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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
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Commission File Number 0-22645
LAMALIE ASSOCIATES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Florida 59-2776441
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
200 Park Avenue
New York, New York
10166-0136
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(Address of Principal Executive Offices)
(212) 953-7900
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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At September 30, 1997, the Registrant had outstanding 5,340,684 shares
of $.01 par value common stock.
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LAMALIE ASSOCIATES, INC.
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Statements of Income
for the three- and six-month periods
ended August 31, 1997 and 1996 3
Condensed Balance Sheets at
August 31, 1997 and February 28, 1997 4
Condensed Statements of Cash Flows
for the six-month periods ended
August 31, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION 9
SIGNATURES 11
</TABLE>
2
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LAMALIE ASSOCIATES, INC.
CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
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1997 1996 1997 1996
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Fee revenue, net $ 16,773 $ 11,506 $ 30,498 $ 22,613
Operating expenses:
Compensation and benefits 12,957 9,890 23,501 19,438
General and administrative expenses 2,071 1,400 3,875 2,828
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Total operating expenses 15,028 11,290 27,376 22,266
----------- ----------- ----------- -----------
Operating income 1,745 216 3,122 347
Interest income (expense), net 37 (105) (108) (146)
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Income before provision for income taxes 1,782 111 3,014 201
Provision for income taxes 766 103 1,296 198
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Net income $ 1,016 $ 8 $ 1,718 $ 3
=========== =========== =========== ===========
Net income per common and
common equivalent share $ .22 $ -- $ .45 $ --
=========== =========== =========== ===========
Weighted average common
and common equivalent
shares outstanding 4,657,000 3,293,000 3,850,000 3,302,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
3
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LAMALIE ASSOCIATES, INC.
CONDENSED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(unaudited)
August 31, February 28,
ASSETS 1997 1997
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Current assets:
Cash and cash equivalents $ 22,424 $ 1,662
Accounts receivable, less
allowance of $1,340 and $890, respectively 14,756 14,392
Prepaid expenses 2,201 937
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Total current assets 39,381 16,991
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Property and equipment, net 4,459 4,184
Deferred tax assets 2,637 1,958
Other assets 3,887 2,428
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Total assets $ 50,364 $ 25,561
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 706 $ 1,914
Accrued compensation 10,523 13,255
Income tax payable 2,295 --
Deferred tax liabilities -- 643
Current maturities of long-term debt 114 387
Other current liabilities 180 175
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Total current liabilities 13,818 16,374
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Accrued rent 1,019 1,038
Long-term debt, less current maturities 229 1,650
Deferred compensation 5,973 3,872
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Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value;
3,000,000 shares authorized; no
shares issued and outstanding -- --
Common stock; $0.01 par value;
35,000,000 shares authorized;
5,340,684 and 3,075,000 shares
issued and outstanding, respectively 53 31
Additional paid-in capital 28,892 4,087
Subscriptions receivable -- (153)
Retained earnings (accumulated deficit) 380 (1,338)
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Total stockholders' equity 29,325 2,627
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Total liabilities and stockholders' equity $ 50,364 $ 25,561
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</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
4
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LAMALIE ASSOCIATES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
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<CAPTION>
Six Months Ended
August 31,
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,718 $ 3
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 404 465
Changes in operating assets and liabilities (2,601) (3,729)
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Net cash used in operating activities (479) (3,261)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (679) (497)
Investment in whole life insurance (1,366) (606)
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Net cash used in investing activities (2,045) (1,103)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt 4,576 3,995
Repayments of long-term debt (6,270) (1,223)
Proceeds from issuance of common stock 24,980 823
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Net cash provided by financing activities 23,286 3,595
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 20,762 (769)
CASH AND CASH EQUIVALENTS, at beginning of period 1,662 2,529
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CASH AND CASH EQUIVALENTS, at end of period $ 22,424 $ 1,760
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
5
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LAMALIE ASSOCIATES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 1. Condensed Financial Statements
In the opinion of the Company, the accompanying unaudited condensed financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of August 31, 1997 and February 28, 1997, and the results of operations for
the three- and six-month periods ended August 31, 1997 and 1996 and cash flows
for the six-month periods ended August 31, 1997 and 1996.
These financial statements, including the condensed balance sheet as of February
28, 1997, which has been derived from audited financial statements, are
presented in accordance with the requirements of Form 10-Q and consequently may
not include all disclosures normally required by generally accepted accounting
principles or those normally made in the Company's Annual Report on Form 10-K.
The accompanying condensed financial statements and related notes should be read
in conjunction with the Company's Registration Statement on Form S-1 (File #
333-26027) as declared effective by the Securities and Exchange Commission on
July 1, 1997.
Note 2. Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share is determined by dividing the
net income by the weighted average number of shares of common stock outstanding
and dilutive common equivalent shares outstanding using the treasury stock
method. Common equivalent shares outstanding during the six-month period ended
August 31, 1997, included options to purchase common stock. There were no common
equivalent shares outstanding during the six-month period ended August 31, 1996.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin ("SAB")
No. 83, shares of common stock issued by the Company during the 12 months
preceding the initial filing date have been included in the calculation of
weighted average shares of common stock outstanding, using the treasury stock
method, as if the shares were outstanding for all periods presented.
All share and per share information in the financial statements has been
adjusted to give effect to the 1,000 to one common stock split and par value
restatement which became effective June 3, 1997, in connection with the
reincorporation of the Company to Florida.
Note 3. Long-Term Debt
The Company has obtained a commitment letter from a bank to provide credit
facilities of approximately $15.0 million. Outstanding borrowings under these
facilities will bear interest at various rates based on either a LIBOR index or
the bank's prime lending rate, as determined at the Company's option. No amounts
were outstanding under these facilities as of August 31, 1997.
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Note 4. Newly Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for financial statements for periods
beginning after December 15, 1997. Management believes the effect of adopting
SFAS 130 would not have a material impact on the accompanying financial
statements.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
FISCAL 1998 COMPARED TO FISCAL 1997
Fee revenue. The Company's fee revenue increased 45.8% and 34.9%, respectively,
to $16.8 million and $30.5 million for the three- and six-month periods ended
August 31, 1997, as compared to $11.5 million and $22.6 million for the same
periods in fiscal 1997. The average fee revenue per consultant employed for a
full year for the six-month period ended August 31, 1997 increased 49.1%, to
$510,000 from $342,000 for the same period in fiscal 1997. As of September 30,
1997, the total number of consultants employed was 69, an increase of 7 since
the beginning of the fiscal year. The average first-year cash compensation of
positions for which the Company conducted searches increased by 4.4% to $235,000
from $225,000 for the six-month period ended August 31, 1997.
Approximately $2.1 million of the increase in fee revenue, or $38,000 per
consultant, was related to two multiple-placement projects in the financial
services sector conducted during the three-month period ended August 31, 1997.
Such projects are infrequent in occurrence and generate much higher average fees
than the typical assignment. The Company does not anticipate conducting similar
projects on a regular basis.
Compensation and benefits. Compensation and benefits increased 31.0% and 20.9%,
respectively, to $13.0 million and $23.5 million for the three- and six-month
periods ended August 31, 1997, as compared to $9.9 million and $19.4 million for
the same periods in fiscal 1997. As a percentage of fee revenue, compensation
and benefits decreased to 77.2% and 77.1%, respectively, for the three- and
six-month periods ended August 31, 1997, as compared to 86.0% for the same
periods in fiscal 1997. This decrease was primarily the result of changes to the
Company's compensation system for consultants implemented effective March 1,
1997.
General and administrative expenses. General and administrative expenses
increased 47.9% and 37.0%, respectively, to $2.1 million and $3.9 million for
the three- and six-month periods ended August 31, 1997, as compared to $1.4
million and $2.8 million for the same periods in fiscal 1997. As a percentage of
fee revenue, general and administrative expenses increased to 12.4% and 12.7%
for the three- and six-month periods ended August 31, 1997, as compared to 12.1%
and 12.5% for the same periods in fiscal 1997. These increases were primarily
due to increased costs associated with recruitment and relocation of additional
staff, an initiative to reduce search cycle time, and the Company's training and
development program.
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Operating income. Operating income increased $1.5 million and $2.8 million,
respectively, to $1.7 million and $3.1 million for the three- and six-month
periods ended August 31, 1997, as compared to $216,000 and $347,000 for the same
periods in fiscal 1997. This change was primarily the result of the decreases in
compensation and benefits partially offset by increases in general and
administrative expenses discussed above.
Net interest income (expense). The Company received net interest income of
$37,000 for the three-month period ended August 31, 1997, as compared to net
interest expense incurred of $105,000 for the same period in fiscal 1997. Net
interest expense decreased $38,000 to $108,000 for the six-month period ended
August 31, 1997, as compared to $146,000 for the same period in fiscal 1997.
This decrease was the result of the Company repaying all outstanding
indebtedness under its credit facilities with proceeds from the issuance of its
common stock during its initial public offering, as well as investment earnings
from the remaining net proceeds.
Provision for income taxes. The effective income tax rate for the six-month
period ended August 31, 1997, of 43% varied from the statutory rate of 34% due
to state and local income taxes and because certain expenses, including
premiums on keyperson life insurance policies, a portion of meals and
entertainment, and dues expense are non-deductible for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
On July 8, 1997, the Company completed an initial public offering covering 2.3
million shares of its common stock. Net proceeds from the offering were
approximately $24.6 million of which $3.9 million was used to repay all
outstanding indebtedness under the Company's credit facilities.
The Company intends to use approximately $3.0 million of the offering proceeds
over the next 12 to 24 months for computer hardware and software purchases,
upgrades, and enhancements. The remaining proceeds will be used for general
corporate purposes, including expansion of the Company's client base, industry
coverage, and geographic reach through selective acquisitions.
The Company relies primarily upon cash flows from operations and available
borrowings under its credit facilities to finance its operations. During the
six-month period ended August 31, 1997, cash used in operations was
approximately $479,000. To provide additional liquidity, the Company has
obtained a commitment letter from a bank to provide credit facilities of
approximately $15.0 million. Outstanding borrowings under these facilities will
bear interest at various rates based on either a LIBOR index or the bank's prime
lending rate, as determined at the Company's option.
Capital expenditures totaled approximately $679,000 for the six-month period
ended August 31, 1997. These expenditures consisted primarily of purchases of
office equipment, upgrades to information systems, and leasehold improvements.
Additionally, investments in whole life insurance policies intended to fund the
Company's deferred compensation plan were approximately $1.4 million.
The Company believes that funds from operations, its expanded credit facilities,
and the net proceeds from the offering will be sufficient to meet its
anticipated working capital, capital expenditures, and general corporate
requirements on both a short-term basis (i.e., during the 12 months following
the offering) and a long-term basis (i.e., after such 12-month period).
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FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Quarterly Report on Form 10-Q contain
forward-looking statements that are based on the current beliefs and
expectations of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Such statements
include those regarding general economic and executive search industry trends.
Because such statements involve risks and uncertainties, actual actions and
strategies and the timing and expected results thereof may differ materially
from those expressed or implied by such forward-looking statements, and the
Company's future results, performance, or achievements could differ materially
from those expressed in, or implied by, any such forward-looking statements.
Future events and actual results could differ materially from those set forth in
or underlying the forward-looking statements.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted. These potential risks and uncertainties
include dependence on attracting and retaining qualified executive search
consultants, portability of client relationships, restrictions imposed by
blocking arrangements, competition, relationship with Amrop International
alliance of executive search firms, implementation of acquisition strategy,
reliance on information processing systems, and employment liability risk. In
addition to the factors noted above, other risks, uncertainties, assumptions,
and factors that could affect the Company's financial results are described in
the Company's Registration Statement on Form S-1 (File No. 333-26027),
originally filed with the Securities and Exchange Commission April 29, 1997, as
amended and as effective July 1, 1997.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
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<CAPTION>
Exhibit
Number Description
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10.1 --1997 Omnibus Stock and Incentive Plan*
10.2 --Non-Employee Directors' Stock Option Plan*
10.3 --Profit Sharing Plan*
10.4 --1997 Employee Stock Purchase Plan*
10.5 --Form of Agreement for Deferred Compensation Plan*
10.6 --Managing Partners' Compensation Plan*
10.7 --Partners' Compensation Plan*
10.8 --Employment Agreement for Mr. Gow*
</TABLE>
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<TABLE>
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10.10 --Employment Agreement for Mr. Rothschild*
10.11 --Form of Indemnification Agreement entered into with Messrs.
Philip R. Albright, Michael Brenner, Arthur J. Davidson, Mark
P. Elliott, David W. Gallagher, Joe D. Goodwin, Roderick C.
Gow, Ray J. Groves, Harold E. Johnson, John F. Johnson, Robert
L. Pearson, Richard W. Pogue, John C. Pope, John S.
Rothschild, Thomas M. Watkins III, Jack P. Wissman**
10.12 --Directors' Deferral Plan*
27 --Financial Data Schedule (for SEC use only)
</TABLE>
*Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 333-26027), originally
filed April 29, 1997, as amended and as effective July 1, 1997.
**Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's first quarter 10-Q filed on August 8, 1997.
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LAMALIE ASSOCIATES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, Registrant's principal financial officer, thereunto duly
authorized.
October 14, 1997 LAMALIE ASSOCIATES, INC.
------------------------
(Registrant)
/s/
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Jack P. Wissman
Executive Vice President
(Authorized officer of Registrant and principal
financial officer)
11
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LAMALIE ASSOCIATES, INC. FOR THE SIX MONTHS ENDED
AUGUST 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 22,424
<SECURITIES> 0
<RECEIVABLES> 16,096
<ALLOWANCES> 1,340
<INVENTORY> 0
<CURRENT-ASSETS> 39,381
<PP&E> 6,589
<DEPRECIATION> 2,130
<TOTAL-ASSETS> 50,364
<CURRENT-LIABILITIES> 13,818
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 29,272
<TOTAL-LIABILITY-AND-EQUITY> 50,364
<SALES> 0
<TOTAL-REVENUES> 30,498
<CGS> 0
<TOTAL-COSTS> 27,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108
<INCOME-PRETAX> 3,014
<INCOME-TAX> 1,296
<INCOME-CONTINUING> 1,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,718
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
