $ 0.28 $ 0.27
=============== ================
Weighted average common shares
outstanding
Basic shares 6,425,158 6,495,158
Plus diluted effect of stock
options and warrant 42,246 60,886
--------------- ----------------
Diluted shares 6,467,404 6,556,044
=============== ================
</TABLE>
F-18
<PAGE>
(1) The Company has acquired the ongoing business and certain assets of McLagan
Partners Incorporated ("McLagan") for approximately $22.7 million, which
includes $765,000 of acquisition costs, to be paid through the borrowing of
$15 million of bank debt, $450,000 of ASI's common stock, a $5 million note
to the shareholders of McLagan, assumption of $1 million McLagan debt and
$500,000 cash on hand. The acquisition resulted in intangible assets,
primarily goodwill, of $22.2 million. In connection with the acquisition,
the Company has deferred financing fees of approximately $490,000 which
includes $180,000 of ASI's common stock issued to the lending institution.
(2) Represents amortization of goodwill and other identifiable intangibles of
approximately $566,000 and $755,000 for the nine month and year-end periods,
respectively.
(3) Represents amortization of a $1 million stay bonus to McLagan employees who
remain with the Company for 30 months after the acquisition, amortized at a
rate of $300,000 and $400,000 for the nine month and year-end periods,
respectively.
(4) Represents amortization of deferred financing fees of approximately $68,000
and $90,000 for the nine month and year-end periods, respectively.
(5) Represents interest expense on the $5 million shareholder note at 8% per
annum and interest on $15 million of bank debt at the bank's prime rate
(8.5% at December 31, 1997 and March 31, 1997) plus .25% or the Eurodollar
rate plus 3.25% per annum.
(6) Tax effect of pro forma adjustments, net of income (loss) from McLagan
(which was previously taxed as an S-corporation), for the periods presented.
(7) Pro forma earnings per share includes the effect of 70,000 shares of common
stock and options to purchase 300,000 shares of common stock issued in
connection with the acquisition and related financing.
F-19
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion on this Form 8-K/A and the incorporation by
reference in the registration statements of ASI Solutions Incorporated on Form
S-8 (File Nos. 333-36509, 333-36511 and 333-36513) of our report dated October
30, 1997, on our audits of the combined financial statements of McLagan Partners
Incorporated as of December 31, 1996 and 1995, and for the years then ended,
which report is included in this Form 8-K/A.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
January 26, 1998
