<PAGE>
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) MARCH 7, 2000
COMMISSION FILE NUMBER 0-13984
DIVERSIFIED CORPORATE RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-1565578
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12801 NORTH CENTRAL EXPRESSWAY
SUITE 350
DALLAS, TEXAS 75243
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 458-8500
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF CHANGED SINCE LAST
REPORT:
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements of Business Acquired
<TABLE>
<S> <C>
Report of Independent Accountants 2
Audited balance sheet 3
December 31, 1999
Audited statement of income and comprehensive income 4
Year ended December 31, 1999
Audited statement of stockholders' equity 5
Year ended December 31, 1999
Audited statement of cash flows 6
Year ended December 31, 1999
Notes to financial statements 7
Year ended December 31, 1999
(B) Pro Forma Financial Information 11
Unaudited pro forma consolidated balance sheet 12
December 31, 1999
Unaudited pro forma consolidated statement of income 13
Year ended December 31, 1999
(C) Exhibits 14
</TABLE>
Page 1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
DATATEK CORPORATION:
In our opinion, the accompanying balance sheet and the related statements of
income and comprehensive income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Datatek
Corporation as of December 31, 1999, and the results of its operations and
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States. 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 audit. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
May 1, 2000
Page 2
<PAGE>
DATATEK CORPORATION
Balance Sheet
December 31, 1999
<TABLE>
<S> <C>
ASSETS
- -------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 971,433
Marketable securities 83,100
Accounts receivable, net of allowance of $7,530 1,218,525
-----------
Total current assets 2,273,058
Fixed assets, net 81,393
Security deposits 3,750
-----------
Total assets $ 2,358,201
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt $ 8,490
Accounts payable and accrued expenses 347,512
-----------
Total current liabilities 356,002
-----------
Long-term debt 24,012
-----------
Deferred rent 1,889
-----------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value; 10,000
shares authorized, 2,000 shares
issued and outstanding 2,000
Unrealized losses on marketable securities (47,878)
Retained earnings 2,022,176
-----------
Total stockholders' equity 1,976,298
-----------
Total liabilities and
stockholders' equity $ 2,358,201
===========
</TABLE>
See notes to financial statements.
Page 3
<PAGE>
DATATEK CORPORATION
Statement of Income and Comprehensive Income
Year Ended December 31, 1999
<TABLE>
<S> <C>
Contract placement services $ 10,856,515
Cost of services 9,095,414
------------
Gross margin 1,761,101
Selling, general and administrative expenses (961,881)
Other income:
Interest income, net 29,299
Net realized gain on sale of investments 18,677
------------
Net income 847,196
------------
Change in unrealized gain (loss) on
marketable securities:
Unrealized losses arising during the year (60,058)
Less realized gains included in net income (18,677)
------------
(78,735)
------------
Comprehensive income $ 768,461
============
</TABLE>
See notes to financial statements.
Page 4
<PAGE>
DATATEK CORPORATION
Statement of Stockholders' Equity
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Unrealized
Gains
Common Common (Losses) on
Stock Stock Marketable Retained Stockholders'
Shares Amount Securities Earnings Equity
----- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 2,000 $ 2,000 $ 51,145 $ 2,713,968 $ 2,767,113
Net income 847,196 847,196
Changes in unrealized gains
(losses) (78,735) (78,735)
Distributions to stockholders:
Marketable Securities (20,288) (577,083) (597,371)
Cash (961,905) (961,905)
----- ---------- ---------- ------------ -------------
Balance at December 31, 1999 2,000 $ 2,000 $(47,878) $ 2,022,176 $ 1,976,298
===== ========== ========== ============ =============
</TABLE>
See notes to financial statements.
Page 5
<PAGE>
DATATEK CORPORATION
Statement of Cash Flows
Year Ended December 31, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 847,196
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 34,720
Realized gain on investments, net of expenses (18,677)
Provision for allowances (1,789)
Changes in operating assets and liabilities:
Accounts receivable 204,683
Accounts payable and accrued expenses 52,267
Deferred rent 1,108
-----------
Net cash provided by operating activities 1,119,508
-----------
Cash flows from investing activities:
Capital expenditures (36,755)
Deposits (1,750)
Purchase of marketable securities (330,075)
Proceeds from the sale of marketable securities 135,784
-----------
Net cash used in investing activities (232,796)
-----------
Cash flows from financing activities:
Principal payments (7,763)
Principal payments to shareholder (75,000)
Distributions to stockholders (961,905)
-----------
Net cash used in financing activities (1,044,668)
-----------
Decrease in cash (157,956)
Cash, beginning of year 1,129,389
-----------
Cash, end of year $ 971,433
===========
Supplemental cash flow information:
Cash paid for interest $ 3,333
===========
</TABLE>
See notes to financial statements.
Page 6
<PAGE>
DATATEK CORPORATION.
Notes to Financial Statements
Year Ended December 31, 1999
1. NATURE OF OPERATIONS:
Datatek Corporation (the "Company"), formed in 1992, provides consulting and
staffing services to both the public and private sectors of the health
insurance industry. Customers consist of major corporations, accounting firms,
consulting groups and governmental agencies throughout the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
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.
FIXED ASSETS:
Fixed assets are recorded at cost. Depreciation and amortization are computed
using the straight-line method over the estimated useful life of the
individual assets or the related lease terms, if applicable, whichever is
shorter. Upon retirement or sale, the cost and related accumulated
depreciation and amortization are removed from the accounts and any resulting
gains or losses are included in the statement of income. Maintenance and
repair costs are charged to expense as incurred. The estimated useful lives of
each class of assets are as follows:
<TABLE>
<S> <C>
Furniture and fixtures 5 years
Computers and office equipment 5 years
Vehicles 3 years
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash, investments in equity
securities and long term debt. The equity securities are valued at market
value using the closing prices as of December 31, 1999 and the Company
believes the recorded value of the long term debt approximates its fair value
due to the Company's ability to obtain such borrowings at comparable interest
rates.
REVENUE RECOGNITION AND COST OF SERVICES:
Revenues from contract placement services are recognized by the Company upon
performance of services. Cost of services consists of direct wages and
payroll taxes paid to consultants. Accounts receivable includes approximately
$473,000 of unbilled receivables that were billed in 2000.
ADVERTISING COSTS:
Advertising costs are expensed as incurred. Advertising costs for the year
ended December 31, 1999 were approximately $37,000.
INCOME TAX:
The Company is not generally subject to federal income taxation due to the
Company's election of `S' corporation status, whereby substantially all its
tax attributes and obligations accrue to the stockholders. Therefore, the
Company has no income tax provision.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investment instruments purchased with
remaining maturities of three months or less to be cash equivalents for
purposes of the statement of cash flows.
Page 7
<PAGE>
3. MARKETABLE SECURITIES:
At December 31, 1999, marketable securities, available for sale, consist of:
<TABLE>
<S> <C>
Equity securities, at aggregate fair value $ 83,100
=========
Gross unrealized gains $ -
Gross unrealized losses 47,878
---------
Net unrealized losses $ 47,878
=========
Proceeds from sale of securities $ 135,784
=========
Gross realized gains $ 20,027
Gross realized losses (1,350)
---------
Net realized gains $ 18,677
=========
</TABLE>
Realized gains and losses are computed using the average cost method
4. FIXED ASSETS:
As of December 31, 1999, fixed assets consisted of:
<TABLE>
<S> <C>
Vehicles $ 48,943
Furniture and fixtures 60,862
Computers and office equipment 33,712
Leasehold improvements 10,176
---------
153,693
Less accumulated depreciation (72,300)
---------
$ 81,393
=========
</TABLE>
Depreciation and amortization expense for the year ended December 31, 1999 was
$34,720.
5. LONG TERM DEBT:
At December 31, 1999, long-term debt consists of the following:
<TABLE>
<S> <C>
Note payable to bank, bearing interest at 8.6%, payable in
monthly installments of $453, including interest, collateralized
by an automobile. This note was retired on March 7, 2000. $ 11,441
Note payable to bank, bearing interest at 9.25%, payable in
monthly installments of $471, including interest, collateralized
by an automobile. This note was retired on March 7, 2000. 21,061
---------
32,502
Less current maturities 8,490
---------
$ 24,012
=========
</TABLE>
Page 8
<PAGE>
5. LONG TERM DEBT - CONTINUED
Future payments of long-term debt are as follows:
<TABLE>
<S> <C>
Year ended December 31,
2000 $ 8,490
2001 9,303
2002 6,425
2003 5,116
2004 3,168
---------
Total $ 32,502
=========
</TABLE>
Interest expense for 1999 was $3,333.
6. LEASE COMMITMENT:
The Company leases its principal office space. Rent expense for 1999 was
approximately $58,000. The Company is liable for the future minimum lease
payments as follows:
<TABLE>
<S> <C>
2000 $ 56,728
2001 36,931
2002 22,712
2003 23,360
2004 6,869
---------
$ 146,600
=========
</TABLE>
7. CONCENTRATION OF CREDIT RISK:
The Company maintains cash on deposit in accounts which at times exceed
federally insured limits. The Company has not experienced any losses on such
accounts and believes it is not exposed to any significant credit risk on cash
and cash equivalents.
Contract placement services from four customers represented approximately 16%,
15%, 15% and 10%, respectively, of total contract placement services for the
year ended December 31, 1999. Accounts receivable from four customers
represented approximately 18%, 17%, 14% and 13%, respectively of total
accounts receivable at December 31, 1999.
8. EMPLOYEE BENEFIT PLAN:
The Company has established an employee benefit plan, under 401K of the
Internal Revenue Code, which covers substantially all employees. The plan
provides for voluntary employee contributions only. In 1999 the Company
incurred $3,100 of costs administering the 401K plan.
9. RELATED PARTY TRANSACTION:
In January 1999, a $75,000 non-interest bearing loan from a stockholder of the
Company was repaid.
10. NON-CASH INVESTING AND FINANCING ACTIVITIES:
In 1999, approximately $597,000 of marketable securities were distributed to
the stockholders of the Company.
Page 9
<PAGE>
11. SUBSEQUENT EVENT:
On March 7, 2000, Diversified Corporate Resources, Inc. ("DCRI") completed the
acquisition of substantially all of the assets of the Company. The purchase
price consists of $3,000,000 in cash, 75,000 shares of DCRI's Common Stock
(subject to a lock-up agreement), four annual deferred payments of
approximately $171,000 each, beginning January 1, 2001 and contingent payments
equal to 25% of the increased profits of the Company (as defined in the
agreement) for five years, beginning April 15, 2001.
Page 10
<PAGE>
DESCRIPTION OF THE ACQUISITION
Diversified Corporate Resources, Inc. ("DCRI") purchased substantially all of
the assets of Datatek Corporation ("Datatek") on March 7, 2000. The purchase
price consists of the following: (i) $3.0 million in cash paid at closing,
(ii) four annual installment payments, payable on January 1 of each of the
years 2001, 2002, 2003 and 2004, in the anticipated amount of $170,625 each,
(iii) contingent payments payable annually, on April 15 of each of the years
2001, 2002, 2003, 2004 and 2005, in an amount equal to twenty-five percent
(25%) of the increased profits of the business acquired from Datatek
(increased profits are based upon Datatek's profits in 1999), and (iv) 75,000
shares of DCRI's common stock, par value $.10 per share, which were issued to
the shareholders of Datatek at the closing of the acquisition. In addition,
within sixty days from the closing of the acquisition, DCRI is obligated to
remit to the shareholders of Datatek, the portion of Datatek's net working
capital (as defined in the Purchase Agreement) in excess of $750,000.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements give
effect to the acquisition by DCRI of substantially all of the assets of
Datatek in a transaction to be accounted for as a purchase in accordance with
APB No. 16. The unaudited pro forma balance sheet is based on the historical
balance sheets of DCRI, which are incorporated by reference to DCRI's Form
10-K, and Datatek which are included elsewhere in this Form 8-K/A and have
been prepared to reflect the acquisition of Datatek by DCRI assuming the
acquisition occurred on December 31, 1999. The unaudited pro forma statement
of income is based on the historical income statements of DCRI and Datatek and
combines the results of operations of DCRI and Datatek for the year ended
December 31, 1999 as if the acquisition occurred on January 1, 1999. These
unaudited pro forma financial statement should be read in conjunction with the
historical financial statement and notes thereto of DCRI and Datatek.
ASSUMPTIONS
Although neither DCRI nor Datatek has complete information at this time as to
the fair value of Datatek's individual assets and liabilities, an estimate of
the eventual allocation of the purchase price was made on the basis of
available information. The actual allocation of the purchase price may be
different from that reflected in the pro forma consolidated financial
statements. Such differences would result from adjustments in the purchase
price and refinements in the estimates of fair values of the net assets
acquired. It is not anticipated that any change in the allocation price will
be material from the pro forma adjustments.
For the purpose of pro forma presentations, the excess purchase price over the
fair market value of the net assets acquired is being amortized over an
estimated life of twenty (20) years.
Page 11
<PAGE>
Diversified Corporate Resources, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
DCRI Datatek Adjustments
Historical Historical and Pro Forma
ASSETS 12/31/99 12/31/99 Elimination Combined
- -------------------------------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 847,171 $ 971,433 $ (1,818,604)A $ -
Marketable securities 83,100 (83,100)B -
Trade accounts receivable, net 9,987,318 1,218,525 11,205,843
Receivables from related parties 75,263 - 75,263
Prepaid expenses and other
current assets 256,714 - 256,714
Federal income taxes receivable 148,523 - 148,523
Deferred income taxes 713,853 - 713,853
----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS 12,028,842 2,273,058 (1,901,704) 12,400,196
PROPERTY AND EQUIPMENT, NET 3,342,524 81,393 (15,541)B 3,408,376
OTHER ASSETS:
Intangibles, net 6,882,809 - 3,219,960 A 10,102,769
Other 293,574 3,750 (162,000)A 135,324
----------- ----------- ----------- -----------
$22,547,749 $ 2,358,201 $ 1,140,715 $26,046,665
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------
CURRENT LIABILITIES:
Line of credit borrowings $ 1,480,000 $ $ 2,392,455 A $ 3,872,455
Trade accounts payable and accrued
expenses 5,128,069 347,512 - 5,475,581
Current maturities of capital lease
obligations 13,413 - - 13,413
Current maturities of long-term debt 1,220,733 8,490 159,845 A 1,380,578
(8,490)B
----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES 7,842,215 356,002 2,543,810 10,742,027
DEFERRED LEASE RENTS 93,528 1,889 - 95,417
LONG-TERM DEBT 1,590,757 24,012 409,715 A 2,000,472
(24,012)B
DEFERRED INCOME TAXES 93,487 - - 93,487
----------- ----------- ----------- -----------
TOTAL LIABILITIES 9,619,987 381,903 2,929,513 12,931,403
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY 12,927,762 1,976,298 187,500 A 13,115,262
(1,976,298)C
----------- ----------- ----------- -----------
$22,547,749 $ 2,358,201 $ 1,140,715 $26,046,665
=========== =========== =========== ===========
</TABLE>
Notes to unaudited pro forma consolidated balance sheet:
A. To record initial cash and share consideration and estimated acquisition
costs, financed partially with line of credit borrowings and long-term
debt. The remainder was funded with cash on hand.
B. To record removal of marketable securities and automobiles retained by
sellers and payoff of related notes associated with the automobiles.
C. Eliminate Datatek Stockholders' equity.
Page 12
<PAGE>
Diversified Corporate Resources, Inc.
Unaudited Pro Forma Consolidated Income Statement
Year Ended December 31, 1999
<TABLE>
<CAPTION>
DCRI Datatek Adjustments
Historical Historical and Pro Forma
12/31/99 12/31/99 Elimination Combined
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net Service Revenues:
Permanent placement $ 26,794,032 $ - $ - $ 26,794,032
Specialty services 7,992,416 - - 7,992,416
Contract placement 18,857,452 10,856,515 - 29,713,967
------------ ------------ ------------- -------------
53,643,900 10,856,515 - 64,500,415
Cost of Services 38,692,929 9,095,414 - 47,788,343
------------ ------------ ------------- -------------
Gross Margin 14,950,971 1,761,101 - 16,712,072
------------ ------------ ------------- -------------
Selling, General and
Administrative Expenses (12,488,852) (961,881) (166,873)A (13,617,606)
------------ ------------ ------------- -------------
Other Income (Expenses):
Interest income
(expense), net (84,599) 29,299 (304,940)B (389,539)
(29,299)C
Other, net (155,048) 18,677 (18,677)C (155,048)
------------ ------------ ------------- -------------
(239,647) 47,976 (352,916) (544,587)
------------ ------------ ------------- -------------
Income From Continuing
Operations Before
Income Taxes 2,222,472 847,196 (519,789) 2,549,879
Income Tax Expense (854,881) - (130,963)D (985,844)
------------ ------------ ------------- -------------
Income From Continuing
Operations $ 1,367,591 847,196 (650,752) 1,564,035
============ ============ ========== =============
Basic Earnings Per Share:
Continuing Operations $ 0.49 $ 0.55
============ =============
Weighted Average Common
Shares Outstanding 2,760,371 75,000 2,835,371
============ ========== =============
Diluted Earnings Per Share
Continuing Operations $ 0.49 $ 0.55
============ =============
Weighted Average Common
and Common Equivalent
Shares Outstanding 2,777,606 75,000 2,852,606
============ ========== =============
</TABLE>
Notes to unaudited pro forma consolidated income statement:
A. To record amortization - intangibles
B. To record interest expense effects of transaction
C. To eliminate Datatek investment income
D. To record tax effect of Datatek operations (estimated at 40% of income
before taxes)
Page 13
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC. AND SUBSIDIARIES
C. EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-K.
2.1 Purchase Agreement, dated as of March 6, 2000, by and
among Diversified Corporate Resources, Inc., Datatek
Consulting Group Corporation, Datatek Corporation,
Julia L. Wesley and Michael P. Connolly (Incorporated
by reference to exhibit 2.1 of the Company's form 8-K
filed March 22, 2000).
10.1 Employment Agreement dated as of March 6, 2000, by
and between Datatek Consulting Group Corporation,
Julia L. Wesley, and Diversified Corporate Resources,
Inc. (Incorporated by reference to exhibit 10.1 of
the Company's form 8-K filed March 22, 2000).
10.2 Employment Agreement, dated as of March 6, 2000, by
and between Datatek Consulting Group Corporation,
Michael P. Connolly, and Diversified Corporate
Resources, Inc. (Incorporated by reference to exhibit
10.2 of the Company's form 8-K filed March 22, 2000).
23.1 Consent of PricewaterhouseCoopers LLP*
* Filed herewith
Page 14
<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.
DIVERSIFIED CORPORATE RESOURCES, INC.
Registrant
Date: May 12, 2000 By: /s/ Anthony G. Schmeck
Anthony G. Schmeck
CHIEF FINANCIAL OFFICER
(Principal Financial Officer)
Page 15
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File Nos. 333-27867 and 333-56671) of Diversified
Corporate Resources, Inc. of our report dated May 1, 2000 relating to the
financial statements of Datatek Corporation which appears in the Current
Report on Form 8-K/A of Diversified Corporate Resources, Inc. dated May 12,
2000.
PricewaterhouseCoopers LLP
Dallas, Texas
May 12, 2000
