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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 30, 2000
Commission File Number:
THE MANAGEMENT NETWORK GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 48-1129619
------- ----------
<S> <C>
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
7300 COLLEGE BLVD., SUITE 302, OVERLAND PARK, KS 66210
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(Address of principal executive offices) (Zip Code)
913-345-9315
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Registrant's telephone number, including area code
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if changed
since last report.)
This Form 8-K/A amends Registrant's previously filed Current Report on Form 8-K
dated September 14, 2000.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The Management Network Group, Inc., (the "Company" or "TMNG") a Delaware
corporation, hereby amends its Current Report on Form 8-K previously filed with
the Securities and Exchange Commission on September 14, 2000, relating to the
Company's acquisition of The Weathersby Group, Inc. ("TWG"), a Maryland
corporation, on September 5, 2000, by means of TMNG acquiring all of the issued
and outstanding stock of TWG in exchange for cash and Company stock. This Form
8-K/A includes the financial statements and pro forma financial information
which had been omitted from the previously filed document as permitted by Item
7(a)(4) of Form 8-K. The financial statements and pro forma financial
information are filed herewith.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
See Exhibit 99.1 and 99.2 for audited annual financial statements and
unaudited interim financial statements of TWG.
(b) PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma condensed combined financial statements,
including the notes thereto, is qualified in its entirety by reference to, and
should be read in conjunction with, the historical financial statements and
notes thereto for the fiscal year ended January 1, 2000 of TMNG, and the
historical financial statements and notes thereto of TWG for the year ended
December 31, 1999, included as exhibits herein.
The following unaudited pro forma condensed combined financial statements
give effect to the Company's acquisition of TWG for $11.2 million in cash and
$8.0 million in TMNG common stock in exchange for all the stock of TWG. This
acquisition was recorded under the purchase method of accounting. The unaudited
pro forma condensed combined statement of operations gives effect to the merger,
assuming that the acquisition had occurred as of January 3, 1999. The unaudited
pro forma condensed combined balance sheet as of July 1, 2000 gives effect to
the acquisition transaction as if it had occurred on that date.
The unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if the mergers had been consummated at the
beginning of the periods presented, nor is it necessarily indicative of future
operating results or financial position.
(c) EXHIBITS
The following Exhibits are filed as part of this report:
99.1 Financial Statements for The Weathersby Group, Inc.
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THE MANAGEMENT NETWORK GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JULY 1, 2000
(in thousands)
<TABLE>
<CAPTION>
Pro forma Pro forma
TMNG TWG Adjustments Combined
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ....................... $ 53,809 $ 792 $ (11,844)(1) $ 42,757
Receivables:
Accounts receivable ............................ 12,523 1,845 14,368
Accounts receivable - unbilled ................. 7,539 1,289 8,828
--------- --------- --------- ---------
20,062 3,134 23,196
Less: Allowance for doubtful accounts ......... (625) (61) (686)
--------- --------- --------- ---------
19,437 3,073 22,510
Other assets .................................... 1,265 (39)(2) 1,226
--------- --------- --------- ---------
Total current assets ........................ 74,511 3,865 (11,883) 66,493
Property and Equipment, net ...................... 784 88 872
Deferred Tax Asset ............................... 3,331 3,331
Goodwill ......................................... 18,724 (3) 18,724
Other assets ..................................... 57 57
--------- --------- --------- ---------
Total Assets ................................ $ 78,626 $ 4,010 $ 6,841 $ 89,477
========= ========= ========= =========
Current Liabilities:
Trade accounts payable .......................... $ 1,157 $ 1,788 $ 2,945
Accrued payroll, bonuses and related expenses ... 3,497 150 3,647
Other accrued liabilities ....................... 1,184 67 $ 846 (4) 2,097
Income taxes payable ............................ 134 134
--------- --------- --------- ---------
Total current liabilities ................... 5,972 2,005 846 8,823
Stockholders' Equity (Deficiency in Assets)
Common stock
Voting - $.001 par value, 100,000,000 shares
authorized; 27,417,370 and 27,496,444 issued
and outstanding on January 1, 2000 and
July 1, 2000, respectively .................. 27 1 (1)(5) 27
Preferred stock
Additional paid-in capital ...................... 106,540 8,000 (6) 114,540
(Accumulated deficit) Retained earnings.......... (28,207) 2,004 (2,004)(7) (28,207)
Accumulated other comprehensive income -
Foreign currency translation
adjustment .................................... (47) (47)
Unearned compensation ........................... (5,659) (5,659)
--------- --------- --------- ---------
Total stockholders' equity (deficiency in
assets) .................................... 72,654 2,005 5,995 80,654
--------- --------- --------- ---------
Total Liabilities and Stockholders' Equity
(Deficiency in Assets) .......................... $ 78,626 $ 4,010 $ 6,841 $ 89,477
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
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THE MANAGEMENT NETWORK GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED JANUARY 1, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro forma Pro forma
TMNG TWG Adjustments Combined
<S> <C> <C> <C>
Revenues ............................... $ 50,322 $ 11,122 $ 61,444
Cost of Services:
Direct cost of services ............... 26,109 7,937 34,046
Equity related charges ................ 2,780 2,780
------------ ------------ ------------ ------------
Total cost of services ............. 28,889 7,937 36,826
------------ ------------ ------------ ------------
Gross Profit ........................... 21,433 3,185 24,618
Operating Expenses:
Selling, general and administrative ... 9,777 2,394 $ 1,872 (8) 14,043
Equity related charges ................ 1,998 1,998
------------ ------------ ------------ ------------
Total operating expenses ........... 11,775 2,394 1,872 16,041
------------ ------------ ------------ ------------
Income (Loss) from Operations .......... 9,658 791 (1,872) 8,577
Other Income (Expense):
Interest income ...................... 277 6 283
Interest expense ..................... (1,998) (1,998)
Other, net ........................... (68) (68)
------------ ------------ ------------ ------------
Total other expense ................ (1,789) 6 (1,783)
------------ ------------ ------------ ------------
Income Before Provision for Income
Taxes and Extraordinary Item ......... 7,869 797 (1,872) 6,794
Provision for Income Taxes ............. (3,208) 430 (9) (2,778)
------------ ------------ ------------ ------------
Income Before Extraordinary Item ....... $ 4,661 $ 797 $ (1,442) $ 4,016
============ ============ ============ ============
Income Before Extraordinary Item
Per Common Share
Basic ............................... $ 0.20 $ 0.17
============ ============ ============ ============
Diluted ............................. $ 0.20 $ 0.17
============ ============ ============ ============
Shares Used in Calculation of Income
Before Extraordinary Item Per Common
Share
Basic ............................... 23,056,283 23,404,440(10)
============ ============ ============ ============
Diluted ............................. 23,807,010 24,155,167(10)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
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THE MANAGEMENT NETWORK GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JULY 1, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro forma Pro forma
TMNG TWG Adjustments Combined
<S> <C> <C> <C> <C>
Revenues .................................. $ 35,866 $ 7,245 $ 43,111
Cost of Services:
Direct cost of services .................. 18,638 5,089 23,727
Equity related charges ................... 3,917 3,917
------------ ------------ ------------ ------------
Total cost of services .................... 22,555 5,089 27,644
------------ ------------ ------------ ------------
Gross Profit .............................. 13,311 2,156 15,467
Operating Expenses:
Selling, general and administrative ...... 7,448 1,554 $ 936 (8) 9,938
Equity related charges ................... 810 810
------------ ------------ ------------ ------------
Total operating expenses ................ 8,258 1,554 936 10,748
------------ ------------ ------------ ------------
Income from Operations .................... 5,053 602 (936) 4,719
Other Income (Expense):
Interest income .......................... 1,626 5 1,631
Interest expense ......................... (3) (3)
Other, net ............................... (124) 14 (110)
------------ ------------ ------------ ------------
Total other income ...................... 1,499 19 1,518
------------ ------------ ------------ ------------
Income Before Provision for Income Taxes .. 6,552 621 (936) 6,237
Provision for Income taxes ............... (2,621) 126 (9) (2,495)
------------ ------------ ------------ ------------
Net Income ................................ 3,931 621 (810) 3,742
Other Comprehensive Income
Foreign currency translation adjustment .. (45) (45)
------------ ------------ ------------ ------------
Comprehensive Income ...................... $ 3,886 $ 621 $ (810) $ 3,697
============ ============ ============ ============
Net Income Per Common Share
Basic .................................... $ 0.14 $ 0.13
============ ============ ============ ============
Diluted .................................. $ 0.14 $ 0.13
============ ============ ============ ============
Shares Used in Calculation of Net
Income Per Common Share
Basic .................................... 27,442,603 27,790,760(10)
============ ============ ============ ============
Diluted .................................. 28,664,458 29,012,615(10)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
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THE MANAGEMENT NETWORK GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On September 5, 2000, The Management Network Group, Inc. purchased The
Weathersby Group, Inc. a privately-owned marketing management consulting
company. The purchase price at closing consisted of 348,157 shares of common
stock valued at $8.0 million and cash payments totaling $11.2 million. Earnout
provisions could provide for additional consideration up to $9.0 million,
consisting of up to $2.5 million cash consideration and up to $6.5 million stock
consideration, contingent on TWG achieving certain performance targets in 2001.
Consideration will be paid-out if the above performance targets are met on March
31, 2002. The transaction has been accounted for as a purchase with the majority
of the purchase price being allocated to goodwill.
The preliminary allocation of the purchase price is summarized below (in
thousands):
<TABLE>
<S> <C>
Net assets acquired $ 2,005
Goodwill 17,186
--------
Purchase price $ 19,191
========
</TABLE>
The fair value of the net assets acquired was based on preliminary estimates and
is subject to further refinement. The purchase price is subject to further
refinement based on finalization of direct incremental costs incurred in the
acquisition.
The amount attributable to goodwill will be amortized over its estimated useful
life of ten years.
2. PRO FORMA ADJUSTMENTS
(1) To reflect the adjustments to cash for purchase price ($11,191) and
final distribution to TWG shareholder ($653) as part of purchase
agreement
(2) To reflect certain prepaid direct acquisition costs included in other
assets as of July 1, 2000 to goodwill
(3) To record goodwill on purchase in amount equal to excess of the
preliminary purchase price over the preliminary allocation of the fair
value of the net assets acquired ($17,186), purchase costs incurred
($885)during acquisition, and final distribution to the TWG
shareholder ($653) as part of purchase agreement.
(4) To record accrual at July 1, 2000 for acquisition costs incurred by
TMNG during the period July 2, 2000 through September 30, 2000.
(5) To reflect elimination of TWG common stock
(6) To reflect stock consideration ($8,000) to TWG shareholder as part of
the purchase price
(7) To reflect elimination of TWG retained earnings ($2,004).
(8) To reflect the period's amortization of goodwill
(9) To record provision for taxes on TWG's pretax accounting income for
the period and the period's amortization of goodwill. The proforma
adjustments assume the tax status of TWG changes from an "S" to a "C"
corporation at the date of the proforma acquisition
(10) To reflect adjustment to shares used in calculation of basic and
diluted earnings per share for stock consideration (348,157 shares) to
TWG shareholder as part of purchase transaction
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SIGNATURE
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.
THE MANAGEMENT NETWORK GROUP, INC.
a Delaware corporation
Dated: November 13, 2000 By: /s/ Donald E. Klumb
--------------------------------
Donald E. Klumb
Executive Vice President and Chief
Financial Officer
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EXHIBIT INDEX
99.1 Audited Financial Statements for The Weathersby Group, Inc. for
The Year Ended December 31, 1999 and Independent Auditors' Report.
99.2 Unaudited Interim Financial Statements for The Weathersby Group,
Inc. for The Period Ended June 30, 2000.
EX-99.1 OTHERDOC
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