|
|
|
|
|
|
|
|
|
|
|
|
|
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
JUNE 21, 2000
CLARK/BARDES HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-24769 52-2103926
(State of incorporation) (Commission file number) (IRS employer
identification no.)
102 SOUTH WYNSTONE PARK DRIVE, #200
NORTH BARRINGTON, ILLINOIS 60010
(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(847) 304-5800
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 21, 2000, Clark/Bardes, Inc. ("CBI), a Delaware corporation and wholly
owned subsidiary of Clark/Bardes Holdings, Inc., a Delaware corporation ("CBH"
and together with CBI, "Clark/Bardes"), entered into and consummated a Stock
Purchase Agreement (the "Purchase Agreement") by and among Pearl Meyer &
Partners, Inc., a Delaware corporation ("PM&P"), and all the shareholders of
PM&P (collectively, the "Sellers"). The Purchase Agreement provided for, among
other things, the acquisition by Clark/Bardes of the businesses and all of the
stock of PM&P for a purchase price of $26.1 million consisting of:
(i) a cash payment by wire transfer to the Sellers of $22.1 million;
(ii) the issuance by CBH of 250,000 shares of its common stock, par
value $.01 per share (the "Common Stock"), having an aggregate
value of $4.0 million based on the closing price of the Common
Stock on June 21, 2000.
The purchase price was determined by an arm's length negotiation among the
parties to the Purchase Agreement. The $22.1 million cash portion of the
purchase price was funded by a borrowing under CBI's existing credit facility
with BancOne.
PM&P is a 40 employee executive compensation and benefit consulting
organization. PM&P is headquartered in New York, New York. Prior to the
acquisition described above, there was no material relationship between any of
the Sellers and Clark/Bardes or any of its affiliates, any directors or officers
of Clark/Bardes, or any associate of any such director or officer.
<PAGE> 3
ITEM 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENT OF BUSINESS ACQUIRED
The Independent Auditor's Report dated May 2, 2000 (except for
certain information dated May 25, 2000) and the following audited
financial statements of Pearl Meyer & Partners, Inc. are included
herein:
(i) Independent Auditor's Report;
(ii) Balance Sheets as of December 31, 1999 and 1998;
(iii) Statements of Income for the years ended December 31, 1999,
1998 and 1997;
(iv) Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.
The following unaudited financial statements of Pearl Meyer &
Partners, Inc. are included herein:
(i) Balance Sheets as of March 31, 2000 and 1999; and
(ii) Statements of income for the three months ended March 31,
2000 and 1999.
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements of the
Company are included herein:
(i) Unaudited Pro Forma Balance Sheets as of March 31, 2000 and
December 31, 1999; and
(ii) Unaudited Pro Forma Income Statements for the years ended
December 31, 1999 and the quarters ended March 31, 2000
<PAGE> 4
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 1999 AND DECEMBER 31, 1998
<PAGE> 5
[CORNICK, GARBER & SANDLER, LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS
PEARL MEYER & PARTNERS, INC.
NEW YORK, NEW YORK
We have audited the accompanying balance sheets of PEARL MEYER &
PARTNERS, INC. as at December 31, 1999 and December 31, 1998 and the related
statements of operations and retained earnings and cash flows for each of the
three years in the period ended December 31, 1999. 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 audits 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 Pearl Meyer &
Partners, Inc. as at December 31, 1999 and December 31, 1998 and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ CORNICK, GARBER & SANDLER, LLP
------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
NEW YORK, NEW YORK
MAY 2, 2000
WITH RESPECT TO NOTE H
MAY 25, 2000
<PAGE> 6
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
As at
December 31
------------------------------
ASSETS 1999 1998
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note A) $ 360,089 $ 589,736
Accounts receivable (less estimated uncollectible
accounts of $312,000 in 1999 and $203,000 in 1998) 3,219,831 3,438,315
Prepaid expenses and other current assets 113,282 10,293
------------- -------------
Total current assets 3,693,202 4,038,344
------------- -------------
Equipment and improvements (at cost) less accumulated
depreciation and amortization (Notes A and C) 185,721 242,138
Security deposits 1,467,102 342,702
Other assets 41,687 41,061
------------- -------------
TOTAL $ 5,387,712 $ 4,664,245
============= =============
LIABILITIES
Current liabilities:
Accounts payable $ 172,542 $ 101,608
Accrued expenses and withheld taxes 462,352 394,452
Accrued bonuses to officer/shareholders 2,600,000 2,757,003
Client retainers 249,500 291,500
Income taxes payable (Note B) 135,813 153,857
------------- -------------
Total current liabilities 3,620,207 3,698,418
------------- -------------
Noncurrent rent payable (Note D) 26,638
Noncurrent portion of deferred compensation payable
(Note E) 201,251 129,682
------------- -------------
Total liabilities 3,821,458 3,854,736
------------- -------------
Commitments and contingencies (Note D)
SHAREHOLDERS' EQUITY
Common Stock- $.01 par value; 200 shares
authorized, 62 shares issued and outstanding 2 2
Additional paid-in capital 529,328 529,328
Less: Subscriptions receivable (Note F) (247,651) (247,551)
Retained earnings (Statement attached) 1,284,575 527,830
------------- -------------
Total shareholders' equity 1,556,254 809,509
------------- -------------
TOTAL $ 5,387,712 $ 4,664,245
============= =============
</TABLE>
The notes to financial statements are made a part hereof.
<PAGE> 7
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Client billings $ 12,579,252 $ 11,230,222 $ 8,530,821
Less:
Operating expenses before shareholders'
compensation and depreciation and
amortization 5,186,575 4,571,024 3,455,215
Shareholders' compensation 6,480,000 6,273,300 4,950,871
Depreciation and amortization 128,058 125,721 120,463
------------ ------------ ------------
Operating income 784,619 280,177 4,272
Interest and dividend income 122,451 85,943 71,071
------------ ------------ ------------
Income before income taxes 907,070 346,120 75,343
Provision for income taxes (Note B) 150,325 114,325 150,425
------------ ------------ ------------
NET INCOME (LOSS) 756,745 231,795 (75,082)
Retained earnings - January 1 527,830 296,035 371,117
------------ ------------ ------------
RETAINED EARNINGS - DECEMBER 31 $ 1,284,575 $ 527,830 $ 296,035
============ ============ ============
</TABLE>
The notes to financial statements are made a part hereof.
<PAGE> 8
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities:
Net income (loss) $ 756,745 $ 231,795 $ (75,082)
------------ ------------ ------------
Adjustments to reconcile results of operations to
net cash effect of operating activities:
Depreciation 128,059 125,722 120,482
Bad debts 109,000 87,000 68,000
Net change in asset and liability accounts:
Accounts receivable 109,484 (1,419,074) (197,800)
Prepaid expenses (102,989) 40,794 (50,764)
Security deposits (1,125,026) (38,461) 600
Accounts payable 70,936 27,569 (18,884)
Accrued expenses 94,556 130,196 72,430
Accrued bonuses payable to officer/
shareholders (157,003) 832,003 275,000
Client retainers (42,000) 128,000 (5,500)
Deferred compensation payable 71,569 129,682
Income taxes payable (18,044) (28,829) 55,290
Rent payable (53,292) (53,292) (53,292)
------------ ------------ ------------
Total adjustments (914,750) (38,690) 285,542
------------ ------------ ------------
Net cash provided by (used for)
operating activities (158,005) 193,105 190,460
Cash flows from investing activities:
Acquisition of fixed assets (71,642) (103,019) (23,497)
Cash flows from financing activities:
Sale of shares 50,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (229,647) 140,086 166,963
Cash and cash equivalents - January 1 589,736 449,650 282,687
------------ ------------ ------------
CASH AND CASH EQUIVALENTS - DECEMBER 31 $ 360,089 $ 589,736 $ 449,650
============ ============ ============
Supplementary cash flow data:
Income taxes paid $ 207,125 $ 169,904 $ 122,638
============ ============ ============
</TABLE>
The notes to financial statements are made a part hereof.
<PAGE> 9
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND RECOGNITION OF INCOME
The Company is a leading executive compensation consulting firm
specializing in the creation of innovative compensation programs to
attract, retain, motivate and reward key senior employees and
directors. Pursuant to contracts with clients, billings to clients are
at the hourly rates of the partners and personnel performing services,
plus out-of-pocket costs. Revenues are recorded as the services are
performed.
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 reported periods. Actual results could differ
from those estimates.
DEPRECIATION
Depreciation of property and equipment is computed on both the
straight-line and accelerated methods for financial accounting
purposes. Leasehold improvements are amortized over the lesser of their
estimated useful lives or the remaining term of the lease.
CASH AND CASH EQUIVALENTS
A substantial portion of the balance in cash and money market accounts
represents cash account balances in excess of FDIC insured amounts.
NOTE B - INCOME TAXES
For federal and state income tax purposes, the Company has elected to
be treated in the same manner as a partnership under the provisions of
Subchapter S of the Internal Revenue Code. Under this election, profits
and losses are reported on the personal income tax returns of the
Company's shareholders and the related income taxes thereon are payable
by them. Income taxes on the income statement for the years ended
December 31, 1999, 1998 and 1997 consist of state income taxes on "S"
corporation earnings and local income taxes, computed on the
alternative method pursuant to which a portion of officers' salaries is
nondeductible.
(Continued)
<PAGE> 10
CORNICK, GARBER & SANDLER LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C - EQUIPMENT AND IMPROVEMENTS
A summary by category as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- LIFE
1998 1998 (YEARS)
---------- --------- ------------
<S> <C> <C> <C>
Cost:
Furniture and fixtures $ 481,381 $ 461,255 7
Computer equipment 291,182 264,805 5
Office equipment 81,185 81,185 5-7
Leasehold improvements 71,784 71,784 LIFE OF LEASE
---------- ----------
TOTAL 925,532 879,029
Less accumulated depreciation
and amortization (739,811) (636,891)
---------- ----------
NET $ 185,721 $ 242,138
========== ==========
</TABLE>
NOTE D - COMMITMENTS AND CONTINGENT LIABILITIES
The Company's office lease expires on June 30, 2000. The lease provides
for base rents which increase substantially over the term. A liability
of $26,646 and $79,938 has been recorded at December 31, 1999 and 1998,
respectively, to reflect an accrual of rents based on annual minimum
base rent payments computed on a straight-line basis over the lease
period. The Company is also required to pay all real estate taxes and
other operating expenses of the property. Rent expense was
approximately $372,000 in 1999, $340,000 in 1998 and $225,000 in 1997.
The foregoing is stated net of sublease income of $168,000 in 1999,
$174,000 in 1998 and $171,000 in 1997.
The Company has entered into a new office lease agreement at an annual
rent of approximately $951,000 to May 31, 2010. Moving expenses and
leasehold improvements for the new premises are expected to cost
approximately $1.9 million.
(Continued)
-2-
<PAGE> 11
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE D - COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
A license agreement with Ms. Pearl Meyer for the Company's use of her
name provides for annual fees of 4% of revenue, which fees are
offsetible against her annual salary in excess of a stated amount. The
agreement is for the longer of the life of Ms. Meyer or her spouse but
could be cancelled on one year's notice upon the occurrence of certain
events, if the current shareholder ownership of the Company is less
than a specified percentage at that time.
Pursuant to, a Buy/Sell agreement, upon the termination of any
shareholder's employment, the Company is obligated to buy and the
shareholder is obligated to sell the Company's shares owned by the
shareholder at a price per share based on the adjusted book value per
share (as defined) on the last day of the preceding year. Any such
payments are due in annual installments over two years following
termination, plus interest.
Severance agreements with each of the Company's six officer/
shareholders provide for payments upon the termination of employment
with the Company for any reason, other than for cause. Such payments
are based on the application of a specified percentage of the
Company's subsequent annual revenues, commencing with the second month
following the severance date, as follows:
<TABLE>
<CAPTION>
<S> <C>
Percentage
Annual Payment of Revenues
-------------- -----------
1 2.2177
2 1.3307
3 .8871
</TABLE>
The Company has the option to defer payment of up to 50% of any
payments for up to five years, plus interest at the prime rate.
In the event that a majority of the Company's stock is sold in any two
year period to any third party or its business or assets are sold and
an officer/shareholder's employment is terminated following such sale,
each terminating officer/shareholder would be entitled to a formulary
payment of 4.4355% of revenues for the year prior to such sale. If
termination occurred prior to any such sale, then each terminated
employee would be entitled to a combination of payments based on the
application of the above percentages to earnings prior to termination
and earnings for the year prior to the Company's sale.
(Continued)
-3-
<PAGE> 12
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE E - DEFERRED COMPENSATION
The Company has a deferred compensation plan for key employees, which
provides for payments based upon vesting requirements as defined in the
agreement. Obligations under the agreement are funded through
investments in certain mutual funds offered by Fidelity Investments.
At December 31, 1999 and 1998, liabilities of approximately $261,000
and $130,000 respectively, have been recorded based upon the payment
terms in the agreement.
NOTE F - SUBSCRIPTIONS RECEIVABLE
In connection with employment agreements with two officer/shareholders,
the Company issued 11 shares of stock in 1995 and 11 shares of stock in
1998 in exchange for notes of $150,000 (of which $50,000 has been paid
to December 31, 1999) and $198,000 respectively. The note received in
1995 is due by 2015 and bears interest at 7.67% a year while the note
received in 1998 is due by 2017 and bears interest at 6.13% a year. The
notes are collateralized by the shares issued to the officers. Their
unpaid balance is reflected as stock subscriptions receivable in the
shareholders' equity section of the balance sheets. Upon termination of
employment, the officer/shareholders are obligated to sell and the
Company is obligated to purchase these shares under the provisions of
the Company's shareholder Buy/Sell agreement.
NOTE G - EMPLOYEE BENEFIT PLAN
The Company's 401(k) profit sharing plan for its eligible employees
provides for a matching contribution of a portion of participating
employees' contributions plus an additional contribution at the
discretion of the Company's Board of Directors.
Contributions by the Company were approximately $240,000 in 1999,
$27,000 in 1998 and $20,000 in 1997.
NOTE H - SUBSEQUENT EVENT
On May 25, 2000, the Company's shareholders signed a letter-of-intent
to sell their shares of the Company's stock to Clark/Bardes Holdings,
Inc., subject to the execution of a definitive purchase agreement.
Such agreement is expected to provide for the cancellation of the
shareholders' buy/sell and severance agreements (see Note D). Also, as
of the date of the closing, the Company's Subchapter S election will
be terminated (see Note A) and it will be subject to federal and
additional state income taxes on the cumulative excess of its earnings
for financial accounting purposes over it earnings for income tax
purposes. Such cumulative differences aggregated approximately
$1,250,000 at December 31, 1999.
-4-
<PAGE> 13
[CORNICK, GARBER & SANDLER, LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
TO THE SHAREHOLDERS
PEARL MEYER & PARTNERS, INC.
NEW YORK, NEW YORK
Our report on our audits of the basic financial statements of PEARL MEYER
& PARTNERS, INC. for the years ended December 31, 1999 and December 31, 1998
and for each of the three years in the period ended December 31, 1999, appears
elsewhere herein. Our audits were made for the purpose of forming an opinion on
the basic financial statements. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ CORNICK, GARBER & SANDLER, LLP
----------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
NEW YORK, NEW YORK
MAY 2, 2000
WITH RESPECT TO NOTE H
MAY 25, 2000
<PAGE> 14
CORNICK, GARBER & SANDLER, LLP
Certified Public Accountants
PEARL MEYER & PARTNERS, INC.
SCHEDULE OF OPERATING EXPENSES
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Salaries $3,177,506 $2,685,115 $1,996,260
Payroll taxes 274,361 230,544 197,410
Employee benefits 244,437 30,130 76,978
Insurance 173,719 139,595 150,731
Professional fees 54,276 56,507 36,994
Rent (Note D) 372,110 340,202 224,544
Repairs 4,171 9,956 11,538
Seminars 40,516 2,390 9,098
Computer 81,585 68,364 53,134
Supplies 42,105 39,848 40,780
Postage 19,857 22,537 11,895
Office 78,405 120,747 80,832
Public relations 167,834 215,558 186,068
Other taxes 18,699 17,001 23,364
Telephone 75,536 62,839 50,690
Travel 48,114 40,451 46,014
Entertainment 26,669 19,542 16,054
Bank charges 6,954 2,866 2,748
Bad debts 109,000 87,000 68,000
Recruiting 18,791 269,650 57,393
Contributions 1,100 7,000 725
Dues and subscriptions 91,819 67,462 74,803
Equipment rental 956 1,130 2,417
Miscellaneous 57,756 34,590 36,745
---------- ---------- ----------
TOTAL OPERATING EXPENSES $5,186,575 $4,571,024 $3,455,215
========== ========== ==========
</TABLE>
The notes to financial statements are made a part hereof.
<PAGE> 15
Pearl Meyer & Partners, Inc.
Balance Sheet
March 31, 2000
<TABLE>
ASSETS
<S> <C> <C>
Cash-Checking Account 901,796.04
Cash-Fidelity 260,932.82
Cash-Merrill Lynch 2,513.25
Petty Cash 500.00
Rental Income Receivable 13,958.77
Prepaid Rent 79,270.83
Due from shareholder 247,650.58
Premium on Bonds 2,625.00
NYC Municipal Bonds 339,326.60
Letter of Credit 650,000.00
Accounts Receivable 3,617,191.75
Allowance for D/A (200,416.00)
3,416,775.75
Loans & Exchanges 53,050.20
---------------
TOTAL CURRENT ASSETS 5,968,399.84
Leasehold Improvements 71,784.15
Accum Deprec-L.I (13,455.00)
Information Systems 45,521.54
Accum Deprec-Info systems (43,140.00)
Computer Equipment 11,775.39
Accum Deprec-Comp Equip (5,699.00)
Equipment 58,647.34
Accum Deprec-Equipment (47,843.80)
Furniture & Fixtures 735,675.88
Accum Deprec-F&F (708,543.35)
Computers 509,918.42
Accum Deprec-Computers (419,693.77)
Moving Susponse 135,674.48
---------------
TOTAL PROPERTY & EQUIPMENT 330,622.28
Other Deposits 516,686.88
---------------
TOTAL ASSETS 6,815,709.00
===============
</TABLE>
<PAGE> 16
Pearl Meyer & Partners, Inc.
Balance Sheet
March 31, 2000
<TABLE>
<S> <C>
LIABILITIES
Accounts Payable 119,190.36
Retainers on Account 302,000.00
Customer Security Deposits 39,061.88
Income Garnishment Withheld (250.00)
401k Contribution Withheld (1,539.83)
Deferred Compensation Liability 260,932.82
Accrued Partner Bonuses 3,500,000.00
Accrued Other Expenses 433,494.94
Accrued Corporate Taxes 66,162.82
Deferred Rent Payable --
------------
TOTAL LIABILITIES 4,719,052.99
EQUITY
Additional Paid in Capital 529,330.05
Retained Earnings 289,831.72
Dividend Distributions (33,931.00)
Net Income 1,311,425.24
------------
TOTAL EQUITY 2,096,656.01
------------
TOTAL LIABILITIES AND EQUITY 6,815,709.00
============
</TABLE>
<PAGE> 17
Pearl Meyer & Partners, Inc.
Income Statement
YTD Mar 2000 Actual vs YTD Mar 1999 Actual, For All Accounts,
Level of Detail: Account Number
Sorted by Account Number, Exclude Zero Balance Accounts
<TABLE>
<CAPTION>
Dollar Variance
Actual for Actual for
Mar 2000 Mar 1999
---------- ---------- ---------------
<S> <C> <C> <C>
SALES
PROFESSIONAL FEES 2,924,635.00 2,720,527.00 204,108.00
INTEREST INCOME - TAX EXEMPT 15,710.33 5,427.43 10,282.90
DIVIDEND INCOME 13,199.37 9,676.95 3,522.42
RENTAL INCOME - MKP CAPITAL MGMT 41,876.31 41,876.31 0.00
------------ ------------ ------------
Total INCOME 2,995,421.01 2,777,507.69 217,913.32
------------ ------------ ------------
EXPENSES
SALARIES & WAGES - PARTNERS 469,999.98 469,999.98 0.00
SALARIES & WAGES - PUBLIC RELATIONS 35,624.98 0.00 35,624.98
SALARIES & WAGES - ASSOCIATES 373,104.17 373,274.54 (170.37)
SALARIES & WAGES - ACCOUNTING 38,480.28 22,858.50 15,621.78
SALARIES & WAGES - SECRETARIAL 86,469.59 70,030.40 16,439.19
SECRETARIAL TIME - BILLED (157,125.00) (134,679.00) (22,446.00)
SALARIES & WAGES - CLERICAL 20,451.84 21,385.52 (933.68)
COMPUTER TIME - BILLED (10,000.00) (10,700.00) 700.00
INCENTIVE COMPENSATION 300,000.00 225,000.00 75,000.00
LETTER OF CREDIT FEES 0.00 1,631.18 (1,631.18)
BANK SERVICE CHARGES 75.00 146.55 (71.55)
BAD DEBT EXPENSE 26,000.00 27,000.00 (1,000.00)
CHRISTMAS EXPENSE 4,500.00 6,000.00 (1,500.00)
DEPRECIATION & AMORTIZATION 37,500.00 21,900.00 15,600.00
MOVE RELATED EXPENSES 619.00 0.00 619.00
SUBSCRIPTIONS & PUBLICATIONS 40,515.94 28,676.66 11,839.28
DUES & SUBS-BILLED (18,400.00) (19,200.00) 800.00
DUES 4,875.00 2,495.00 2,180.00
EQUIPMENT RENTAL 207.68 443.01 (235.33)
EQUIPMENT RENTAL BILLED (18,400.00) (19,200.00) 800.00
INSURANCE - EMPLOYEE GROUP 57,521.15 39,283.10 18,229.05
N.Y.S. DISABILITY 620.90 (340.00) 960.90
INSURANCE - GENERAL 6,200.00 0.00 6,200.00
DATA PROCESSING 2,594.45 764.73 1,829.72
401(k) PLAN FEES 303.50 344.00 (40.50)
401(k) EMPLOYER CONTRIBUTIONS (4,980.97) 8,703.40 (13,684.37)
INTEREST EXPENSE 150.00 150.00 0.00
LEGAL & ACCOUNTING 6,000.00 12,000.00 (6,000.00)
SEMINARS 70.00 0.00 70.00
MISCELLANEOUS EXPENSE 5,778.04 13,210.07 (7,432.03)
OFFICE EXPENSE 10,208.17 14,512.20 (4,304.03)
OUTSIDE SERVICES: CONSULTING 1,237.50 2,325.00 (1,087.50)
OUTSIDE SERVICES: ACCOUNTING 0.00 102.00 (102.00)
OUTSIDE SERVICES: COMPUTER 11,138.25 14,501.74 (3,363.49)
OUTSIDE SERVICES: OTHER 3,000.00 1,000.00 2,000.00
POSTAGE EXPENSE 4,529.08 2,563.15 1,965.93
POSTAGE EXPENSE - BILLED (20,000.00) (20,500.00) 500.00
RENT AND ELECTRICITY 141,975.89 139,317.12 2,658.77
REPAIRS & MAINTENANCE 767.49 1,079.31 (311.82)
COMPUTER SOFTWARE 893.02 5,645.50 (4,752.58)
TELEPHONE 19,125.64 14,860.76 4,264.88
TELEPHONE EXPENSE - BILLED (27,600.00) (29,900.00) 2,300.00
PAYROLL TAXES 84,323.13 75,917.43 8,405.70
OTHER TAXES 6,026.47 4,362.01 1,664.46
RECRUITING EXPENSE 46,150.00 968.06 45,183.94
SUPPLIES EXPENSE 9,684.60 10,321.27 (636.67)
PUBLIC RELATIONS 27,022.39 56,707.97 (29,685.58)
T & E TRAVEL 2,366.80 5,241.24 (2,874.44)
T & E CAB/AUTO 8,172.74 4,988.02 3,184.72
T & E AIRLINE 6,120.50 2,319.00 3,801.50
T & E OTHER 0.00 103.00 (103.00)
T & E MEALS 5,307.57 5,153.55 154.02
------------ ------------ ------------
Total EXPENSES 1,648,995.77 1,472,764.07 176,231.70
------------ ------------ ------------
TAXES
STATE INCOME TAX 0.00 325.00 (325.00)
CITY INCOME TAX 35,000.00 37,500.00 (2,500.00)
------------ ------------ ------------
Total INCOME TAXES 35,000.00 37,825.00 (2,825.00)
------------ ------------ ------------
Total TAXES 35,000.00 37,825.00 (2,825.00)
------------ ------------ ------------
Net income after taxes 1,311,425.24 1,266,918.65 44,506.59
</TABLE>
<PAGE> 18
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table sets forth unaudited pro forma financial information of the
Company for the periods ended and as of the dates indicated. The unaudited pro
forma financial information of the Company set forth below was derived from the
audited and unaudited financial statements of Clark/Bardes Holdings, Inc. and
Pearl Meyer & Partners, Inc.
The unaudited pro forma balance sheets and income statements have been prepared
to give effect to the acquisition of Pearl Meyer & Partners, Inc. as if such
transaction had occurred as of the beginning of each period presented. The
unaudited pro forma financial information of the Company set forth below is
based upon available information and certain assumptions that the Company
believes are reasonable. The unaudited pro forma financial information of the
Company set forth below does not purport to represent either what the Company's
financial position or results of operations actually would have been if the
transactions had actually occurred as of such dates or what such results will be
for any future periods.
<PAGE> 19
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31,1999
(In Thousands Except Shares)
<TABLE>
<CAPTION>
THE PEARL MEYER
COMPANY & PARTNERS ADJUSTMENTS THE COMPANY
(HISTORICAL (HISTORICAL DR/(CR) PRO FORMA
12/31/99) 12/31/99) # $ AS ADJUSTED
----------- ----------- --- --- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 4,832 360 1 $ (360) $ 4,832
Accounts and notes receivable - net 18,295 3,220 1 (3,220) 18,295
Prepaid expenses 113 1 (113) --
Deposits and advances 1,123 5 475 1,598
--
--------- --------- ---------
Total current assets 24,250 3,693 24,725
--------- --------- ---------
Intangible assets - net
Present value of in force revenue 59,284 59,284
Goodwill 34,440 5 25,035 59,475
Non competition agreements 1,267 1,267
--------- --------- ---------
94,991 -- 120,026
--------- --------- ---------
Equipment and leasehold improvements - net 4,505 186 5 689 5,380
Security deposits 1,467 (1,467) --
Deferred tax asset 282 282
Other assets 831 42 1 (42) 831
--
--------- --------- ---------
Total assets $ 124,859 $ 5,388 $ 151,244
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,100 $ 172 2 $ (172) 4,100
Commissions and fees 3,475 3,475
Accrued bonuses to officer/shareholders 2,600 2 (2,600) --
Accrued liabilities 7,841 712 2 (712) 7,841
Income taxes 4,350 136 2 (136) 4,350
Debt maturing within one year 7,252 4 4,431 11,683
--
--------- --------- ---------
Total current liabilities 27,018 3,620 31,449
--------- --------- ---------
Long term debt 35,473 4 17,723 53,196
Deferred compensation payable 201 201
--------- --------- ---------
Total Liabilities 62,491 3,821 84,846
--------- --------- ---------
Stockholders' equity
Preferred stock -- -- --
Common stock - issued and outstanding --
December 31, 1999 = 9,629,999 96 -- 5 2 98
Pro forma = 9,879,999 5 4,028 4,028
Paid in capital 50,099 282 5 (282) 50,099
Retained earnings 12,173 1,285 5 (1,285) 12,173
--------- --------- ---------
Total stockholders' equity 62,368 1,567 66,398
--------- --------- ---------
Total liabilities and stockholders' equity $ 124,859 $ 5,388 $ 151,244
========= ========= =========
</TABLE>
<PAGE> 20
<TABLE>
<S> <C>
EXPLANATION OF PRO FORMA ADJUSTMENTS
1 Assets not acquired
Cash $ 360
Accounts receivable - net 3,220
Prepaid expenses 113
Other assets 42
Security deposits 992
--------
total $ 4,727
--------
2 Liabilities not acquired
Accounts payable $ 172
Accrued bonuses to officer/shareholders 2,600
Accrued liabilities 712
Income taxes 136
--------
total $ 3,620
--------
net $ 1,107
========
3 Cash paid at closing (borrowed under line of credit)
Due in one year $ 4,431
Long term 17,723
--------
total 22,154
--------
4 Clark/Bardes Holdings, Inc. -common stock issued at closing
250,000 shares @ $16.1250 4,031
--------
Total purchase price (excluding expenses) 26,185
========
5 Allocation of the purchase price
Assets acquired:
Equipment $ 875
Deposits 476
Deferred compensation payable (201)
--------
1,150
Goodwill 25,035
--------
$ 26,185
========
</TABLE>
<PAGE> 21
UNAUDITED PRO FORMA INCOME STATEMENT
AS OF DECEMBER 31, 1999
(In Thousands Except shares)
<TABLE>
<CAPTION>
THE PEARL MEYER
COMPANY & PARTNERS ADJUSTMENTS THE COMPANY
(HISTORICAL (HISTORICAL DR/(CR) PRO FORMA
12/31/99) 12/31/99) # $ AS ADJUSTED
----------- ----------- --- --- -------------
<S> <C> <C> <C> <C> <C>
Revenues
Commissions and service fees $ 119,158 $ -- $ -- $ 119,158
Consulting fees 12,579 12,579
Other 1,602 1,602
--------- --------- ---------
Total revenue 120,760 12,579 133,339
Commission and fee expenses 53,108 6,480 59,588
--------- --------- ---------
Gross profit 67,652 6,099 73,751
--------- --------- ---------
Operating expenses
General and administrative 45,153 5,314 50,467
Amortization of intangibles 4,370 2 1,252 5,622
--------- --------- ---------
49,523 5,314 56,089
--------- --------- ---------
Operating income 18,129 785 17,662
Interest
Income 329 122 451
Expense (3,548) 1 (1,964) (5,512)
--------- --------- ---------
(3,219) 122 (5,061)
--------- --------- ---------
Income before taxes 14,910 907 12,601
Income taxes 6,079 150 3 (1,189) 5,040
--------- --------- ---------
Net income $ 8,831 $ 757 $ 7,561
========= ========= =========
Net income per share:
Basic $ 0.97 $ 0.81
========= =========
Diluted $ 0.95 $ 0.79
========= =========
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
EXPLANATION OF PRO FORMA ADJUSTMENTS
1 Interest on borrowed funds
$22,154 @ 9.0% $1,994
======
2 Amortization of goodwill
$25,035 @ 20 years $1,252
======
3 Income taxes @ 40%
4 Net income per share
</TABLE>
<TABLE>
<CAPTION>
Basic Diluted
--------- ---------
<S> <C> <C>
Weighted average shares 9,077,775 9,328,939
Shares issued 250,000 250,000
--------- ---------
Pro forma 9,327,775 9,578,939
========= =========
</TABLE>
<PAGE> 23
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2000
(In Thousands Except Shares)
<TABLE>
<CAPTION>
THE PEARL MEYER
COMPANY & PARTNERS ADJUSTMENTS THE COMPANY
(HISTORICAL (HISTORICAL DR/(CR) PRO FORMA
3/31/00) 3/31/00) # $ AS ADJUSTED
----------- ----------- --- --- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 778 $ 2,157 1 $ (2,157) $ 778
Accounts and notes receivable - net 14,024 3,431 1 (3,431) 14,024
Other assets 975 380 5 95 1,450
--
-------- -------- --------
Total current assets 15,777 5,968 16,252
-------- -------- --------
Intangible assets - net 97,587 5 25,095 122,682
Equipment and leasehold improvements - net 4,360 331 5 544 5,235
Security deposits -- --
Deferred tax asset 12 12
Other assets 2,329 517 1 (517) 2,329
--
-------- -------- --------
Total assets $120,065 $ 6,816 $146,510
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,213 $ 119 2 $ (119) 3,213
Commissions and fees 1,444 341 2 (341) 1,444
Accrued bonuses to officer/shareholders 3,500 2 (3,500) --
Accrued liabilities 7,553 432 2 (432) 7,553
Income taxes 2,235 66 2 (66) 2,235
Debt maturing within one year 7,480 4 4,431 11,911
--
-------- -------- --------
Total current liabilities 21,925 4,458 26,356
-------- -------- --------
Long term debt 31,844 4 17,723 49,567
Deferred compensation payable 261 261
-------- -------- --------
Total Liabilities 53,769 4,719 76,184
-------- -------- --------
Stockholders' equity
Preferred stock -- -- --
Common stock - issued and outstanding --
March 31,2000 = 9,769,826 98 -- 5 2 100
Pro forma = 10,019,999 5 -- --
Paid in capital 52,234 529 5 3,499 56,262
Retained earnings 13,964 1,568 5 (1,568) 13,964
--
-------- -------- --------
Total stockholders' equity 66,296 2,097 70,326
-------- -------- --------
Total liabilities and stockholders' equity $120,065 $ 6,816 $146,510
======== ======== ========
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
EXPLANATION OF PRO FORMA ADJUSTMENTS
1 Assets not acquired
Cash $ 2,157
Accounts receivable - net 3,431
Prepaid expenses --
Other assets 517
--------
total $ 6,105
--------
2 Liabilities not acquired
Accounts payable 119
Commissions and fees 341
Accrued bonuses to officer/shareholders 3,500
Accrued liabilities 432
Income taxes 66
--------
total $ 4,458
--------
net 1,647
========
3 Cash paid at dosing (borrowed under line of credit)
Due in one year $ 4,431
Long term 17,723
--------
22,154
--------
4 Clark/Bardes Holdings, Inc. -common stock issued at closing
250,000 shares @ $ $16.1250 4,031
--------
Total purchase price (excluding expenses) $ 26,185
========
5 Allocation of the purchase price (excluding expenses)
Equipment $ 875
Deposits 476
Deferred compensation payable (261)
--------
1,090
--------
Goodwill $ 25,095
========
</TABLE>
<PAGE> 25
UNAUDITED PRO FORMA INCOME STATEMENT
AS OF MARCH 31, 2000
(In Thousands Except shares)
<TABLE>
<CAPTION>
THE PEARL MEYER
COMPANY & PARTNERS ADJUSTMENTS THE COMPANY
(HISTORICAL (HISTORICAL DR/(CR) PRO FORMA
3/31/00) 3/31/00) # $ AS ADJUSTED
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Total revenue $ 31,147 $ 3,176 $ 34,323
Commission and fee expenses 10,884 -- 10,884
-------- -------- --------
Gross profit 20,263 3,176 23,439
-------- -------- --------
Operating expenses
General and administrative 15,013 1,901 16,914
Amortization of intangibles 1,335 2 314 1,649
-------- -------- --------
16,348 1,901 18,563
-------- -------- --------
Operating income 3,915 1,275 4,876
Interest
Income 74 71 145
Expense (925) 1 (498) (1,423)
-------- -------- --------
(851) 71 (1,278)
-------- -------- --------
Income before taxes 3,064 1,346 3,598
Income taxes 1,273 35 3 131 1,439
-------- -------- --------
Net income $ 1,791 $ 1,311 $ 2,159
======== ======== ========
Net income per share:
Basic $ 0.18 $ 0.22
======== ========
Diluted $ 0.18 $ 0.22
======== ========
</TABLE>
<PAGE> 26
EXPLANATION OF PRO FORMA ADJUSTMENTS
<TABLE>
<S> <C>
1 Interest on borrowed funds for 3 months
$22,154 @ 9.0% $498
====
2 Amortization of goodwill
$25,095 @ 20 years $314
====
3 Income taxes @ 40%
4 Net income per share
</TABLE>
<TABLE>
<CAPTION>
Basic Diluted
--------- ----------
<S> <C> <C>
Weighted average shares 9,738,125 9,937,819
Shares issued 62,500 62,500
--------- ----------
Pro forma 9,800,625 10,000,319
========= ==========
</TABLE>
<PAGE> 27
SIGNATURE
CLARK/BARDES HOLDINGS, INC.
Date: June 30, 2000 /s/ THOMAS M. PYRA
-----------------------------
Thomas M. Pyra
Chief Operating Officer and
Chief Financial Officer
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
EX-99.1 Asset Purchase Agreement, dated June 21, 2000, by and among
Clark/Bardes, Inc., Clark/Bardes Holdings, Inc. and Pearl
Meyer & Partners, Inc. and certain shareholders.
</TABLE>
|
|