<PAGE>
U. S. 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) August 3, 1999
--------------
HEALTHWORLD CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
----------------------------------------------
(State or other jurisdiction of incorporation)
0-23059 13-3922288
------------------------ ------------------------------------
(Commission File Number) (IRS Employer Identification Number)
100 Avenue of the Americas, New York, New York 10013
---------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 966-7640
--------------
<PAGE>
Item 2 of the current report on form 8-K of Healthworld Corporation filed on
August 13, 1999, is hereby amended to read as follows:
ITEM 2. Acquisition of Assets.
On August 3, 1999, Healthworld Corporation ("Healthworld") acquired Falk
Communications, Inc., a Delaware Corporation ("Falk"), from Spencer Falk, the
founder of Falk, the Spencer Falk Grantor Retained Annuity Trust u/t/a/d March
5, 1999 and the Falk Communications, Inc. Defined Contribution Plan and Trust
u/t/a (the "Plan") dated July 29, 1999 (collectively, the "Falk Shareholders"),
by means of a merger of Falk into a wholly-owned subsidiary of Healthworld for
an initial purchase price, exclusive of expenses, of $15,501,610, consisting of
$7,550,000 in cash and 649,111 shares of Healthworld's Common Stock, par value
$.01 per share (the "Common Stock"). In addition, Healthworld may be obligated
to make additional earn-out payments to be paid in cash and Common Stock on or
prior to April 30, 2000, 2001, 2002 and 2003, such amounts, if any, to be based
upon a multiple of future operating profits of Falk. The aggregate consideration
(including cash and Common Stock) to be paid to the Falk Shareholders in
connection with the merger are not expected to exceed $35,950,000. However,
because the amount of Common Stock to be paid in connection with additional
earn-out payments is based upon a moving average price of the Common Stock
during a 20 day period ending 3 days before the date payment is made, while such
Common Stock paid in connection with the earn-outs will be valued for accounting
purposes based upon its market price on the date of issuance, it is possible
that as a result of market fluctuations in the price of the Common Stock the
value of the aggregate consideration paid to the Falk Shareholders in connection
with the merger could exceed $35,950,000.
On September 15, 1999, Healthworld paid $425,000, consisting of $211,736 cash
and $213,264 in Common Stock to the Falk Shareholders in exchange for Falk stock
received by the Plan as consideration to certain Falk employees. A tax
deduction will be taken on Healthworld's income tax return for the taxable year
ending December 31, 1999 with respect thereto. Upon determination of the final
tax deduction, Healthworld will make a payment of additional consideration paid
to acquire the Falk stock, such payment will be in cash and Common Stock.
The Press Release of Healthworld Corporation dated August 4, 1999, pertaining to
the acquisition of Falk by Healthworld, which is annexed hereto as Exhibit
20.01, is hereby incorporated by reference in this Form 8-K.
All of the funds expended in the acquisition of Falk were derived from
Healthworld's cash on hand.
<PAGE>
Item 7 of the current report on form 8-K of Healthworld Corporation filed on
August 13, 1999, is hereby amended to add the following financial statements and
pro forma financial information:
Page(s)
-------
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS:
Balance Sheets F-2
Statements of Income F-3
Statements of Stockholders' Equity F-4
Statements of Cash flows F-5
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998 F-6
(B) PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS AS OF JUNE 30, 1998 F-14
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME FOR THE YEAR F-15
ENDED DECEMBER 31, 1998
UNAUDITED PRO FORM COMBINING STATEMENTS OF INCOME FOR THE SIX F-16
MONTHS ENDED JUNE 30, 1999
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS F-17
<PAGE>
ITEM 7(A) FALK COMMUNICATIONS, INC. HISTORICAL FINANCIAL STATEMENTS WITH REPORT
OF INDEPENDENT PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Healthworld Corporation:
We have audited the accompanying balance sheets of Falk Communications, Inc. (a
Delaware corporation) as of December 31, 1998 and 1997, and the related
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 financial position of Falk Communications, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Melville, New York
July 6, 1999 (except with respect to the matters
discussed in Note 10 as to which the date
is August 3, 1999)
F-1
<PAGE>
FALK COMMUNICATIONS, INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
---------------- -------------------------------
ASSETS 1999 1998 1997
---- ---- ----
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,236 $ 2,136 $ 1,053
Accounts receivable, net 5,491 5,745 4,249
Marketable investment securities (Note 3) 731 617 667
Other current assets 123 28 134
-------- -------- ---------
Total current assets 7,581 8,526 6,103
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net (Note 4)
577 401 465
RESTRICTED CASH (Note 5) 132 132 157
OTHER ASSETS 69 34 39
-------- -------- ---------
Total assets $ 8,359 $ 9,093 $ 6,764
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Line of credit (Note 6) $ - $ 200 $ -
Accounts payable 386 453 457
Deferred charges 3,145 2,780 2,577
Accrued expenses 853 885 303
Dividend payable - 800 -
Deferred tax liabilities 165 165 208
-------- -------- ---------
Total current liabilities 4,549 5,283 3,545
DEFERRED RENT 54 50 42
-------- -------- ---------
Total liabilities 4,603 5,333 3,587
-------- -------- ---------
COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 500 shares authorized, issued and
outstanding 25 25 25
Retained earnings 3,731 3,735 3,152
-------- -------- ---------
Total stockholders' equity 3,756 3,760 3,177
-------- -------- ---------
Total liabilities and stockholders' equity $ 8,359 $ 9,093 $ 6,764
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-2
<PAGE>
FALK COMMUNICATIONS, INC.
STATEMENTS OF INCOME
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
--------------------------------- -----------------------------------
1998 1997 1999 1998
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 9,342 $ 9,056 $ 4,531 $ 4,481
-------- -------- -------- --------
OPERATING EXPENSES:
Salaries and related costs 6,135 6,721 3,141 3,187
General and office expenses 1,555 1,194 890 714
Depreciation and amortization 124 106 71 56
Merger costs - - 147 -
-------- -------- -------- --------
7,814 8,021 4,249 3,957
-------- -------- -------- --------
Income from operations 1,528 1,035 282 524
Investment and other income, net 75 206 70 93
-------- -------- -------- --------
Income before provision for income taxes
1,603 1,241 352 617
Provision for income taxes (Note 7) 162 125 35 62
-------- -------- -------- --------
NET INCOME $ 1,441 $ 1,116 $ 317 $ 555
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
FALK COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
------------------------------- Retained
Shares Amount Earnings Total
------ ------ -------- -----
<S> <C> <C> <C> <C>
BALANCE, December 31, 1997 500 $ 25 $ 3,152 $ 3,177
Shareholder distributions - - (858) (858)
Net income - - 1,441 1,441
------ ------- -------- --------
BALANCE, December 31, 1998 500 25 3,735 3,760
Shareholder distributions (unaudited) - - (321) (321)
Net income (unaudited) - - 317 317
------ ------- -------- --------
BALANCE, June 30, 1999 (unaudited) 500 $ 25 $ 3,731 $ 3,756
====== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
FALK COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
---------------------------- ---------------------------
1998 1997 1999 1998
---- ---- ---- ----
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income $ 1,441 $ 1,116 $ 317 $ 555
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 124 106 71 56
Deferred rent 8 15 4 4
Deferred taxes (43) (44) - -
Net changes in operating assets and liabilities:
Accounts receivable (1,496) (683) 254 781
Marketable investment securities 50 740 (114) 20
Other current assets 106 (69) (95) (63)
Other assets 5 - (35) -
Accounts payable (4) (34) (67) 35
Deferred charges 203 (525) 365 (1,113)
Accrued expenses 582 (185) (32) 524
--------- --------- ---------- ----------
Net cash provided by operating activities 976 437 668 799
--------- --------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, equipment and leasehold
improvements (60) (246) (246) (21)
Restricted cash 25 26 - -
--------- --------- ---------- ----------
Net cash used in investing activities (35) (220) (246) (21)
--------- --------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to shareholders (58) (2,351) (1,122) (58)
Proceeds from/(repayments of) line of credit 200 - (200) -
--------- --------- ---------- ----------
Net cash provided by/(used in) financing
activities 142 (2,351) (1,322) (58)
--------- --------- ---------- ----------
NET (DECREASE) INCREASE IN CASH 1,083 (2,134) (900) 720
CASH AND CASH EQUIVALENTS, beginning of year
1,053 3,187 2,136 1,053
--------- --------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 2,136 $ 1,053 $ 1,236 $ 1,773
========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for taxes $ 127 $ 216 $ 95 $ 116
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
FALK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands, except share data)
1. BUSINESS:
Falk Communications, Inc. (the "Company") was established on May 14, 1989. The
Company provides communications and product support services to the
pharmaceutical industry. This includes communicating the value of a client's
products both internally to its sales staff and affiliates and externally to
customers and supporting the launch of new drugs through press and publications
management.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records revenues from fixed-priced projects on a completed contract
basis as the project phases are completed. Revenues for time incurred projects
are recognized each month based on hours provided multiplied by the billable
rates for each project. Revenues are recorded net of client pass-through
expenses, which generally include sub-contract costs, travel and other related
expenses.
Cash and Cash Equivalents
Cash and cash equivalents consists of demand deposits, money market funds and
interest bearing investment accounts with original maturities of three months or
less.
Accounts Receivable
Accounts receivable includes fees recognized, project and other costs incurred
on behalf of clients, which are paid for by the Company and billed to clients.
Marketable Investment Securities
The Company classifies its investments in marketable investment securities as
"trading" in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Such securities are reported at fair value, with unrealized gains
and losses included in earnings. Gains and losses on the disposition of
securities are recognized on the specific identification method in the period in
which they occur.
Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets as follows:
Furniture 5-7 years
Equipment 5-7 years
Leasehold improvements Lesser of lease term or useful life
F-6
<PAGE>
Maintenance and repairs are charged to operations when incurred. Betterments and
renewals are capitalized. When furniture and equipment are sold or otherwise
disposed of, the asset account and related accumulated depreciation account are
reduced, and gain or loss is included in operations.
Deferred Charges
Deferred charges represent costs incurred [and unearned revenue] on undelivered
projects.
Income Taxes
The Company has elected under the Internal Revenue Code to be an S corporation.
In lieu of corporate income taxes, the shareholders of an S corporation are
taxed on their proportionate share of the Company's taxable income. Therefore,
no provision for federal income tax has been included in these financial
statements.
Concentration of Credit Risk
The Company provides communication, marketing, advertising and related services
to clients who operate in the pharmaceutical industry. For the years ended
December 31, 1998 and 1997 and the six months ended Jun 30, 1999 and 1998, the
following customers represented in excess of 10% of total revenue and accounts
receivable for the respective years:
<TABLE>
<CAPTION>
December 31, June 30,
--------------------------- ---------------------------
Customer 1998 1997 1999 1998
-------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue: A 29% 30% 1% 17%
B 23% 17% 33% 25%
C 42% 47% 46% 52%
Accounts receivable: A 42% 27% 8% 39%
B 28% 1% 22% 31%
C 13% 68% 31% 5%
</TABLE>
Primarily all of the Company's trade accounts receivable were concentrated in
companies in the pharmaceutical industry. The Company extends credit to all
qualified clients, but does not believe that it is exposed to any undue
concentration of credit risk to any significant degree. The Company maintains
reserves for potential credit losses, but has not experienced any material
losses to individual clients or groups of clients.
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.
Actual results could differ from those estimates.
F-7
<PAGE>
Accounting for Long-Lived Assets
The Company accounts for long-lived assets according to the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS No. 121"), which requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset in question may not be recoverable. The adoption of
SFAS No. 121, in 1997, did not have a material effect on the Company's results
of operations, cash flows or financial position.
Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires companies to report all changes in equity during a period, except those
resulting from investment by owners and distribution to owners, in a financial
statement for the period in which they are recognized. Comprehensive income is
the total of net income and all nonowner changes in equity (or other
comprehensive income) such as unrealized gains/losses on securities
available-for-sale, foreign currency translation adjustments and minimum pension
liability adjustments. Comprehensive and other comprehensive income must be
reported on the face of the annual financial statements or in the case of
interim reporting, in the footnotes to the financial statements. For the years
ended December 31, 1998 and 1997 and the six months ended June 30, 1999 and
1998, the Company's operations did not give rise to items includable in
comprehensive income which were not already included in net income. Therefore,
the Company's comprehensive income is the same as its net income for all periods
presented.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities". This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999 (subsequently amended by SFAS No. 137, to be
effective for all fiscal quarters of fiscal years beginning after June 15, 2000)
and will not require retroactive restatement of prior period financial
statements. This statement requires the recognition of all derivative
instruments as either assets or liabilities in the balance sheet measured at
fair value. Derivative instruments will be recognized as gains or losses in the
period of change. If certain conditions are met where the derivative instrument
has been designated as a fair value hedge, the hedge items may also be marked to
market through earnings thus creating an offset. If the derivative is designed
and qualifies as a cash flow hedge, the changes in fair value of the derivative
instrument may be recorded in comprehensive income. The Company does not
presently make use of derivative instruments.
3. MARKETABLE INVESTMENT SECURITIES:
Marketable investment securities at June 30, 1999 and December 31, 1998 and
1997, consisted of trading securities with aggregate fair values of $731, $617
and $667, respectively. Fair values of equities and bonds are based upon quoted
market prices.
F-8
<PAGE>
The gross unrealized holding gains and fair values of trading securities by
major security type as of June 30, 1999 and December 31, 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998 December 31, 1997
-------------------------------- --------------------------------- --------------------------------
Gross Gross Gross
Unrealized Fair Unrealized Fair Unrealized Fair
Holding Value of Holding Value of Holding Value of
Gain Investments Gain Investments Gain Investments
---- ----------- ---- ----------- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Equities $ 170 $ 731 $ 170 $ 617 $ 199 $ 617
Bonds - - - - - 50
--------- --------- ------- ------- ------- -------
$ 170 $ 731 $ 170 $ 617 $ 199 $ 667
========= ========= ======= ======= ======= =======
</TABLE>
4. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
----------------- ----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Furniture and equipment $ 850 $ 723 $ 665
Leasehold improvements 150 30 28
-------- ------- -------
1,000 753 693
Less: Accumulated depreciation and
amortization 423 352 228
-------- ------- -------
$ 577 $ 401 $ 465
======== ======= =======
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1998 and
1997 was $124 and $106, respectively. Depreciation and amortization expense for
the six months ended June 30, 1999 and 1998 was $71 and $56, respectively.
5. RESTRICTED CASH:
At June 30, 1999 and December 31, 1998 and 1997, in connection with the lease
for office space, the Company was required to establish irrevocable standby
letters of credit with face amounts of $132, $132 and $157, respectively. The
Company was required to set aside certificates of deposit in these amounts, as
collateral for such letters of credit.
6. LINE OF CREDIT:
The Company has in place a $500 commercial line of credit with a bank, which
bears interest at the Bank's base rate plus 1/2%, and was 8.25% at December 31,
1998. The agreement renews annually in May and is guaranteed personally by the
majority shareholder. As of December 31, 1998 and 1997, the Company had $200 and
$0 outstanding under the line, respectively. The outstanding balance was repaid
on January 4, 1999.
F-9
<PAGE>
7. INCOME TAXES:
The components of the provision for income taxes consist of the following at
December 31,:
1998 1997
---- ----
State and local:
Current $ 205 $ 169
Deferred (43) (44)
------- -------
$ 162 $ 125
======= =======
The net deferred tax liabilities result principally from temporary differences
between the financial accounting and income tax treatment (at the state and
local level) of deferred revenue and various other accruals.
8. INTERIM FINANCIAL STATEMENTS:
The financial statements of Falk Communications, Inc. as of June 30, 1999 and
for the six months ended June 30, 1999 and 1998, presented herein have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The financial statements reflect all
adjustments (consisting of only normal recurring adjustments) which, in the
opinion of management, are necessary to present fairly the financial position,
results of operations and cash flows of the Company as of June 30, 1999, and for
the six months ended June 30, 1999 and 1998. The Company's interim results may
fluctuate as a result of a number of factors and are not necessarily indicative
of the results to be obtained for the full year.
9. COMMITMENTS:
Leases
The Company has entered into a noncancellable lease covering office spaces
expiring on August 30, 2003. There is no option to renew the lease upon
expiration.
The following is a schedule of future minimum rental payments required under the
above operating lease:
Year Ending December 31,
1999 $ 289
2000 298
2001 307
2002 316
2003 215
--------
Total minimum future rental payments $ 1,425
========
Rental expenses amounted to $285 and $240 for the years ended December 31, 1998
and 1997, respectively. For the six months ended June 30, 1999 and 1998 rental
expenses amounted to $112 and $108, respectively.
F-10
<PAGE>
Profit Sharing Plans
The Company maintains a profit sharing plan and trust pursuant to which
participants receive certain benefits upon retirement, death, disability and
upon termination of employment for other reasons. Allocation among participants'
interests is in accordance with current Internal Revenue Service Regulations.
The Company contributed approximately $85 and $70 to the plan for the year ended
December 31, 1998 and 1997, respectively, and $57 and $46 for the six months
ended June 30, 1999 and 1998, respectively.
10. SUBSEQUENT EVENTS:
Defined Contribution Plan and Trust
On July 29 1999, the Company adopted a Defined Contribution Plan (the "Plan")
for the benefit of certain key employees. In conjunction with the Plan, the
Company created a trust to hold certain assets in connection with the Plan. The
Company issued and deposited 78 shares of its common stock to the trust for the
benefit of the key employees participating in the Plan.
Sale of Company
On August 3, 1999, the Company was acquired by a wholly-owned subsidiary of
Healthworld Corporation ("Healthworld"), whereby the Company was merged into
Healthworld in consideration of an initial purchase price of $15,502, consisting
of $7,550 in cash and $7,952 in Healthworld common stock (the "Common Stock").
Total amounts to be paid in connection with the merger, including potential
future earn-out payments based upon the Company achieving certain targeted
operating profits are not expected to exceed $36,000. However, because the
amount of Common Stock to be paid in connection with additional earn-out
payments is based upon a moving average price of the Common Stock during a 20
day period ending 3 days before the date payment is made, while such Common
Stock paid in connection with the earn-outs will be valued for accounting
purposes based upon its market price on the date of issuance, it is possible
that as a result of market fluctuations in the price of the Common Stock the
value of the aggregate consideration paid to the Company shareholders in
connection with the merger could exceed $36,000.
On September 15, 1999, Healthworld paid $425, consisting of $212 cash and $213
in Common Stock to the Falk Shareholders in exchange for Falk stock received by
the Plan as consideration to certain Falk employees. A tax deduction will be
taken on Healthworld's income tax return for the taxable year ending December
31, 1999 with respect thereto. Upon determination of the final tax deduction,
Healthworld will make a payment of additional consideration paid to acquire the
Falk stock, such payment will be in cash and Common Stock. Pursuant to the
merger agreement, the Company will make a distribution to its former
shareholders equal to the amount by which pre-acquisition stockholders equity
exceeded $500 as of July 29, 1999.
F-11
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands, except share data)
1. BASIS OF PRESENTATION:
Healthworld Corporation acquired Falk, by means of a merger of Falk into a
wholly-owned subsidiary of Healthworld for an initial purchase price, exclusive
of expenses, of $15,502 consisting of $7,550 in cash and 649 shares of
Healthworld's Common Stock, par value $.01 per share (the "Common Stock"). In
addition, Healthworld may be obligated to make additional earn-out payments to
be paid in cash and Common Stock on or prior to April 30, 2000, 2001, 2002 and
2003, such amounts, if any, to be based upon a multiple of future operating
profits of Falk. In accordance with Emerging Issues Task Force Issue No. 96.8,
"Accounting for Contingent Consideration Paid to the Shareholders of an Acquired
Enterprise in a Purchase Business Combination", Healthworld will record these
contingent earn-out payments, to the extent earned as additional purchase price.
The aggregate consideration (including cash and Common Stock) to be paid to the
Falk Shareholders in connection with the merger is not expected to exceed
$36,000. However, because the amount of Common Stock to be paid in connection
with additional earn-out payments is based upon a moving average price of the
Common Stock during a 20 day period ending 3 days before the date payment is
made, while such Common Stock paid in connection with the earn-outs will be
valued for accounting purposes based upon its market price on the date of
issuance, it is possible that as a result of market fluctuations in the price of
the Common Stock the value of the aggregate consideration paid to the Falk
shareholders in connection with the merger could exceed $36,000.
On September 15, 1999, Healthworld paid $425, consisting of $212 cash and $213
in Common Stock to the Falk Shareholders in exchange for Falk stock received by
the Plan as consideration to certain Falk employees. A tax deduction will be
taken on Healthworld's income tax return for the taxable year ending December
31, 1999 with respect thereto. Upon determination of the final tax deduction,
Healthworld will make a payment of additional consideration paid to acquire the
Falk stock, such payment will be in cash and Common Stock. Pursuant to the
merger agreement, Falk will make a distribution to its shareholders equal to the
amount by which pre-acquisition stockholders equity exceeded $500 as of July 29,
1999.
The unaudited pro forma balance sheet combines the balance sheets of Healthworld
and Falk as of June 30, 1999, assuming that the business combination, accounted
for as a purchase, had been completed as of that date. The pro forma statements
of income combine the statements of income of Healthworld and Falk for the year
ended December 31, 1998 and for the six months ended June 30, 1999, assuming
that the purchase occurred at the beginning of the periods presented.
The historical balance sheets used in the preparation of the pro forma financial
statements have been derived from Healthworld's and Falk's unaudited financial
statements as of June 30, 1999. The historical statements of income for the year
ended December 31, 1998 have been derived from the audited statement of income
of Healthworld and Falk. The historical statements of income for the six months
ended June 30, 1998 have been derived from Healthworld's and Falk's respective
unaudited financial statements.
F-12
<PAGE>
The pro forma adjustments are based on the historical financial position and
results of operations for the periods presented, available information and upon
certain estimates and assumptions that Healthworld believes are reasonable under
the circumstances. However, the actual recording of the acquisition (which
management does not expect to vary materially) will be based on ultimate
appraisals, evaluations and estimates of fair market values. The pro forma
financial data does not purport to represent what Healthworld's consolidated
financial position or results of operations would actually have been if the
acquisition of Falk in fact had occurred on the dates indicated; or to project
Healthworld's financial position or results of operations for any future period.
In addition, since Healthworld and Falk were not under common control or
management prior to the closing of the acquisition, pro forma combining results
may not be comparable to or indicative of future performance.
F-13
<PAGE>
ITEM 7(B) PRO FORMA FINANCIAL INFORMATION
HEALTHWORLD CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINING BALANCE SHEETS
AS OF JUNE 30, 1999
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Healthworld Falk Adjustments Pro forma
----------- ---- ----------- ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 17,529 $ 1,236 $ (9,212) (a) $ 9,553
Accounts receivable, net 18,727 5,491 - 24,218
Marketable investment securities - 731 (731) (b) -
Unbilled production charges 3,751 - - 3,751
Other current assets 1,013 123 425 (c) 1,561
----------- ----------- ----------- -----------
Total current assets 41,020 7,581 (9,518) 39,083
Restricted cash 1,784 132 - 1,916
Property and equipment, net 4,505 577 - 5,082
Goodwill, net 14,025 - 16,450 (d) 30,475
Other assets 574 69 - 643
----------- ----------- ----------- -----------
Total assets $ 61,908 $ 8,359 $ 6,932 $ 77,199
=========== =========== =========== ===========
Bank loans and overdrafts $ 41 $ - $ - $ 41
Current portion of long-term debt 110 - - 110
Current portion of capitalized lease obligations 56 - - 56
Accounts payable 3,987 386 - 4,373
Accrued expenses 6,397 853 - 7,250
Dividend payable - - 2,525 (b) 2,525
Advanced billings 19,059 3,145 - 22,204
Other current liabilities 268 - - 268
Deferred tax liabilities - 165 - 165
----------- ----------- ----------- -----------
Total current liabilities 29,918 4,549 2,525 36,992
Long-term debt 55 - - 55
Capitalized lease obligations 112 - - 112
Minority interests 97 - - 97
Deferred rent 931 54 - 985
Other liabilities 63 - - 63
----------- ----------- ----------- -----------
Total liabilities 31,176 4,603 2,525 38,304
Common stock 74 25 7 (e) 81
(25) (f)
Additional paid-in capital 22,891 8,156 (e) 31,047
Retained earnings 8,071 3,731 (475) (f) 8,071
(3,256) (b)
Accumulated other comprehensive income (304) - - (304)
----------- ----------- ----------- -----------
Total stockholders' equity 30,732 3,756 4,407 38,895
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 61,908 $ 8,359 $ 6,932 $ 77,199
=========== =========== =========== ===========
</TABLE>
F-14
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Healthworld Falk Adjustments Pro forma
----------- ---- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 63,677 $ 9,342 $ - $ 73,019
Operating expenses:
Salaries and related costs 47,296 6,135 (751) (g) 52,680
General and office expenses 8,450 1,555 - 10,005
Depreciation and amortization 1,129 124 548 (h) 1,801
----------- ----------- ----------- -----------
56,875 7,814 (203) 64,486
Income from operations 6,802 1,528 203 8,533
Interest (expense) income, net 642 75 (424) (j) 293
----------- ----------- ----------- -----------
Income before provision for income taxes and minority interests
7,444 1,603 (221) 8,826
Provision for income taxes 2,976 162 559 (k) 3,844
147 (l)
Minority interests in net earnings of subsidiaries 42 - - 42
----------- ----------- ----------- -----------
Net income $ 4,426 $ 1,441 $ (927) $ 4,940
=========== =========== =========== ===========
Per share information:
Net income per common share:
Basic $ 0.60 $ 0.61
=========== ===========
Diluted $ 0.58 $ 0.60
=========== ===========
Common shares used in computing per share amounts:
Basic 7,415 8,081
=========== ===========
Diluted 7,592 8,258
=========== ===========
</TABLE>
F-15
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(In thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Healthworld Falk Adjustments Pro forma
----------- ---- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 33,067 $ 4,531 $ - $ 37,598
Operating expenses:
Salaries and related costs 24,491 3,141 76 (g) 27,708
General and office expenses 5,009 890 - 5,899
Depreciation and amortization 778 71 274 (h) 1,123
Merger costs - 147 (147) (i) -
---------- ---------- ---------- -----------
30,278 4,249 203 34,730
Income (loss) from operations 2,789 282 (203) 2,868
Interest income, net 277 70 (212) (j) 135
---------- ---------- ---------- -----------
Income (loss) before provision for income taxes and minority
interests 3,066 352 (415) 3,003
Provision for (benefit from) income taxes 1,349 35 123 (k) 1,444
(63) (l)
Minority interests in net earnings of subsidiaries 3 - - 3
---------- ---------- ---------- -----------
Net income $ 1,714 $ 317 $ (475) $ 1,556
========== ========== ========== ==========
Per share information: Net income per common share:
Basic $ 0.23 $ 0.19
========== ==========
Diluted $ 0.23 $ 0.19
========== ==========
Common shares used in computing per share amounts:
Basic 7,426 8,092
========== ==========
Diluted 7,598 8,264
========== ==========
</TABLE>
F-16
<PAGE>
UNAUDITED PRO FORMA ADJUSTMENTS
Descriptions of the adjustments included in the unaudited pro forma financial
statements are as follows:
(a) Reflects $7,550 in cash consideration paid upon the closing of the
acquisition, an estimated $1,450 in direct costs incurred in connection
with the acquisition and the $212 payment for the Defined Contribution Plan
and Trust tax benefit realization at fiscal year end.
(b) Reflects the distribution to the Falk shareholders equal to the amount by
which pre-acquisition stockholders equity exceeded $500.
(c) Reflects total tax benefit realization by Healthworld for the taxable year
ending December 31, 1999 for compensation paid to Falk employees in
connection with the Defined Contribution Plan and Trust.
(d) Represents the excess purchase price, including related costs, over the
fair value of the net assets acquired.
(e) Reflects the issuance of 649 shares of common stock at closing at a fair
market value of $7,950 and the issuance of 17 shares of common stock at a
fair value of $213 in consideration for the Defined Contribution Plan and
Trust tax benefit realization at fiscal year end.
(f) Reflects the elimination of Falk's common stock and retained earnings.
(g) Reflects the adjustment of salary expense based on employment agreements
entered into in connection with the merger over historical compensation
costs of those employees.
(h) Reflects amortization of the excess of the purchase price, including
related costs, over the fair value of the net assets acquired using a
30-year amortization period.
(i) Represents the reversal of merger costs incurred by Falk.
(j) Reflects reduction to interest income on the cash outflow to fund the
purchase price.
(k) Reflects a provision for federal and state income taxes for Falk as if it
were treated as "C" Corporation rather than a "S" Corporation.
(l) Reflects the net income tax provision / benefit for the salary and interest
income adjustments and merger costs as of June 30, 1999 but excludes
goodwill amortization as it is non-deductible.
F-17
<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 thereunto duly authorized.
HEALTHWORLD CORPORATION
By: /s/ Stuart Diamond
------------------------------------------
Name: Stuart Diamond
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Date: October 18, 1999
F-18
